Small Business Idea

A recession hits a small business just as much as its been hitting the big banks, multinationals, and other huge companies. The only difference is, instead of posting billions of $’s in losses and announcing 100’s or 1000’s of layoffs, a small business owner simply has to accept the fact that they’re either going to go belly-up or that they won’t be able to afford that extra holiday after all…

How Can a Small Business Increase Profit During a Recession?

A business exists to make money (not to be a hobby.)  As such, it is imperative that more money flow in than flows out.  This is called being profitable.  This is what having a business is all about.

Some people forget that.  Or, having grown accustomed to routines and assumptions and just taking historical margins for granted, some folks hardly notice their business creeping towards being unprofitable.

Especially in the midst of a recession, when purchasing luxuries has dried up for many consumers.

So what can you do about it?

Recession-Proof Your Business

There are two ways to improve your business’s profitability: to make more money or to spend less.

That’s it.

There are no other ways.

Make More Money with Your Small Business

Good luck with that :)  They don’t call a recession ‘tough’ just for fun.

For many businesses, particularly those who supply products or services typically purchased using discretionary funds (money people can choose to stop spending when their budgets get reduced), a recession is simply a time to try to keep revenue neutral or only a few % points down.

Provided you can do so cheaply, this might be a good time to try shifting your small business’s focus to offering products or services that are non-discretionary.  Examples of this include food (people always eat), car tires (who’s going to drive on old bald tires?), accounting services (those books aren’t going to keep themselves), IT support, etc.

But in general, don’t get too bummed out if you don’t increase your revenue over the next few quarters.  Chances are it just ain’t gonna happen.

But that doesn’t mean you can’t increase your small business’s profit.  Far from it.

Spend Less Money with your Small Business

Most businesses spend more money than they really need to when times are good. They try to find ways to increase revenue (make more money) as a part of becoming more profitable.

Common ‘investments’ include swollen marketing budgets, research & development on experimental offerings, expansion-related capital costs, or other boom-time optimistic expenses. And that’s okay - that’s how businesses typically grow.

But what happens when revenues are forecast to stay flat? What happens when there is no new revenue to be found?  How does a business become more profitable then?

Its obvious - they spend less money.

Yet, most businesses keep spending money like before the recession happened.  Go figure.

But you’re much smarter than the average business owner, right?

Concrete Steps You Can Take Today to Save $$$ for Your Small Business

If you are serious about increasing profit by saving money over the coming weeks and months (so you can afford that holiday), here are several specific services to check out.  Each of these offers cost-cutting efficiencies unheard of only a few years ago:

In addition to trying new tools, be sure to review all of your budget items with a critical eye. Ask yourself, “if I stopped spending $ on this, what would happen? Is this expense really needed to satisfy my clients’ (and my) needs?” If the answers are no, pull out the axe!

Time to Get Started!

If you believe the saying, “there’s no time like the present,” I guess the time to start saving money is now.

In one of my own business, I have recently cut approximately 70% of expenses, which goes a long way to making that 20% drop in revenue seem less severe!