Preparing for a potential economic downturn can help you protect your business's future.
When the economy is booming, it’s easy to forget that things can turn around quickly and lead to a decline. While no one knows with certainty when the next downturn will happen, there are plenty of indicators that we could be on the precipice of one.
Economic stagnation tends to halt economic expansion and force companies to cut costs geared toward growth while adjusting to a sudden drop in demand.
Customers and businesses both tend to hold off on purchases during uncertain times, particularly in the durable goods sector, which is more vulnerable to recessions and will be affected more severely.
The good news is that companies can act proactively to safeguard themselves from a downturn. Because a downturn in the economy is regarded as a normal part of the business cycle, businesses should be ready to endure and prosper when things start to improve.
With numerous ways to mitigate risk in preparation for an economic downturn, here are four ways to prepare your business for what's (potentially) to come.
Dispose of unsold inventory.
One of the most significant risks facing our customers in an economic downturn is the potential for excess inventory. As inflation rates rise, demand decreases, and manufacturers, distributors, and wholesalers pay the price. Your sales analysis report should give you an indication of what products are underperforming, and which products still meet demand.
Once you know exactly which product categories are falling short, you can reduce your portfolio to concentrate on products with a higher margin. By utilizing the economic downturn to sell off your underperforming goods and make investments in worthwhile ones, your business can begin to stabilize production capacity output.
Revisit the economic history.
Risks can be reduced by being aware of your country's economic history. Knowing your history can help you understand why the economy has taken a dip and what tends to happen next. A combination of factors often causes recessions and studying previous recessions can help you to identify potential causes and warning signs of an upcoming downturn.
Additionally, understanding how different policy choices and economic conditions influenced the severity and duration of past recessions can help you make better future choices. Studying previous recessions and analyzing past financial data will help you develop better models for predicting and managing future recessions and make your business highly resilient.
Reposition the business.
Repositioning for growth once the business cycle enters the recovery phase is another way of mitigating risk. Once the downturn is over, you can reposition the business, such as by purchasing inventory ahead of an expected demand increase.
This may be a bit of a risk, but it could pay off in the long run if the economy improves and your customers start purchasing products at a higher rate. Other options include assessing your strengths and weaknesses. Then, identify areas for improvement, such as your product line or marketing strategy. Finally, develop a plan of action to implement your identified changes. Doing so may help you position your business for long-term growth.
sales-i can help wholesalers, distributors, and manufacturers prepare for an economic downturn by providing data-driven insights that help them identify risks and opportunities, optimize their inventory, and make more informed decisions.
If you’re looking for a simple, easy-to-use solution, click the link below and find out what sales-i can do for your sales team's future growth.