In the last few months, it is virtually impossible to avoid hearing the dreaded R-word, recession. From a technical standpoint, the definition of a recession is two consecutive quarters of negative economic growth. But for most small and medium-sized business owners, definitions are for economists and politicians. If it looks like a recession, if it feels like a recession, it is a recession. Your suppliers, your customers, and your bankers are already acting differently. So let's call it what it is–a recession.
But there are other more appropriate R-words that business owners should be focusing on–readiness and resilience. The time to act is now, not when things have really hit rock bottom. So what can you do to recession-proof your business?
Here are a few tips:
Focus on Your Finances
In a recession, keeping track of your cash flow is vital–both revenues and expenses. This means keeping a close eye on all of your financials, including receivables, payables, inventory, bank loans, etc. For a reasonable fee, you can get monthly accounting and bookkeeping services so that you can make critical business decisions in real time. The professionals at TAAG can provide monthly accounting services, along with other services that can assist your business.
Reduce Your Fixed Costs
While it may be difficult to eliminate certain costs such as a long-term lease (although you can try), it is important to streamline your business by eliminating both fixed and variable costs. One option you might consider is TAAG’s Virtual Chief Financial Officer (VCFO) service where we provide a virtual CFO to your business at a substantial reduction to the cost of paying a full-time employee.
Re-Evaluate Your Product and Service Offerings
In an economic downturn, it is essential to re-evaluate what products and services you are offering to your clients. Keep the most profitable lines and eliminate the rest. At the same time, evaluate your client list. Not all clients are the same. Some clients provide a regular stream of income and profit to your business. These are the ones where you should be focusing your efforts. This may sound a bit harsh, but in recessionary times keeping afloat should be your primary objective. You can start expanding your product and client lists again once the storm has passed.
Continue Your Marketing
As you go through these changes, it is important to keep in touch with your client base. Even if you have to cut products or services, they will appreciate the contact and will maintain a connection to your business. Continue some, if not all, of your marketing initiatives, but make sure they are targeted to that part of the market that will bring you the optimal results.
Minimize Your Tax Obligations
When your regular business or individual income is disrupted, make sure that you are taking advantage of all business and capital loss tax credits. In a future article, we will be explaining the advantages to high-net-worth individuals of one of these—using government sanctioned Flow-Through Shares (FTS) to produce substantial savings on both income and capital losses. The professionals at TAAG’s Multi-Family Office group can explain the sizable benefit of this option.
Stay Connected and Seek Advice
A recession is not the time to recede into a business shell. Stay in touch with your bankers, your financial advisors, your business planners. They can provide you with professional advice on matters such as government assistance programs, business strategies, tax planning, capital sources, or even connect you to potential partners who may be able to assist your business. It is not a sign of weakness to seek help–it is a show of confidence that your business will get through this period until normalcy returns.
If you have any comments or questions about the content or the business services mentioned, please contact us.
Published by TAAG Corporation
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