Preparing small business for coronavirus and recession
What does coronavirus mean for my business? What do lower interest rates mean for small business? Do you know how to prepare for a recession?
The world is spooked by COVID-19 and the markets are falling. Sequoia Capital issued a letter to portfolio companies calling Coronavirus “The black swan event of 2020.” As Coronavirus cases in the US mount, every entrepreneur owner should be asking themselves: “what am I doing to prepare my business for the next recession?”
At CFOshare, we encourage our clients to perform downturn planning before signs of the recession begins. This enables decisiveness making in the face of uncertainty. Now and the next few months are the time to review and update the plan with the information you have.
Even if you don’t already have a downturn plan, we believe it is better late than never to find ways of surviving a recession. Here are some steps to create or update such a plan.
How to Protect your Small Business in a Recession
Build a small business forecast
Small business forecasting helps you measure runway, anticipate challenges, and use data to validate your instincts. Check out our how-to on business forecasting, or learn about how a professional forecasting service works. Knowing shortcomings in your business is the first step in preparing for a recession.
Perform Recession Planning
Every business is a snowflake – no two recession plans are alike, and your plan may evolve throughout the recession. Revisit your plan with key managers weekly or monthly during a recession to keep the team aligned.
Pivot into growth markets
Every recession creates opportunities. If you identify a new growth market for your company, be sure to measure the risk and uncertainty with a pro forma financial model. These models will clarify your growth strategy and determine if you have enough capital to make the pivot.
How to Take Advantage of the Recession
Invest in ad channels with dropping customer acquisition costs
As your competition slashes their sales and marketing budgets, you may see advertising costs drop. Boldly pursue these opportunities to grab market share. Just be sure you understand and measure your CAC, and keep an eye on customer lifetime value (LTV). CAC values can also rise in a recession, so you will need to be tactical with growth plans.
Hire away from competitors
Take advantage of your competition’s weakness to recruit good talent.
Buy a business: strategic acquisitions in a downturn
Recessions are a great time to buy companies at a discount.
Hire small business finance professionals
When facing a situation your business has never encountered, bringing on professional experience can be a critical decision. Listen to one of our customers, The Receptionist, as they share things to consider when hiring a fractional CFO in this podcast.
No matter your background, the important thing is to perform some kind of recession planning.
LJ Suzuki is the founder of CFOShare.