Rising geopolitical tensions. The COVID-19 or CoronaVirus scare. A slowing Chinese economy that could throw the rest of the world into a recession. Brexit.
These are not just alarmist terms intended to cause fear but a very real fact of life. Being entrepreneurs, risk is a part of our vocabulary and all of this can be managed with some careful planning.
As we’ve talked about before, recession proof businesses are your best bet in such unsure times. However, not all entrepreneurs have the luxury of switching over to another business and not all businesses will remain recession proof forever.
Hence as a savvy entrepreneur, you should instead look towards turning your business into one that is able to withstand even the harshest of recessions. While all of this is definitely much easier said than done, it is very much doable.
So, if you’re looking to build a business that can weather any storm, we’ve put together some tips and tricks that you’ll find surprisingly useful.
1. Diversify your customer base
As the old saying goes, you should never put all of your eggs into one basket. During the early days of your business, it can be tempting to focus on a select few customers who bring in the most value to your business.
However, doing so increases the risk of one becoming overly reliant on these customers. In the event of an economic downturn, losing the business of said customers can easily spell the end for your enterprise.
In such dire economic times, diversification is crucial to success. Instead of relying on a few anchor customers, spread out your revenue sources and reach out to a wider customer base.
For example, instead of only offering copywriting services, Harold decides to expand his repertoire of skills by taking on projects related to media and website design. From here his agency is able to offer a greater variety of services to their existing customer base whilst diversifying his business risk.
2. Build up your war chest
A war chest is used to describe a collection of specialized tools or money intended for use in times of great danger. In the medieval era, lords and knights of the land store arms and suits armor in a secure chest hence the term, war chest.
While you won’t have much use for suits of armor or swords nowadays, having a tidy sum of cash stored in reserve can make all the difference for your business during a recession.
Cash is the lifeblood of any business and without it, you won’t be able to pay suppliers, keep the lights on or even keep your employees on the payroll. Experience has shown us that time and time again, cash flow problems have killed more than one successful business.
Every month set aside a percentage of your net profit to be parked into a business account where it can be kept in reserve. As time passes on, you’ll be able to amass a healthy amount of cash that will help keep your business afloat during the tough times.
3. Expand your borders
A business should not be constrained to mere borders. Instead of focusing on domestic customers, entrepreneurs should look towards taking their business overseas and beyond borders.
For example, if you are a sports fan, instead of only betting on the NBA expert picks in BetAmerica.com, try to search for other leagues too. Bet on the Euroleague for example and even start following other sports to broaden your betting range.
Thanks to the connectivity offered by the internet and a global logistics network, even the smallest of enterprises now have the opportunity to market their products and services to an international audience.
Depending on the market conditions of your customer’s country, chances are you’ll be in a better position to offer a superior product or service as compared to that of local competitors thus giving you a much-needed edge.
The path taken by an entrepreneur is not an easy one and is often fraught with challenges. However, with careful financial planning and discipline, you’ll be able to build a business that can withstand the wildest storms.