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If you’re running a small business, you might feel the pressure of uncertainty in our current economy. And because the range of possible outcomes can seem vast, is it even worth planning to manage your business differently during economic uncertainty? Or should we brace for impact and hope we’re still standing when it blows over?
While it may seem like an uphill battle to manage against the unknown, financial advisors recommend strategically managing your business during economic uncertainty to help conserve and protect your hard-earned money. Here are seven tips for managing your business during economic uncertainty.
Related: Small Businesses Can Become Stronger Than Ever With These 5 Essential Strategies
1. Cut unnecessary expenses
Review and evaluate your current expenses to identify areas where you can reduce costs. To start, audit your energy usage to see if implementing better energy-efficient processes can reduce utility costs. Depending on how you manage your business, telecommuting, flexible work arrangements or a virtual office can reduce or eliminate expenses during economic uncertainty. Also, canceling any subscription or membership services you can function efficiently without may be beneficial.
Sometimes, unnecessary expenses are hidden.
You may have excessive office space, more or higher tech equipment than you need or even regular overstaffing that’s draining your budget — audit areas where you can cut back or eliminate expenses during economic uncertainty. Pay special attention to your advertising, branding and marketing dollars and if they produce a worthwhile return on investment. You may find that certain advertising channels work better than others for your target market, making it easy to decide where to cut back and where to focus your efforts.
2. Negotiate better rates
Don’t hesitate to negotiate better deals with suppliers, vendors and service providers. Times of economic uncertainty can be an excellent opportunity to shop around and see if others can offer more competitive pricing. Your existing partners may also see this as an opportunity to provide better rates to retain your business.
Small business owners often don’t have a system or process for checking in with suppliers, vendors, and service providers, but doing so can be vital to conserving cash during economic uncertainty. That way, you won’t leak money and can keep a tight ship when managing your company through this time. Negotiate better rates, then mark your calendar to revisit your rates next year to ensure they’re still the best you can get.
Related: 4 Tips for Small Business Owners as They Navigate an Economic Downturn
3. Increase efficiency
Identify bottlenecks and inefficiencies in your business processes and implement solutions to help streamline them. First, automate repetitive tasks such as invoicing, scheduling and data entry, and outsource tasks not core to your business to free up time and resources. Then, continuously evaluate your process, measure progress and adjust as needed.
Small business owners sometimes find it challenging to adopt new systems and processes that would increase productivity and efficiency. The solutions can take time to learn and integrate, but once they become a part of your business, they can become massive money and time savers, making you wonder how you ever managed your business without them.
In economic uncertainty, think about how you take inventory, schedule staff and bill clients. Consider how and where you market to your customers and if the process can be made easier and more efficient.
4. Diversify revenue streams
Consider offering new products or services to your clients, expanding into new markets and exploring partnerships or collaborations with other companies. You can also create recurring revenue through subscriptions, renting out space or assets, selling digital products or offering consultant or coaching services.
Many small business owners make the mistake of putting “all their eggs in one basket,” so to speak, when it comes to how they create revenue. And while it’s great to specialize and have a niche offering, this can be risky during economic uncertainty, especially if that niche offering is something people cut out of the budget when money is tight.
Getting creative with your revenue streams can help reduce your reliance on any single source of income. Leverage technology to manage your business, widen your reach and tap into new markets while deepening your value offering for existing clients.
Related: 3 Recession-Proof Strategies for Small Business Owners
5. Explore financing options
There are many unique and traditional financing options for small businesses. Look into government grants or loans, like the SBA loan, or consider crowdfunding or private financing options. You may also want to review and renegotiate existing leases and loans for additional savings.
Other loan options include online loans, traditional bank loans, business lines of credit, business credit cards, small business grants and invoice factoring. Crowdfunding options include debt, equity, reward or donation-based campaigns. Each loan, credit or crowdfunding type has its pros and cons. Research each option carefully during economic uncertainty to determine what best fits your needs.
6. Leverage technology
Many software tools and online platforms can help you optimize your processes and make managing your business easier. For example, CRM (customer relationship management) and automation software help make simple, repetitive tasks easier and faster, reducing labor costs and sometimes eliminating the need for certain positions within the business. Look to technology to optimize or automate your current processes, then train your team to do what computers can’t.
Small businesses can be slow to adopt new technology, but this is can be how successful businesses get ahead of the competition. Think of time-consuming things that your staff regularly does. Is there a way to optimize those tasks to save time and money on labor? Then, consider mundane, repetitive tasks that can be automated. Finally, we all know that labor costs are on the rise. Must everything be done in-house and locally? Consider outsourcing to a virtual assistant or an overseas team that can do quality work at a fraction of the cost.
7. Consider temporary cost-saving measures
If your business faces a short-term financial crunch, you may need to implement temporary measures such as furloughs and reduced hours. You can also utilize free or low-cost marketing channels and postpone pricy marketing efforts that don’t have a certain or immediate return on your investment. Throughout the process, be sure to communicate openly with your employees.
Times of economic uncertainty can be scary, and business owners can have difficulty speaking transparently and candidly to their employees — especially if it’s to relay bad news. Cultivating a culture of openness and honesty from the beginning is critical. It will allow your employees to understand and respect your decisions all the more, even if they are initially difficult to receive.
Whether you’ve navigated the ups and downs of the economy for many years or are new to small business ownership, a financial planner can help you explore your options and develop a good plan for you. Learning how to manage your business during economic uncertainty is challenging enough. A good financial planner can make the process easier so you can get to the other side with greater ease and less stress.