Founders, here's some first-hand advice on how to save yourself and your business from going bust.
I’ve been here before. 2008 exposed the financial fault lines in my business. 2009, I fell through the cracks and went belly-up.
In case you haven’t heard, maybe because you’ve been vacuuming up the pieces from Covid, business owners are once again tightening their belts ahead of what could be the worst of both worlds, a prolonged economic downturn, and a growing inflation rate. In economics terms, they like to call this Stagflation.
In a recent Globe and Mail article, billionaire Vancouver investor and Founder of Plenty of Fish, Marcus Frind, didn’t mince words when he bluntly stated “It’s going to be a bloodbath.”
Bloodbath or not now is the time to batten down the hatches.
Covid didn’t cause our financial vulnerability, it exposed it. If you didn’t dial in on your numbers then, this my friends is the time, because things are likely to get a whole lot worse, last longer and, this go around, there likely won’t be bailouts.
The sooner you start to build a sound budget, the stronger your framework will be. When you're prepared and have the right tools and strategies, there's no reason to worry about your financial future. History has shown us it's possible not only to survive but to thrive and prosper during economic downturns.
So let’s dial in on 11 ways to start future-proofing your business today!
Automate your auto-pilot //
Think about ways you can use technology to streamline your business and automate your processes. Maybe there's a tool you could use to complete your projects for a lower cost or with less labour.
Count on continuous contact //
Did you know, on average, 80% of your sales come from 20% of your customer? Create meaningful and authentic client touch points to keep your services top of mind so they'll keep coming back.
Map your marketing efforts //
One of the most common mistakes is to cut your marketing budget when you're in a recession. A downturn is a time when your marketing is most important because you need to bring in new business.
Now is the time to dial in on what messages and mediums work best.
>>> Fierce Founders: Circle back on Step 6 in the Formula
Curate your credit //
You may have borrowed to the brink though Covid, but if not, now’s the time to lock in on potential sources of capital before you need them.
BTW, now's also the time to safeguard your access by strengthening your credit. The last thing you want is to reach the point of needing a loan, only to find that your credit is too low to get one.
Chart your cashflow //
Running low on cash is always a top concern for Founders, but especially so, when dealing with stagflation. Get a handle on your current cash balances and upcoming expenses to create a rolling cash flow forecast for the next quarter or two.
>>> Fierce Founders: Circle back on 'Next Steps' in the Formula
Create a cash cushion //
Please hear this... your net profit is your cash cushion. Unfortunately, with over 82% of small business owners generating less than a 2% net profit, we know cash-cushions are hard to find, especially after most of us drew down on any spare cash through Covid. When you can, create an emergency cash fund that can cover up to six months of essential costs including payroll, inventory, and utilities. Aggressively collecting on receivables can get you started
Double down on debt //
Coming into a recession as debt free as possible positions you to have the highest amount of money available to draw from in the future should you need it.
>>> Fierce Founders: Double back on your Debt Repayment Calculator
Implement inventory thresholds //
Inventory is like depreciating cash sitting on shelves, especially during stagflation, when turnover may be slow. It requires careful monitoring, and some improvisation as inventory can become even more costly as obsolescence, damage, and higher costs of longer storage set in.
Raise your rates //
I’ve said it before, but I’ll say it again. Now is the time to raise your price. I’m certain that if today you were to dial in on your direct costs, you’d find they’ve increased on average by 4%. This is what our founders have been finding over the past month alone. This is 4% that is coming right off your bottom line. Cash you can’t afford to lose.
>>> Fierce Founders: You know the drill. Steps 3 and 4 will calculate your costs and defend your price
Optimize your offerings //
Identify ways to modify an offering to make it relevant to customers during a downturn. Modifications can be made to the product itself, how it's packaged, and how it's priced, to cater to the customer's needs.
>>> Fierce Founders: Circle back on Step 2 in the Formula
Strategize with strategic partners //
There’s strength in numbers. Strategic partnerships can build brand awareness, increase revenue (through partner/affiliate fees), and help make products or services more attractive. Be sure to select partners that align with your brand promise, and increase the perceived value of your product since value quality and durability tend to be key attributes during economic down turns.
So there it is. 11 valuable tips to protect your business from the negative effects of stagflation.
But now, I want to challenge you to dial in on your household budget and sign up for my 5 DAY WAKE UP CALL.
5 Days x 25 min x 5 Drills to dial in on your numbers and strengthen the five pillars that are holding up your entire financial future. Don't let stagflation take you down!