Invoice Bazaar Blog

How can an SME owner insulate herself from an economic downturn?

By Invoice Bazaar | September 20, 2020

Every SME owner must prepare an appropriate action plan well in advance, which is specifically aimed at tiding over recessionary trends and slowdowns. Furthermore, when the situation warrants, she should also take essential steps to insulate her business venture from the adverse impact of the economic downturn. These include conserving cash, improving the cash flows, reviewing inventory management, focusing on core competencies, luring the customers of competitors, boosting customer delight, stepping up marketing efforts, etc.

Conserving cash would mean setting aside some cash as reserves to deal with unforeseen market downturns or financial crisis in future. This money can be from the profits generated by the business enterprise or by avoiding frivolous expenses or by cutting costs or reducing operating expenses. The SME owner should also ensure stable revenue streams and good cash-flows by confirming that customers or debtors pay on time. Some cash incentives or discounts can be offered to encourage customers to clear up their unpaid invoices promptly.

Furthermore, implementing a just-in-time model of inventory management will reduce inventory and warehousing costs by ensuring that working capital has not got locked in or stuck anywhere by holding more inventory than what is needed. To be able to focus on core competencies, some of the business tasks and functions that may not be cost-effective to have in-house can be outsourced to an external agency so that the business owner and her staff can devote more time, efforts and attention on the core areas and also save on time, cost and efforts.

During an economic slowdown, every SME should strive to expand its client-base by luring more and more customers, including that of its competitors. To entice customers of rival companies, the SME owner must do research and find out and start offering something different or more than what the competition offers. Boosting customer delight or resorting to aggressive marketing can also bring in new customers. This will enable the concerned SME to successfully deal with the economic downturn and even profit from it.