The start of the year is already marked by uncertainty and will likely continue on a similar trend due to elections happening in various key areas of the world. If there’s a change in political power, there will be a change in policies, which may alter trajectories for inflation, borrowing costs, currency values, trade/capital flows, and production costs.
There’s some good news, as well. The global economy is expected to stabilize at a steady but subdued growth rate. However, the most gains will happen in emerging markets and developing economies (EMDEs).
Wherever you are in the world, this is no time to let your guard down. Uncertainty leads to volatility, which is never good for small businesses. The best thing you can do is prepare for what’s to come.
In this article, we discuss several key steps small businesses must take to remain resilient against economic shifts.
Build Financial Resilience
Cash flow is the lifeblood of your business, so focus all your efforts toward its proper management. During economic growth, you can be more relaxed and invest your time and efforts into generating revenues.
However, when the economy is volatile, you must make sure you maintain positive cash flow. For this, you must learn how to balance liquidity, minimize debt risks, and optimize costs.
First, make sure you have enough cash reserves to cover 3 to 6 months of operating expenses, like payroll, rent, and utilities, to cushion against unexpected downturns.
Second, reorganize your debt. Reduce high-interest obligations as much as possible and work on building a strong credit score. This will help you access affordable financing, like SBA loans or business development programs available in your state.
Side note: Affordable funding usually comes with extra conditions and limitations, so it’s important to understand SBA loan requirements as well as the requirements of any other funding programs you’re considering.
Lastly, audit your expenses and trim non-essential spending. Check your monthly expenses, renegotiate vendor contracts, and leverage automation tools to streamline operations without compromising quality.
Make Full Use of Technology & Innovation
Technology is an important ally as it allows you to reduce costs and improve efficiency. Over two-thirds of small businesses already use AI-driven solutions to streamline workflows, and this number is expected to grow by the end of the year.
Another way to cut down costs is to migrate to cloud platforms. This makes remote collaboration easier and improves data accessibility. However, make sure to prioritize cybersecurity – this is one expense you can’t afford to be stingy with.
If you haven’t worked on your digital presence yet, now is the best time to start. Use e-commerce platforms and social media for marketing and sales. Digital channels drive better customer engagement and revenue, so it’s easier to find clients even during tough times.
Also, don’t ignore the need to upskill your employees. Train them on emerging tools like AI and cloud-based collaboration software to boost productivity and efficiency. Yes, it’s an added expense, but it is necessary (check with your state for existing subsidies or programs).
Wrap Up
Tough times don’t last; tough people do. Focus on building financial resilience and invest in technology to mitigate risks and maintain your competitiveness even if things aren’t looking quite rosy right now. Stay resilient, take care of your business and employees, and focus on growth.
