“The business environment becomes more unstable every day,” says Gregory Womack, president, and principal of Womack Investment Advisers, a wealth management firm. “Industry veterans and new entrepreneurs alike are struggling to keep up with complex tax laws, the volatile stock market, and supply chain hiccups that impact brands nationwide.”
Market uncertainty has long been a part of the entrepreneurial journey, but the frequency and severity of such situations are battering SMBs like never before. A whopping 65% of small businesses say they will have to close their doors permanently if inflation continues, which is nearly two in three business owners around the United States.
But defense is the new offense for business protection and profits. And when it comes to the longevity of your business, an ounce of prevention will be worth a pound of cure.
Here’s what you need to know.
How To Protect Your Business In An Unpredictable Market
There’s no reliable way to predict market downturns or economic hardships. However, there are established prevention steps that will protect your profits and prepare your brand to weather storms of any size.
Be sure to integrate these five defenses into your current business preservation strategy.
Hedge Your Bets
When it comes to navigating tough times and defending your business outlook, it won’t hurt to get ahead of the curve with a little extra planning.
You could choose to do this in a number of ways:
- Have backup plans for every business strategy, regardless of the anticipated failure rate.
- Look for ways to mitigate economic risk by sticking to set arrangements and helpful guidelines.
- Set parameters that can help you pause objectives when they must be put on the back burner.
Remember: hedging your bets doesn’t mean deserting your dreams or abandoning your goals. However, it does mean you should remain flexible and be willing to pivot however necessary.
Preparation Is Everything
It pays to be prepared in this day and age — regardless of the economic climate.
First, save up an emergency fund with three to six months of business expenses. Cash will ensure you feel calm and collected in the midst of a disaster, and have the wherewithal to support yourself when the going gets tough.
Next, you may want to measure the amount of risk in major business decisions. You may not want to invest in expensive new equipment, for example, if your cash flow is already limited or reduced.
“Be sure to partner with other business stakeholders to consider future objectives,” says Gregory Womack. ”Two minds are better than one, and checking your strategies against a dozen other experts will be critical to your lasting success.”
Build A Roadmap
Every business needs an economic roadmap that points to where they are, where they’re going, and where they might go in the future. Although no two mappings will ever look alike, you’ll want to include:
- Clear objectives and measurable goals
- A full company assessment
- Timelines for reaching goalposts
You may also want to work alongside a business advisor to consider your needs in greater detail.
Invest In The Now
While a little forecasting is good for building a vision and supporting goals, looking too far ahead could place you in a dangerous position.
This is where investments come in. By pouring your resources into your current tools, teams, or equipment, you’re building a flywheel of success that can outpace the rapidity of inflation. Most experts suggest reinvesting 20% – 30% of profits back into your business, although this number will look different depending on your size and industry.
Be Honest With Yourself
It can be hard to look at your business from an objective standpoint. After all, it’s difficult to spot red flags in the people and things that we love — leaving us vulnerable to the whims and fancies of the marketplace.
Avoid this by performing a full SWOT analysis once per year:
- What are my business strengths?
- What are my business weaknesses?
- What opportunities are presented to my business?
- What threats are in the way of my business?
Slide decks, PowerPoints, and even Word documents are some great ways to highlight your findings.
Putting Prevention Into Practice
No business can avoid market uncertainties altogether. Economic downturns are the norm rather than the exception, and with so many considerations and volatile conditions, prevention is the best way to ensure your entrepreneurial success.
“You can start hedging your bets for tomorrow by planning for today,” says Womack. “Prepare your business financially, mitigate risk, and check your strategy against other business stakeholders. You’ll want to build a roadmap that projects all possibilities and consider ways you can invest in current assets.”
Finally, and perhaps most importantly, you’ll need to be honest with yourself. What are your strengths and weaknesses? Can you identify threats and opportunities? Do you have available paths to get from point A to point B?
Recession prevention is anything but easy — but for startups and SMBs, it’s all but a necessity. As your business grows and the global marketplace changes, be sure to support your framework of success with strategies that last the test of time. You, and your business’s future, will thank you.
About Womack Investment Advisers
Womack Investment Advisers (WIA) provides counseling, coaching, and resources to address financial planning and wealth building to its clients. Established in 2000, the company provides expert financial advisory services and is independent of other organizations.
WIA is an independent registered investment advisor serving clients in Texas, Illinois, Indiana, California, and Oklahoma.
To learn more about WIA, you can visit their website.