Five tips for surviving the current economic turbulence
The volatility in the global economy has created a dramatic and confusing landscape leaving small businesses uncertain about their future and what they should be focusing on. While it's almost impossible to predict what will happen on a global scale, a focus on the core business basics is your best line of defence and will leave you well positioned to take advantage of opportunities when they come your way. Here are five tips to help your business survive the likely turbulent ride.
On this page:
- Watch your costs and profit margins
- Focus on high-profit sales
- Improve your debt collection
- Reduce your costs
- Get social
Watch your costs and profit margins
You're likely to be facing demands for increased wages, rising transport costs and higher prices from suppliers. These cost increases can add up quickly and both erode your profit margins and increase the number of sales you need to make in order to break even. This means you'll either need to increase prices to earn the same profit per item or sell more in order to earn the same amount of profit.
Some tips:
- Work out your cost of sales on each item you sell.
- Keep a record of how much profit you make on each item you sell.
- Plan to increase your prices to absorb the higher costs. Read more about setting prices and controlling costs to help you do this effectively.
- Work out the level of sales you need to break even and monitor your sales performance.
Focus on high-profit sales
When you're worried about making ends meet, it's easy to fall into the trap of chasing every sale. Each sale you make does mean more money flowing into your business – but it pays to remember that not all sales are equal. Sales with a high profit margin are more lucrative and bring more money into your business, and this is where you should focus most of your efforts.
Some tips:
- Work out which of your products and services are the most lucrative for your business.
- Focus on selling the items that will make your business the most profit.
- Find ways to add value so that you can increase your prices and profit margins on other lines as well.
- Investigate ways to increase your profit.
Improve your debt collection
Payment defaults are likely to increase as your customers come under increasing financial strain. Tight credit control procedures including credit checks, credit limits, immediate billing and prompt debt collection will help to limit your exposure to bad debts and reduce the possibility of a cash crunch that could negatively affect your business.
Some tips:
- Always run a credit check before granting credit.
- Bill promptly and follow up outstanding payments immediately to increase your chances of being paid.
- Offer early settlement discounts to encourage prompt payment.
- Find out more about managing debtors and try this free online lesson on how to collect debts.
Reduce your costs
You don't have to increase sales to increase your profit. Reducing your costs can go a long way to increasing your profitability. Look for ways to cut overheads and fixed costs. Can you reduce your electricity bill or telephone costs? Find ways to reduce production costs through sharper prices, sourcing new suppliers, using new technology or developing more cost-effective products or services.
Some tips:
- Draw up a list of your larger monthly business expenses and brainstorm ways to reduce these.
- Don't ignore the smaller cost savings from switching the heater lower to teleconferences instead of travelling to meetings.
- Find out how much money you are really making and assess your business's financial health.
Get social
Social media isn't a passing trendy fad. These online platforms give you immediate access to your customers at a fraction of traditional advertising costs. Find out where your customers hang out online and take part in the conversations. Manage your reputation, post helpful videos, write informative blogs, run competitions, grow your e-newsletter subscriber base and drive traffic to your website. Use social media to turn your business into a well-supported brand.
Some tips:
- Ask you customers which social media networks they use, and sign up.
- Social media is all about engagement rather than direct sales – find a way to add value as a member of a growing online community and social media will work for your business.
- Find out more about using social media and getting the most out of social media.
