Because recessions tend to hit the United States economy every 11 years, the next one may happen in 2020. When a recession occurs and consumers pay more attention to their spending, odds are your revenues go down. By reducing your debt, managing your inventory and marketing a mix of current and new products or services, your business is more likely to survive. Find out how to prepare for a recession by evaluating your expenses now.
Review Compensation Policies
Stay away from committing to more fixed compensation benefits. You need all the funding you can get to cover daily operations. Consider modifying compensation policies to focus more on variable compensation that rewards employees’ performance rather than guaranteeing raises.
Reduce Discretionary Expenses
Reconsider your company’s policies for travel, per diems and office supplies. Look into subleasing part of your office space to offset lease payments and office space expenses. Evaluate vendor output to determine whether you can put a hold on online advertising, web design or other miscellaneous services.
Pay Off Debt
Owing less money increases flexibility in paying your expenses. Tackle your highest-cost balances first, and secure the lowest possible interest rates for your remaining debt. See if you can consolidate credit card debt onto a low- or no-APR card to reduce your monthly payment.
Identify Essential Products and Services
Define which products and services are your best and most profitable. Protect them from cutbacks in quality to maintain your company’s identity. Also, maintain your product development operations. New products can separate your business from the competition. Or, you may create a simplified, lower-priced version of the goods or services you already offer to capitalize on consumer price sensitivity. Even if overall demand for your products and services declines, you have an increased chance of prospering.
Keep just enough inventory on hand to fill customer needs. Excess inventory may end up being sold at below-market prices, resulting in a significant loss. Avoid ordering too much of a particular product. If possible, choose drop shipping to eliminate shipping and warehousing costs. Determine whether items can be purchased elsewhere for a lower price while maintaining the quality your customers expect.
Shop Insurance Policies
Because prices tend to change annually, get quotes from multiple providers when renewing or purchasing a policy. You may receive additional coverage at a reduced cost, especially if you bundle your policies.
Increase Your Line of Credit
You may need a higher limit to cover expenses during an economic downturn. With repeated on-time payments each month, you are perceived as a lower credit risk and may gain flexibility in borrowing money.
Use a Back-Office Solutions Provider
Outsource your back-office processes to USA Staffing Services. Our experienced professionals can handle workers’ compensation, payroll funding and administration, accounts receivable management and more. Reach out to us today!