Like a lot of business owners, I’m concerned about the ongoing inflation that we’re experiencing and how it’s going to impact the economy. If I had to guess I feel there’s a high likelihood that things get worse, not better, over the next 12-18 months (maybe longer). My prediction may be wrong, but I'd rather be wrong with a plan rather than right without a plan.
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I started my business in 2015 so apart from a few months during 2020 when COVID hit, I’ve never had to endure a sustained period of lower economic activity. The next few years are going to be a real test for me. Even though I think things will get worse, I’m confident I’ll make it to the other side, hopefully without too much damage to the business.
As I look ahead, here are some of the things I’m going to be focussing on to ensure my business is in the best shape possible going into these uncertain times. I focus on each of these pursuits already but they are things I’ll be doubling down on as we continue to navigate these treacherous waters.
Improving my systems and processes
I’m a firm believer that if you focus on operational efficiency, your business will grow. I spoke about this recently on the blog and how for the last few years, my business has continued to grow as I’ve focussed more on efficiency, prioritising this over revenue growth.
If you can streamline a process by automating it or cutting out unnecessary steps, you save not just time but money.
When the going gets tough, a lot of people look at all their expenses first to find where they can cut back or reduce costs. I could save around $100 a month by not using a tool like Calendly. But if Calendly saves each of my team members a few hours a month, that collectively adds up to thousands of dollars worth of time saved.
Increasing the value I can offer
This is something I’m always trying to do of course but becomes even more important when times are tough.
For a consulting business like mine, I make money when I can convince someone that what we can teach them is worth paying for. But if budgets are tight, it’s harder to convince someone to part with their money. The only way to convince them is to increase the value you offer in order to make it a good deal for them.
Depending on what you do, maybe this means offering more of your service for the same price, increasing the amount of post-sale support you offer or repackaging your offer into different formats. This is where you need to get creative and have open conversations with clients or potential customers about how to come up with an equitable deal for both parties.
Doubling down on what works well
Over the years I’ve diversified my business by establishing multiple streams of revenue. I generate an income mainly from consulting but also from affiliate arrangements, sponsorships, YouTube ads, product sales, licensing and other bits and pieces.
A downturn in the economy isn’t necessarily going to have an equal impact on each of these revenue streams.
My consulting income may go down. But this may lead to an increase in YouTube ad revenue as more people look to free content. If that’s the case, I’ll probably spend a lot more time making YouTube videos.
I earn an affiliate income from promoting and signing my clients up for various software products. If I can protect this revenue stream and ensure customers keep using these tools, I can maintain this affiliate income.
By looking at your sources of revenue and working out what’s working well or which revenue streams are more resilient than others, you can look after the stronger ones in order to protect cash flow.
Nurturing current and previous clients
Any good business owner or salesperson should be able to tell you who their best customers are.
We're all in this together and I’m already doing everything I can to look after and nurture my most important relationships. There’s no such thing as business-to-business (B2B). Business is done person-to-person (P2P).
I’m confident if I look after my customers, they’ll look after me.
Focussing on revenue more than costs
So far, most of what I’ve talked about has been related to revenue. As mentioned previously, the first thing most people do in a pinch is panic about their costs. Of course costs matter and you should be trimming waste expenditure where you can as long as it doesn’t reduce revenue.
One of the biggest takeaways I had from Ramit Sethi’s book, I Will Teach You to be Rich is that there is a limit to how much you can save but no limit to what you can earn.
Let’s say I spend around $5,000 a month paying for all my tools, contractors and other business expenses. First, I’ll never be able to cut costs to $0/mth because I need to spend some money in order to keep operating. Maybe I can cut costs 20%, that would be $1,000 per month in savings. Okay…
I would argue that by focusing my time and energy on revenue generation, nurturing clients, increasing the value of my offer and doubling down on what works well, then I can probably earn generate more than $1,000 per month in incremental revenue.
I’m not saying don’t cut costs or reduce wasteful spending (you should already be doing this). Everyone I pay and every tool I use, I pay for because it helps me to be more efficient or generate more value so I’m already not wasting money. What I’m saying is to put your time and energy into revenue-generating activities rather than obsessing just about expenses.
Contribute to savings and lengthen your runway
If things get really bad, I may have to start dipping into my savings in order to cover my costs and keep operating.
In a business, your runway is defined as how long you can operate if you are burning cash quicker than you are generating it.
Right now, I’m trying to squirrel away as much money as I can to give myself as long a runway as possible. Hopefully, all this disaster planning that I’ve been talking about today is an overreaction and things won’t be as bad as I expect. But, I’d rather have planned well and been wrong instead of not planning at all and being right.
Those who know me know that I’m a big Bitcoin advocate and I believe the world really needs a stable form of money that can’t be controlled or debased by governments. So while I’m saving a bit of cash each month, I’m also buying Bitcoin which is at a very low price right now. If currencies continue to lose their value through inflation, I think more people and entities will look for stores of value like Bitcoin as a way of protecting their wealth. But that’s just me, please do your own research.
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I hope this has been useful. Let me know what you’re doing to protect your business or if you have any questions leave me a comment below!