Cash is always King, but particularly so in the crucial period from startup to midsize business. Generally, this time in the business lifecycle is characterized by funding challenges. Many organizations fail to make it to the next level, where cash flows more smoothly than in those lean startup years.
In light of everything that has happened in 2020 so far, how can your business prepare for hard times? If our “new normal” is a fluctuating economy, what does a small business need to do to stay ahead of the game?
Preparing for the Unexpected with a Cash Reserve
Preparing for the unexpected is essential, no matter the size of your business. But for small companies, preparing for marketing declines is critical for survival—particularly as businesses are just starting out.
Having a cash reserve should be an essential part of your business strategy from the moment you open your doors. Late last year, the Small Business Credit Survey showed that 17% of small companies said they would have to sell or close their doors if they didn’t have revenue coming in for just two months. The survey, sponsored by the Federal Reserve Bank of New York, also found:
- 47% of participants said they would use personal funds to keep their business running during a rough patch.
- 37% said they would have to reduce salaries.
- 34% reported they would lay off employees.
- 33% predicted they would downsize operations.
Only 14% of the small businesses surveyed said they had enough cash reserves to get them through two mouths. Sadly, the survey came out before the COVID-19 pandemic; we hope these companies made it.
Get Smarter About Inventory Management
Small companies should carefully consider their costs of holding inventory. Is there anything you can do to cut inventory without inconveniencing customers or sacrificing the quality of your products? Do you have a lean ordering system and several backups for your supply chain? What about drop-shipping to cut down on your warehousing costs? Rethink your supplier network and take the time to get savvy about the prices you’re paying and your inventory on hand.
Go After the Competition
Customer retention is your number one job. You want to be certain that your clients stay with you and become repeat buyers. Investing in training your customer service teams to outshine your competition is the best way to keep them coming back for more. But growth happens when you being to add new customers on top of the existing ones. If you’re adding on new clients, that usually means you’re stealing them away from your competitors. Start thinking creatively about how you can specifically target your competitor’s clients and then go after them.
All of these steps will help your small business stay ahead of unexpected downturns, whether it’s a market shift or a global pandemic.
Exelare offers recruiting automation software designed to help you reach more candidates more quickly. Talk to our team today to find out how our state-of-the-art platform could be a game changer for your entire organization.