How Delafield, WI Small Business Owners Can Safeguard Their Companies Against a Recession
In these uncertain times, it's more important than ever for small business owners to take steps to protect their companies from the effects of an economic downturn. While it's impossible to completely recession-proof your business, there are steps you can take to lessen the blow. In this post from the Delafield Chamber of Commerce, we'll discuss some of the best ways to do just that.
Reduce Debt and Cut Expenses
One of the most important things you can do to recession-proof your business is to reduce your debt and cut expenses wherever possible. This will not only free up cash flow in the event of a downturn, but it will also make your business more attractive to potential investors. To start reducing debt, take a close look at your expenses and see where you can cut back. For example, you may be able to negotiate better terms with suppliers or reduce marketing spend. Cutting costs doesn't have to mean skimping on quality — it simply means being more mindful of where your money is going and how it could be better spent.
You may find that your filing needs a little updating during this process. Take the opportunity and get everything up to speed at once. Not only will it help you to see exactly where you stand financially now, it will help you to keep track of your finances more accurately moving forward. And if you find that a PDF would be best separated and then filed, then separate the pages using a free online tool. The point is to make an organizational system that you can follow, so take the steps needed to create that system.
Update Invoicing for Quicker Payments
Another way to improve cash flow during a recession is to update your invoicing system so that payments are received more quickly. This may mean switching to electronic invoices or setting up automatic payments for customers who routinely pay late. Quicker payments will help ensure that you have the cash on hand to meet obligations even when revenue is down.
Take a Look at Your Company's Legal Designation
For some businesses, a new designation can save money and help recession-proof the company. For example, you may be able to save money by becoming a limited liability company (LLC), according to Grasshopper. An LLC provides the same limited liability protection as a corporation but is taxed like a partnership, which can be a more tax-efficient structure for small businesses.
Another option is to form a sole proprietorship or an S corporation. These structures are simpler and less expensive to set up than LLCs or corporations. However, they offer less protection from personal liability. No matter what business structure you choose, make sure you consult with an accountant or attorney to get the best advice for your specific situation.
Re-Evaluate Your Business Structure to Save Money
In addition to cutting costs, another way to recession-proof your business is to re-evaluate your business structure and make changes that will save money in the long run. For example, you may want to consider downsizing your office space, moving to a less expensive location, or switching to remote, if possible. You may also want to outsource non-essential functions like accounting or IT. By making these kinds of changes now, you'll be in a better position financially if a recession does occur.
Create New Revenue Streams
Finally, one of the best ways to recession-proof your business is to create new revenue streams that are not dependent on the health of the economy. For example, Reloadly suggests you may want to consider diversifying your product offerings so that you're not as reliant on one particular market or industry. You may also want to browse the internet for some innovative ideas that could help your business weather any storm. By having multiple sources of income, you'll be in a much better position if one area of your business begins to struggle during tough economic times.
Plan to Persevere
While no one can predict the future, small business owners can take steps now to protect their companies from an economic downturn. By making strategic changes to how they run their business and manage their expenses, small business owners can give their companies a fighting chance in any economy. And whenever it’s possible, rely on free online tools!
If you’re ready to grow your business with the help of great local resources and partnerships, join the Delafield Chamber of Commerce.
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