How Your Small Business Can Survive An Economic Slowdown

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How Your Small Business Can Survive An Economic Slowdown

America is the best country to live in. We have our freedoms, and, for the most part, we can do what we want, when we want to do it. America is also a country that uses capitalism as its economic foundation. This means that private companies, such as your small to medium-sized business can operate how it wants, sell what it wants, and make profit off these ventures (within the law, of course). Goods and services are produced off supply and demand, which is known as a market economy. Capitalism is a wonderful system that allows businesses to profit as much as their products are in demand, and it allows consumers to have the goods and services that they want when they want it.

However, because of the fact that our economy is based on supply and demand, it can be cyclical, meaning that if demand plummets, it will be hard to sell your goods. Or, if an outside event out of your control, such as an errant virus or a war, threatens people and/or the economy, people could stop buying. This creates too much supply, and the prices of your goods fall. Facing economic slowdowns and recessions is part of being in business. It is to be expected and planned for. So what does your small business do to survive an economic slowdown?

The Hedaya Capital Group in New York offers working capital solutions for small to medium-sized businesses. We offer factoring services, accounts receivable (A/R) financing, import and trade financing, and credit protection services. We understand that sometimes you cannot qualify for a traditional commercial bank loan. We're here to help. Our small business financing solutions can get you access to the working capital you need, when you need it. Below, we'll offer up tips on how your small business can survive an economic slowdown. Contact us today to get started!

tips to survive and economic slowdown infographic


Ensure Cash Flow Needs

In essence, without cash to function, your business could suffer irreparable damages to the point you go out of business. In fact, a study done by U.S. Bank says that poor cash flow management is the cause for 82% of small business failures. That number is huge. Cash flow, or the movement of money in and out of your small business cannot stagnate in a downturn. It needs to keep flowing, and you need to have access to cash in order to keep operating.

There are many ways to ensure your cash flow at least keeps flowing, even if it's slower than before. You can slow down what you are purchasing, in order to slow down cash outflows. You can speed up your production, or what you are selling, in order to increase cash inflows. You can rally your team and get them to be more productive than ever before. You'll have to tighten your belt, and so will your staff who will have to learn to manage without donuts on Fridays and who will have to work harder than ever before.

Another great way to ensure your business has the working capital it needs to survive an economic slowdown is to get financing. Ideally, you would have access to financing solutions before the market takes a turn for the worse and banks decide to tighten up lending. A business line of credit or a business credit card is a great option to have available, even during good economic times.

As such, if traditional banks are tightening up lending during economic slowdowns, you can always turn to alternative forms of investing, such as those offered by The Hedaya Capital Group in New York. We offer factoring services, where you can sell your accounts receivable, or your invoices, to us (this is also known as A/R financing). We will then give you a percentage of the face value of your invoices, usually around 80% for you to use as working capital. We then collect the invoice from your creditors, give you the remaining 20% minus our factoring fees. It truly is that simple. You receive working capital often within 24 hours of when you need it.

The Hedaya Capital Group also offers PO financing, or purchase order financing. In this type of financing agreement, when you get a big order from a customer, but you don't have the working capital to fulfill it, you can contact a PO financing company such as us who will pay the supplier for you so you can get the goods you need to complete the order. You can think of this as a cash advance on expected income, such as if you were to advance your kids their allowance in order to buy a toy they want now rather than later. The PO company, or we, will then collect on the invoice of the order for you. We then will collect our fees for this service from the invoice, while sending you the remaining amount.

Review Your Inventory Practices

For many small businesses, inventory and sitting on inventory can be a big expense. Inventory is effectively cash sitting in the form of a toy doll, coffee packages, mugs, or whatever it is you sell. Thus, you'll want to take a hard look at your inventory and see what you can trim down without impacting the customer experience i.e. running out of wanted items. This will involve taking a hard look at your sales numbers (we know, no one really likes number crunching except for accountants) and seeing what you can order less of, what items could perhaps be procured elsewhere for a better price, and what items could temporarily be dropped altogether.

In addition, while you may be loyal to one supplier, when times are lean, it may be time to switch. After all, you have to ensure your business survives first before you can worry about others. Thus, you may have to begin to shop around for cheaper alternative suppliers as well.

Diversify and Concentrate

While these two ideas may at first seem opposed, hear us out. One of the best ways to weather an economic downturn as a small to medium-sized business is to diversify, or have multiple ways in which to earn money. This way, you aren't relying on only one product or service if the recession you are facing has thrown that product or service to the wind. It's the old adage of "don't put all of your eggs in one basket." You'll want to look for ways to offer complementary services, or engage in different ways to sell your wares, such as affiliate marketing, recurring membership subscriptions, one-on-one services, or even ad revenue. When the economy nose dives, unless it's an economic depression, some wheel is always turning. Your goal as a small business is to be on at least one of those wheels.

That being said, an economic downturn is not the best time to launch a new product or service. Instead, it's time to buckle down on your bread and butter. For instance, a company like Apple will want to push their iPhones hard during an economic recession because people always need phones. They will want to pull back on the more luxury items they offer, such as iPads and computers, that people will postpone buying. Thus, identify your core competencies and continue to ensure that those products and/or services are at their best.

Keep the Clients You Have!

All small businesses know that to grow, you need to be continually adding in new clients, marketing to these groups, and even offering specialty items to cater to their needs. However, the cost to acquire a new customer will far exceed the cost to keep your existing customers. In fact, acquiring a new customer can cost five times more than retaining your old ones. You'll want to reward your current customers who love you anyways and will keep coming back.

The Hedaya Capital Group in New York suggests that you offer special rewards days or discounts to existing clients via email and/or social media. Even just handing out a sticker for visiting can go a long way in keeping your existing clients happy. Remember, they like you anyways, so the little gestures can go extremely far, especially if they are suffering from the downturn as well.

One more bonus with happy customers is that happy customers turn into raving customers who will promote your business every chance they get, especially if you've just rewarded them. This is free marketing and exactly what you need when the economy is not at its best.

In addition, you can continue to market to the clients you have. Take every point of contact as an opportunity, which your sales team should embrace whole-heatedly. Even though the economy is in a downslide, people still have to purchase goods and services. With marketing, you'll want to make sure that it is your goods and services they are buying.

Think Outside the Box

When your world is turned upside down, you turn upside down with it, meaning you will have to flip your thinking, adjust course, and think outside the box in order to generate ideas and solutions for your small business needs. A great example of this is with the recent coronavirus outbreak. Many businesses were shut down as a result. Here, they had two choices: do nothing, or evolve and offer new services. Many did. For example, gyms began to offer at-home workouts for their members, hair salons began delivering their hair products, and coffee shops went to drive thru only. When the economy tanks, you have to rise to the occasion, be better than your competition and innovate like you've never done before. With the survival of your business on the line, all ideas are on the table. When the going gets tough, you get tougher. The Hedaya Capital Group in New York wants to remind you that this is just a large wave in a calm sea. Soon enough, it will pass, and all of your extra work will pay off in the long run.

Be Nimble

In addition to thinking outside of the box, you have to be quicker than your competition when it comes time to act. You'll have to eliminate any bottlenecks that exist in decision making and eliminate any hesitancy that normally would be there. Risk is inherent in any small business, but when times are lean, you'll have to risk more to stay on top and afloat. You'll have to keep moving even when the desire is not there, and you'll have to press forward when you are unsure if resources are available. In short, you'll have to be mentally stronger than you have ever been before.

don't impact your cash flow when bringing products into the country


The Hedaya Capital Group began with a mission to help small to medium-sized businesses stay in business, to beat the statistics of failure, and, in fact, to watch them grow to wild success. With our small business financing options, we believe we have succeeded in our mission. From factoring to PO financing, our working capital solutions will provide your business with the cash flow solutions it needs when it needs it. Once you use our business financing services, you have the option of continually selling us your accounts receivable when you need to, which is exactly what you need during an economic downturn if cash flow is pinched.

The Hedaya Capital Group in New York takes each of our client's situations individually, developing customized solutions that will best meet their needs. We will do a thorough initial evaluation of your company in order to ensure we are meeting your cash flow needs adequately, and we can always adjust as well as market conditions change. We put our clients first, always maintaining open lines of communication to ensure we are meeting our clients' needs. We have helped hundreds of businesses obtain the working capital solutions they need in a wide variety of industries, including housewares, health and beauty, transportation, textiles, food and beverage, electronics, children's apparel, and more.

Our financial solutions are detailed, and no stone is left unturned when it comes to helping clients achieve their growth objectives. Our devoted and dedicated staff ensures efficient responses to your needs, timely reporting, and updates on any and all financial service needs. We are always available to answer your questions and serve your needs.

If you are a small to medium-sized business looking for a top-notch working capital solution, call The Hedaya Capital Group in New York today!