It can be difficult to weather the ups and downs of your business. There will always be periods of prosperity and periods when you just aren’t sure if you’re going to make it through.
But it doesn’t have to be this way!
There are steps you can take to insulate yourself from tough times. Being prepared is the best defense against a bad economy or just a standard slow time of the year
A landscaping company can expect a slow winter. A snow removal company can expect to shut down in the summer (although you never really know in Michigan). These companies may have a different schedules, but both can benefit from these 3 tips to survive the down times
Contracts
Contracts are complicated. There’s a reason that there is an entire subsect of attorneys that specialize only in contract law, even though they all learn it.
Contracts are absolutely necessary in all industries, and can be an incredible asset for your business. They can help you to ensure you get paid by your customers, guarantee a good price or terms from a vendor, or help you to plan for long-term projects.
They can also help you to get through a slow-down in your business. By guaranteeing that a vendor will hold a price or that a customer will stay with you, you can more easily weather any storm that heads your way.
Conversely, be wary of any contracts that lock you into services that you would want to cancel when times are tough. Be sure to compare the benefits now to what the consequences may be if you need to get out of the contract early or break it if you run into cash flow issues.
Budgeting
There are lots of benefits of a good budget. The most obvious being that you are better able to plan for the future.
Budgeting not only allows you to understand the cash flow in your business, but also provides a fantastic rear-view of what your business has gone through. For many businesses, there is a time of year that is slower than the rest.
Almost every industry experience ups and downs that are pretty consistent year-over-year. By implementing a budget, you’ll be able to easily forecast and plan for lost revenue. If you normally experience a slow-down in Jan after massive holiday sales in December, then you can customize your budget to account for these differences in revenue even if your expenses remain relatively constant.
Planning
I talk about planning a lot, but there’s a good reason for that. Planning within your business can be your best protection from any economic downturn. Knowing what expenses can be cut back or completely removed when necessary can be the difference between a slow-down in your business and going out of business.
Any expenses in your business should be necessary, but some may be more important than others. Doing a deep dive into all of your expenses can give you a good idea of what you can do without if needed.
You should have a plan, which must be written down, for several different scenarios and how you would get your business through each one. You may never use these plans, but, as the saying goes, you’d rather have it and not need it, than need it and not have it.
Preparing your business for economic downturns as early as possible will put you in a better position when the tough times roll in. Taking these steps can be time-consuming, but will absolutely pay off in the long-run.
As a business owner, it’s up to you to make sure that your business can take a few hits without crumbling. Make sure you understand your cash flows, and use your historical data as a crystal ball to see what the future is likely to bring.
You’ll never be able to foresee the future with 100% accuracy, but knowing what it may bring can put you in the best position to survive.
Need help determining the health of your business? Still Waters Bookkeeping can provide deep insights and analysis on how your business is functioning with recommendations on how to make improvements. Contact me today for a free consultation.