As the cost of living continues to rise and the possibility of an upcoming recession looms, many business owners are facing financial worries. To stay afloat during economic downturns, it's important for agencies to take proactive steps to recession-proof their operations.
This article provides five practical tips that can help you prepare for a potential recession starting today. By implementing these strategies, you will increase your financial insight, profitability, attractiveness to lenders, and run a more predictable business.
1. Increase Your Financial Insight
To prepare for a recession, start by increasing your understanding of your agency. Track your financials weekly and monitor your financial position. Review your Key Performance Indicators (KPIs) to understand what spending generates the greatest return on investment and what's wasted cash. Knowing which costs provide the most value will allow you to make quick decisions and prune your business when necessary.
2. Minimise Costs
During a recession, it becomes essential to cut down on costs wherever possible. One of the most significant expenses for most businesses is staff costs. To minimise staff-related expenses, it's important to keep your team lean and agile. This means hiring when necessary, and only in line with your capacity plan.
When your business experiences sudden peaks in workload or unexpected capacity gaps, instead of hiring permanent employees, consider using freelancers. Freelancers can help you to fill short-term capacity gaps without the commitment of a permanent employee. This not only saves money but also provides greater flexibility to adjust to changes in demand.
3. Improve Your Credit Score
In a recession, it's difficult to secure finance, so start working on improving your credit score now. Pay your bills (and taxes) on time, reduce existing debts, regularly check for fraudulent activity, and use a credit card and pay it off each month. A high credit score will put you in the best possible position should you need a loan to keep your agency afloat.
4. Continue To Focus on Marketing
Marketing is even more critical during a recession. Maintain brand awareness and let your customers know that you're still around to serve them. Change your marketing messaging to show the value you can provide them in the context of a recession but don’t stop marketing! If you’re not attracting new business you’re not generating cash, and cash is king.
5. Retention Of Existing Clients
Your existing clients are extremely valuable during a recession. Have a focus on client retention, after all, clients that trust you tend to spend more and help to drive customer acquisition by recommending your services to their network. Take care of your existing clients through email check-ins and social media engagement. Make them feel valued and appreciated, and you’ll remain top of mind.
In conclusion, preparing for a recession in 2023 doesn't have to be complicated. The sooner you take action, the better you'll be able to safeguard your agency. By following these simple tips, you can recession-proof your agency and thrive despite the challenging economic environment.