In times of economic or business downturn, companies face the challenge of managing their finances effectively to ensure their survival until the market makes an upturn. While cutting costs and reducing expenses are common strategies, they may not be enough to guarantee a company’s long-term sustainability.
To ensure they have adequate financial resources in place when the economy rebounds, companies must adopt a proactive approach and explore various financing options available to them. Below, 20 Forbes Business Council members discuss some effective ways for companies to secure financial resources during a downturn so they can survive and then thrive when the market improves.
1. Prepare Before The Downturn
Most companies put finances on the back burner because it isn’t “sexy.” When an economic downturn happens, it is the only thing that can help ensure stability. I believe that a company can have adequate financial resources if they prepare their “house” before the downturn. Start by planning and preparing during the good times so that you can ensure stability when things don’t go well. – Brady Slack, High Country Finance, LLC
2. Employ A Lead Generation Process
Implement an anti-cyclic marketing and lead generation process so that during economically harder times, you still have a constant stream of potential customers to follow up with. If you have to react whilst the economic challenges are on your doorstep, you are probably too late and you will likely have to cut down on the organizational investments you have made. This will ensure a major setback can be avoided. – Marielle Dellemijn, Fueld
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3. Practice Resilience
Focus on value always and invest in creating the value that resonates with your customers, not those you care for. It is about simultaneously being defensive on risk and offensive on growth. Reduce your decision cycle, believe in the value of data and analytics and build a culture that is not focused on monetary compensation and can survive uncertainty. – Sid Mohasseb, Anabasis, Inc.
4. Keep Your Stakeholders Updated
If you’re a startup, make sure your investors know how much runway you have left. If you borrowed from a bank, let them know if you expect to have trouble paying your bills and work with them to resolve it. It’s tough for everyone during these times, but you’ll be surprised how much better it is when expectations are set and there’s transparency. – Gil Eyal, Stardust Ventures
5. Redirect Spending
One way to ensure adequate resources is by focusing on core business and redirecting spending towards areas with the greatest return on investment (ROI). By concentrating on key offerings and optimizing allocation, businesses can strengthen their finances, reduce questionable expenses and maximize profits. This strategic approach enables businesses to be prepared for upturns and capitalize on emerging opportunities. – Blake Plumley, BluWater Capital LLC
6. Stay On Top Of Collections
Cash flow is king in times like now. Be on top of collections, making sure to have constant conversations and communication with your bank to let them know the situation at every given moment and, as such, make them a partner to keep your credit facility in line. – Rotem Eylor, Republic Floor
7. Consider Your Cash Flow Management
Focus on cash flow management. This could involve cutting nonessential costs such as travel or entertainment, renegotiating contracts with suppliers or vendors or implementing cost-saving measures such as reducing inventory levels. – Greg Welborn, First Financial Consulting
8. Prioritize Saving
It seems ridiculously obvious, but companies can safeguard their financial future in one simple way—save! The problem is that companies are like individuals and suffer a form of present bias where the focus is on the benefits of today at the expense of tomorrow. This current focus prevents them from thinking long term whether it’s about saving or succession planning. – Nuala Walsh, MindEquity
9. Strengthen Relationships Before You Need Them
Relationships matter so much during a downturn, and they are so much harder to develop when you are in crisis. When things are going well, invest time and energy in getting to know your bankers, potential investors and other options for financial support. That way, you have known resources to tap into when you need help during a challenging time. – Julie Williamson, Karrikins Group
10. Be Financially Conservative
Adopt a conservative financial strategy that focuses on reducing costs, conserving cash and improving efficiency. Cut costs by reducing discretionary spending, renegotiating contracts and prioritizing investments in essential business areas. – Yasmin Walter, KMD Books
11. Know Your Economic Breakeven Point
During a downturn, it’s most important to know exactly what your economic breakeven is as a company or how many months in reserves you have to sustain a loss. It’s important to not make future growth decisions based on current financial constraints, but you cannot spend freely either when the future is uncertain. Conservative budgeting based on real data is imperative. – Ralph DiBugnara, Home Qualified
12. Look For Alternate Means Of Funding
The key is to reduce expenses and conserve cash as much as possible while also exploring alternative funding sources such as government grants, loans or crowdfunding. Companies can also improve cash flow by tightening credit and collecting outstanding payments. Finally, businesses can explore strategic partnerships or mergers and acquisitions to increase resources and improve competitiveness. – Jacopo Dalessandris, Canidae
13. Focus On Cash Management
By reducing their expenses, conserving cash and developing a detailed cash forecasting process, companies can adapt to any changing circumstances and emerge stronger. Effective cash management during downturns can help companies maintain financial stability and achieve long-term success. – Michael Shribman, APS Global Partners Inc.
14. Create A Comprehensive Budget Plan
One effective strategy for a company to secure adequate financial resources is to establish a comprehensive budget plan. By anticipating future expenses, tracking revenue sources and monitoring cash flow, businesses can stay on top of their finances and make informed decisions. Maintaining a reserve fund, seeking alternative financing options and increasing operational efficiency is vital. – Leigh Burgess, Bold Industries Group, Inc.
15. Be Aware Of Where Your Money Is Going
Audit and understand where cash is flowing out of the business, reduce superfluous spending and spend carefully moving forward. Economic downturns are great times to double down on marketing because competitors often cut marketing spending first. Additionally, focus on upselling and cross-selling existing customers, as it’s easier to increase revenue with them than it is to acquire a new customer. – Ty Allen, SocialClimb
16. Establish A Cash Reserve During Stable Times
By diligently saving and reducing operational expenses, companies can build a financial cushion to weather downturns. This can maintain core operations, engage in strategic opportunities and pivot the business model during economic recovery to profit on the upturn. – Dustin Lemick, BriteCo
17. Focus On Maintaining Healthy Cash Flow
During an economic or business downturn, it is important for companies to maintain a healthy cash flow and manage their debt. It can also be beneficial to have financial reserves in place that can be used to help the company weather difficult times and invest in key areas when the upturn comes. – Tomas Keenan, Step It Up Academy
18. Keep Marketing Your Offering
We continue to aggressively market and advertise our services. As Jimmy Stewart said as George Bailey in It’s a Wonderful Life, “Potter isn’t selling. Potter’s buying!” We continue to optimize our marketing and advertising budgets to take full advantage of the economic rebound that always comes. – ‘Smitty’ Robert J. Smith, Robert J. Smith Productions
19. Scale Back Without Impacting The Core Business
During an economic or business downturn, it’s important for companies to conserve their financial resources and prepare for the eventual upturn. Companies can take advantage of the downturn to reassess their operations and identify areas where they can cut costs without impacting their core business. This may involve reducing staff, consolidating facilities or scaling back on nonessential expenses. – Patrick Mensah, WallStreet Investment
20. Optimize Your Operations
To survive a downturn, companies can optimize operations, reduce waste, invest in sustainability and adopt ethical practices. This can differentiate them from competitors and build customer loyalty. By focusing on long-term growth and social responsibility, companies can thrive in any economic environment. – Mo Rafi, Rafi Credit Consulting
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