Today, small business owners must be more prepared to survive and thrive during tough financial times. With rising inflation and a pending recession, small business owners must clearly understand how their businesses will endure these uncertain economic times and remain successful.
It can be very stressful for small business owners to address such a daunting topic. The last thing any entrepreneur wants to consider is the potential for their business not to bring in enough money to make ends meet. Therefore, preparing in advance and planning for dealing with tough financial times before they arise is better.
Here is a 6-step guide to surviving tough financial times:
1. Evaluate where costs can be reduced
Small business owners should evaluate where to reduce their expenses when struck with tough financial times. First, they must assess where to cut costs without sacrificing customer quality. Furthermore, entrepreneurs could reduce their costs by seeking cheaper suppliers. Of course, they will still need to purchase the products that make performing business possible. However, if they noticed a recent increase in price, they could look for other vendors.
2. Evaluate where prices can be raised.
Small business owners should also evaluate where they can raise their prices during tough financial times. They may need to consider temporarily increasing the costs of their products and services to keep their business open and running. However, small business owners must take it upon themselves to ask customers why they are suddenly paying more. Customers may not enjoy paying more for the products and services they typically purchase at a lower price. However, they will be more receptive and understanding toward having to do so if they know the reason behind the price increase. Small business owners must convey to their customers that these inflated prices are temporary and ask them to remain patient with their businesses as they work through these difficult times.
3. Stop offering expensive products and services to produce and bring in minimal profits.
During tough financial times, small business owners can also save money by temporarily discontinuing the products and services it costs them the most to produce. If these products and services are expensive and result in a small profit margin, it may be best to stop offering them during financial hardship. Small business owners may be able to save or redirect the money they would typically put into making them to other areas of their business that desperately need it. Customers may be unhappy they cannot access these products and services. Thus, it is imperative for small business owners to once again practice open communication with their loyal customers. They must explain that these products and services are only discontinued temporarily. Furthermore, small business owners should take it upon themselves to help their customers find temporary alternatives for their missing products and services.
4. Temporarily halt bonuses
In tough financial times, small business owners should consider temporarily halting bonuses. It may be anxiety-inducing for entrepreneurs to inform their employees they will no longer receive the expected prizes. It may be necessary to ensure the continued success of their businesses. Small business owners may receive some pushback and anger from employees. Halting bonuses is necessary to keep their businesses running and ensure their baseline salaries can continue to be paid. Small business owners must be open and honest with their employees. They must be willing to answer any questions once they announce this news. Employees will be much more receptive to this decision if they can ask questions and understand its reasoning.
5. Consider if it is necessary to lay off employees.
Small business owners enduring tough financial times may also have to consider laying off employees. This is not an easy task. It can save them money on their payroll when they need it most.
However, small business owners must act with caution when laying off employees. They must consider not only if it is necessary to do so but also if these layoffs will have more significant effects on the overall health of their businesses.
Small business owners must ensure they will not be left with a labor shortage if they lay off employees. They must evaluate if their remaining team can handle an increased workload and keep their businesses running efficiently and effectively.
If laying off employees is likely to cause more harm than good to the health of their companies, they should probably avoid doing so unless necessary. No small business owner wants to lay off employees to save money and then be unable to serve their customers adequately and, in return, make money.
6. Consider accessing alternate sources of cash.
When struck with tough financial times, small business owners may also have to consider taking out loans to keep their businesses afloat. However, they must start planning now if they think they may have to do so. First, small business owners must ensure their financial documents are in order. Then, they may need to talk with a bank to ensure they qualify for a loan. Taking these steps in advance will help them save time when a crisis arises and give them access to their borrowed money sooner.
Furthermore, small business owners find out they do not qualify for loans during this initial planning; in that case, they will have time to make alternative plans for securing money during a financial crisis. While it is never good for small business owners to hear they are rejected for a loan, it is better to listen to this news before a financial crisis than during one. However, small business owners who qualify for loans and decide to take them out must ensure they have thorough plans outlining how they will repay them. Small business owners do not want to take on debt without knowing how they will pay it off.
Planning for tough financial times can be daunting and overwhelming for any small business owner.
However, they must remember it is better to prepare for a financial crisis in advance than be utterly unprepared if and when one arrives.
There is no time better than the present to start planning for the financial future of a small business.
Do not be afraid to dive in and create a guide for surviving tough financial times. You’ve got this!
PaySmart is a payroll provider in Mechanicsburg, Pennsylvania, supporting small businesses in the Central PA region. We are dedicated to helping small businesses take care of their payroll needs. To learn more about how PaySmart may provide payroll solutions, don’t hesitate to contact us at 717-766-1777. Our New Client Concierge is waiting for you!