Are you worried about your business’ ability to survive the current COVID-19 induced recession? Not sure what you should do to stay afloat in these turbulent times? Our Chestermere accountant has cobbled together three ways you can make your business more recession-proof to help give you some guidance.
The “Great Lockdown” as the IMF is calling it has thrown the global economy into a tailspin. The Canadian economy is expected to contract by 6.2 per cent this year, as global demand for oil has disappeared amid the chorus of nations telling their citizens to stay home as much as possible to prevent the spread of the virus. The road ahead for Canadian businesses will be an unprecedentedly rocky one, and many will not make it through the journey. With that in mind, our CPA Chestermere financial expert has put together three ways your business can try to weather the storm by making your operation more recession-proof.
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3 ways to make your business more recession-proof
As a business owner, you know your revenue and cash flow are critical to the sustained success of your company. But during a recession, there are some lesser known (and perhaps counterintuitive) strategies you can employ and integrate into your operations to bolster your ability to survive the current economic storm. Here are the top three ways to do so, according to our Chestermere accountant.
1. Expand your revenue base
If you’re wondering how can a business overcome obstacles during a recession, diversifying its revenue stream usually tops the list. While increased revenue is always a good thing, having different avenues for that revenue to come in is even better. During a recession it doesn’t take long for your buyer’s problems to become your problems, which is why you shouldn’t have one customer account for more than 10 per cent of your total revenue, or your top five customers account for more than 25 per cent. Try to find ways you can increase your customer base, in addition to identifying other products or services that you might be able to offer. This will help you avoid becoming collateral damage should one of your main customers not be able to survive the recession.
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2. Get lean
During a recession every expense must be looked at under a microscope. You’ve got to determine which ones are discretionary, and which ones are essential to your operation. Perhaps you’re spending a bit too much on office supplies, or can afford to cut back on them without compromising productivity. After salaries, one of the highest expenses for most businesses is the money they pay for their leased office space. You might be able to sublease some of your space to offset your reduced revenues, or work with your landlord to reduce your rent during the recession. As landlords are loath to lose good tenants, especially during uncertain economic times, you may find yours to be much more willing to help than you initially thought.
Unsure of everything the federal government has unveiled to help businesses through COVID-19? Our Chestermere accountant has put together a list of all the measures to date.
CANADA’S COVID-19 RESPONSE FOR BUSINESSES
3. Don’t forget about marketing or your current customers
After reading the above paragraph, you might think that your marketing budget is one of the places where you can get lean. While there are certainly marketing costs you may want to tighten your belt on, be careful of overdoing it. A recession causes people to reevaluate their purchasing habits, which is why it’s so important that your business is still visible and there to sway these restless customers towards your products or services. Don’t forget about your current customers during this time either. They can often be your cheapest route to acquiring new business. Be sure to check in on them and perhaps offer them a loyalty incentive as a way of showing your appreciation. You never know when they’ll repay the favour by sending new business your way.
IAPC is here to help during COVID-19
If you’re concerned about the state of your business’ finances or taxes in light of the ongoing pandemic, book a free consultation with one of our trusted Chartered Professional Accountants today and let us help guide you through this uncertain economic time.
