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How to recession-proof your business. |
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Extracts from Diana Ransom’s article on www.smsmallbiz.com
Since business may soon be tougher, it is critical for entrepreneurs to take steps to up-end any damage that could happen as a result of a recession.
The secret to weathering a particularly nasty economy is to diversify your customer base, free up cash flow and cut costs where you can. Here are some steps for recession-proofing your business:
CUT COSTS. "When times are tough, it's best to focus on core markets and spend money in those areas, not in areas that haven't been more profitable," says Bill Lenhart, the national director of business restructuring at BDO Consulting in New York.
RATCHET DOWN INVENTORY. When a recession hits, the last thing you'll want to do is get stuck with shelves of needless inventory. Establish inventory targets and make sure the sales and purchasing departments are talking.
MAINTAIN PRICES. You will sell more products but you'll also cut your profit margins and likely dilute your brand in the process, says Bradley J. Sugars, a business coach in Las Vegas.
RESERVE DISCOUNTS. "Don't go into a discounting war," Reserve discounts only for current, repeat customers. "You're trying to breed loyalty" without diminishing your brand's value, says Sugars.
FOCUS ON SERVICE. "It is one of the best ways to add value without costing money," Sugars says.
INVEST IN EMPLOYEES. Make boosting productivity a focal point. For those that rise to the top, be sure to reward them accordingly. Consider offering vacations or time off, which can be cheap incentives, argues Lenhart.
FREE UP CASH FLOW. Ask to have payments to suppliers extended, and if you have old debts, call them in, says Howard Applebaum chief lending officer of Sterling National Bank in New York.
RENEGOTIATE CONTRACTS, says Applebaum.
LOOK TO EXPAND YOUR BUSINESS. If, on the other hand, you're sitting pretty, Carmen Bianchi, director of San Diego State University's Entrepreneurial Management Center, suggests to "Look for weaknesses and instability," in the competition. You may be in a good position to pick up their business at bargain-basement prices.
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