Owning your own business is a huge accomplishment – congratulations! But that doesn’t mean everything is always smooth sailing.
The world, and the economy, are volatile and constantly shifting. According to the National Bureau of Economic Research (NBER) there has been a recession on average every six years since WW2. This means that it is incredibly important to prepare your organization to survive and maintain success in any future market downturns.
So the question becomes, how do you prepare yourself and your business in the face of shifting market conditions?
Step one: understand your business costs
Every business operates a little differently. It is important to understand your business costs and cash flow. We’re not just talking about Fixed and Variable costs (shoutout to that high school economics class) but also the timing of those costs. For items you could pay off, save yourself the trouble where you can and free yourself of the risk. But for ongoing costs, it may be best to shift to monthly plans and tie your costs directly into your cashflow. That way if sales start decreasing, it is easier to cut out unnecessary spend.
Additionally, as markets start to shift, cut out unnecessary spend OR front load it in alignment with cashflow. That way, you aren’t tightening the belt while holding on to extra perks.
Step two: establish a run-rate and seasonality expectations
Probably the most obvious piece of advice, is to establish a business run-rate. Based on the last 6 months of revenue, how do you anticipate the next 12-18 months performing? Will you be growing month over month? Will your revenue stay flat? How much do you anticipate earning? Map out your history, so that you can better predict your future.
In addition to your run-rate, very few businesses are perfectly linear (and by very few we mean none). Generally, business revenue will fluctuate with seasonality, market trends, or even alongside marketing strategy. It is important as a business owner to know how your revenue will trend in order to prepare for potential changes to your market.
Step three: save up to 6 months of reserves
You never know what could happen. A market can flip at any time, and you want to be prepared. Using the information from steps one and two, plan out the reserves you would need to cover your costs for a minimum of 6 months and, potentially, match the difference between those costs and your revenue. This will not only prepare you for a potential future, but also give you peace of mind to know your business is secure.
Step four: Prioritize the experience of your clients
Your clients drive your business, and more importantly your future (repeat) business. Ensuring that you are taking the steps now to deliver a strong client experience, clear concise processes, and an incentive to return will determine your future success. It is always more expensive – both time and money – to recruit brand new clients than it will be to bring back previous ones. By putting your clients first and ensuring their satisfaction you will build a good business model and brand for your organization.
In conclusion, don’t wait until it’s too late. Prepare now for any eventuality and safeguard your business’ future.
Recommended Next Read
Sell your impact: How to communicate with your clients and articulate your value