If the start of last year’s COVID-19 outbreak taught us anything, it’s that the economy can turn on a dime. The immense wave of small business closures throughout the year demonstrated just how many entrepreneurs weren’t prepared financially or strategically to make the necessary adjustments to keep their business afloat. For many, federal assistance was crucial to keeping workers paid and keeping businesses running through the worst of it.
Over the last 20+ years—as long as our expert small business coaches have been advising entrepreneurs like you to improve business—we’ve seen a variety of economic ebbs and flows challenge small business owners. The 2020 pandemic wasn’t the worst, and it won’t be the last. Knowing that can give today’s businesspeople a chance to set up their business to weather any storm that may come tomorrow.
Predict the Unpredictable
A tried-and-true maxim of business ownership is to expect the unexpected. You have to think fast and be ready to face any number of potentially unforeseeable issues, including economic downturn. The best way to prepare for the worst while hoping for the best? Be intentional about your small business’ version of a rainy-day fund.
Keep a cache of funds at the ready in case business goes south. Just like with personal finances, you should try your best not to spend what you don’t have. If the economy takes a turn and your business isn’t pulling in the revenue you need to cover your expenses, an emergency fund can help you mitigate loss and give you and your business some breathing room while you figure out what to do next. We and other business coaching experts would suggest having a fund worth around 3-6 months of your business’ expenses saved up.
Don’t Wait to Act
Of course, you don’t want to dramatically change your business model or market strategy for a blip on the economic radar. That said, waiting for an emergency fund to dry out and being left with no plan and no safety net isn’t advisable either. The first and best thing you can do when you start pulling cash from your emergency savings is strategize. Learn from experienced small business coaches about how you can improve business in the short term to ride out a potentially long-term emergency.
Keep your ear to the ground on what others in your industry are doing and call in advice from mentors and friends. Come up with a plan to decrease spending wherever possible and, importantly, increase revenue as demand for your product or service shifts.
Stay Light on Your Feet
Just because your business is small doesn’t mean it’s nimble. The biggest companies have a much easier time shifting focus and responding to changing economic demand because they have expendable funds and, however unfortunately, expendable labor. Much smaller businesses like yours have less wiggle room. You may need to seek advice from an experienced coach or business advisor who’s handled similar situations before.
Streamlining your operations and staying ready for a quick response—in the case of 2020, adjusting to meet new health and safety standards, finding alternative revenue streams or improving access to your product or service—can mean the difference between your business struggling and thriving during the next economic crisis.
Want to strategize with an expert? Talk to an AdviCoach small business coaching expert today about how you can set your business up for success in any economy.