We’ve all seen the warning signs for a while, but now it looks more and more like we’ll see a recession this year. The good news? Many economists are predicting that this recession won’t be as severe as they initially feared. The bad news? Recessions (even mild ones) always create a level of financial uncertainty for business owners.
If you’re like many business owners I work with, you might be showing a little more caution about investing money into your business. This is understandable—it’s a good idea to be a little more cautious in an economically uncertain environment.
However, if you experience anxiety or fear because of economic uncertainty, this can be a problem. Because you still have a business to run and decisions to make.
So today, I’d like to share 5 tips for business success during a recession (or any other time of economic uncertainty).
Tip #1. Be smart about your business changes.
If you decide to grow your staff, change your service offerings (or products), move to a new location, etc., run the numbers first. While running the numbers is a good idea generally, it is an especially important step in times of economic uncertainty. And that’s because you want to be really confident that the changes you’re considering are going to help increase your profitability.
And remember, there can be a significant delay between when you implement a change and when you start to see profit from it. (So, now might not be the best time to implement long-term changes that would set your business back in the short-term… unless, of course, you’re financially prepared for that.)
Tip #2. Focus on your profitable revenue stream(s).
If you offer multiple services or products, focus on the ones that are the most profitable. In order to do this, you have to know the relative profitability of your different services (or products). And, in order to know this, you need to run the numbers first. Because without hard numbers you’ll be flying blind. (By the way, notice any theme? 😉) Once you’ve distinguished your profitable services and products from your less profitable offerings, start thinking about ways you can lean on and expand the more profitable ones.
Tip #3. Don’t neglect strategy.
To me, addressing your business tax strategy is the obvious, low-hanging fruit if you haven’t yet addressed it. It can potentially make a big cash-in-pocket difference if you are feeling a financial squeeze. Most small business owners who address their tax strategy seriously for the first time can qualify for at least $15k-$20 in additional tax savings for that year (and it could be far higher if your business is already generating a high six or seven-figure income).
Tip #4. Prioritize workforce efficiency.
Prioritizing workforce efficiency could mean downsizing your staff (if there is clearly dead weight on your workforce). But it could also mean hiring additional contractors or part-time staff to handle administrative or logistical tasks—if this would help you and your key employees work more efficiently.
Prior to making any changes, run the numbers so you can determine your return on investment (ROI) for each staff member. (Determining ROI involves figuring out how much value each staff member is producing for your business for each hour—or day, or week, or month—of work). If you don’t already have a method you can use to obtain this number, consider working with a business coach or consultant who can guide you through the process—or join us in Business Money Mindset, my ongoing masterclass series for Business Owners where we cover in-depth topics just like this!
Tip #5. Be flexible.
In an uncertain economic environment, it’s highly likely that at some point you will need to pivot, shift, or re-orient some aspect of your business. Keep your eyes open and try to anticipate changes you might need to make in the future. Most importantly, when you realize that a change needs to happen, don’t drag your feet. Indecisiveness can hurt you as a business owner even in good times, but it can really hurt you in hard times. Because in hard times, your margin for error is going to be smaller, and the time you have available to course-correct is going to be reduced.
I’m sure by now you’ve thought “Huh, this all sounds like good general business advice!” And you’re right!
These tips are good, basic advice for any business owner in any situation. However, in times of economic uncertainty, these tips become especially important because the stakes are higher and the margin for error is smaller. Economic uncertainty just amps up the importance of putting your business on a healthy and sustainable path.
So don’t let the idea of a recession stress you out. Just stay focused, be intentional, and be flexible. And when you realize you need to make a change, be decisive! You can make 2023 a successful, profitable year for your business, and you absolutely can have business success during a recession!