Economic downturns can have a tremendous impact on people and businesses. Yet many businesses have managed to grow and prosper during times when others were going under. There are obviously ways to survive in even the worst depths of a recession. Here are some things that can strengthen your business and help ward off the worst during a business slowdown.

1. Strengthen relationships with customers. It costs money to attract new customers, and money is what businesses usually run short of in the lower part of a cycle. Market heavily to your existing customer base and do all you can to bring their next purchase forward to maintain cash flow. Present them with special offers and extra attention – if they’ve bought from you before, they can be encouraged to do it again. If you’re offering special discounts, make sure your business can afford them.
2. Keep an eye on your industry and competition. Monitor your industry and others in your line of business and be alert for any signs of success – not only to help you remain competitive, but to ensure you don’t miss out on opportunities. Get active in your industry association or chamber of commerce to keep up with other businesses in your community. Contact leaders in your industry around the country and share information.
3. Negotiate a better deal with suppliers. If times are tough for you, they’re tough for others as well, and that includes your suppliers. This gives you the opportunity to negotiate better deals or time payment terms on everything you purchase, from office supplies to raw materials. You can achieve discounts by agreeing to pay by a specific date instead of waiting until the end of the month, or by centralizing your purchasing with one supplier.
4. Consider new products or services. The bottom of economic cycles can be an excellent time to introduce new products to the marketplace and cross-sell them to existing customers. The costs of labor and materials can be low compared to better times, and customers will be looking for simpler products that cost less than expensive versions, but still meet the same needs. Products with higher margins can be repositioned and sold into new market segments at lower prices.
5. Carry out maintenance. When business is booming it’s often hard to find enough time to maintain business premises and equipment. It can be difficult to schedule repairs when equipment is running at peak capacity. A slowdown presents the opportunity to look after the condition of your business assets and get them ready for the next upturn. Plus, it’s a great time to evaluate processes and bottlenecks that occurred during the last boom and focus on how you can be better prepared next time.
6. Look for production cost savings. Keep an eye on your finances. You might not have had the time or the incentive before to really look at ways to reduce costs; now you must. Review all expenditures and see where costs can be reduced, or eliminated altogether. A lot of expenditures becomes habitual and is done without much regard to the value returned from it. Do some comparison shopping for everything you need to purchase, and you may be pleasantly surprised at the savings that are possible.
7. Control credit. Be firm with the application of your business’ credit policy. Talk with your major customers and explain that you need their payments on time each month so you can continue supplying them with the goods or services they need and still meet your own commitments. Don’t let accounts become overdue and keep an eye out for skipped payments; contact customers the day an account is due for payment. Offer to collect payments from local customers. The worst thing a business can do during an economic contraction is to ignore their cash flow.

For more information on navigating your business during a downturn, contact Doeren Mayhew’s CPAs and business advisors.