7 tips to make your Australian business more recession resilient

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A perfect storm is currently brewing in the wake of the COVID-19 pandemic. Soaring energy prices, supply chain disruptions, labour shortages, an increasingly high cash rate (currently at 1.35 per cent), and inflation expected to hit 7 per cent by end of this year – are all signs of a weak economy.

In the 2022 financial year alone, Australia recorded 3,917 liquidations or administrative appointments across all industries, with the construction sector accounting for 28 percent of all insolvencies.

For small businesses specifically, an economic downturn can be more damaging and extensive. Research has shown that almost 75 per cent of businesses experience a decline in revenue and profits during a recession. So how can businesses better manage their risk appetite?

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“This is a glass half full vs half empty situation. Many small businesses might not be too sure how to proceed because they’re either operating on a month to month basis, or they’re breaking even, or they’re in a really good business position but they’re nervous that things could change,” says Trent Yesberg, Bookkeeper and Registered BAS Agent at Regional Business Services.

But, businesses can still be profitable in an economic downturn through a combination of good planning and smart revenue-preservation strategies. Here are 7 tips that small businesses can take onboard:

1. Focus on your customers

Rather than seeking more customers, focus on meeting the needs of your existing customer base. Not only is this less costly (repeat patronage and no increased spend on ads), happy customers will act as ambassadors for your business.

So, having a clear understanding of your existing customers’ needs and how these change during an economic downturn is key. It is essential to listen to your customers’ challenges and changing needs and be aware of how their buying habits are shifting.

When this happens, you may want to alter your offering to keep meeting your customers’ needs. For example, this could be adding a local delivery option, or creating an online store to make your product offering more widely available. A great example was how activewear brands offered a wider range of athleisure/casual loungewear during lockdown as more people stayed at home.

Pivoting your product offering can help you recession-proof your marketing strategy, put your business in a better position and preserve your revenue.

2. Build an agile workforce with recession-proof skills

Change is inevitable so the ability to be flexible, pivot and adapt to a new environment is key to surviving an economic downturn. When resources are scarce, having a tech savvy workforce with the right technical and communications skills can help you keep the ball rolling. Investing in training and upskilling your staff can help you achieve this goal.

“In saying that, we also need to acknowledge the current labour shortage in Australia,” Trent says. Just last month, the Australian Bureau of Statistics announced that 31 percent of Australian businesses are struggling to find suitable workers. This is even more the reason why businesses need to upskill their current workforce.

“The recent 5.2 percent increase in the minimum wage announced by Fair Work Australia, is also an indication of how costs will just keep increasing due to inflation,” Trent says.

“However, one thing you can control in a recession is your pricing strategy – whether that’s market appropriate, or ensuring that you’re making a profit upfront when you’re setting prices for your products, goods and services.”

3. Create a cash flow plan

When you’re expecting tough times ahead, it is important to have a clear overview of your financial position. You can do so by developing a rolling cash flow forecast for your business so you can have an idea about what the next three months will look like. This will also help the management team identify any warning signs.

You can check your income streams against ongoing expenses and create a current cash balance. A good way to protect your business against a recession is by increasing the amount of cash holdings in your business’ portfolio.

“On top of the recession, we know that there’s inflation, we know that interest rates are on the move, there are a lot of variables that are arguably out of your control. So, having a good cash flow allows you to make decisions with some elements of forecasting. It provides some clarity as to what you should be focusing on,” Trent says.

Jimmy Nguyen, accountant at DKM Accounting and member of the QuickBooks’ Trainer Writer Network further describes a cash flow projection as an indicator of your balance position and how much physical cash will potentially be coming in and out of the business.

“A cash flow projection helps you pre-plan your outgoings, your expected revenue, put in buffers for surprises and allows you to work with your management team, or your board on what type of investments you can make without breaking the bank,” Jimmy says.

So, if you’ve created a cashflow forecast and found yourself in a very poor position, this could be a good time for you to decide whether it is better to spend and reach into your asset reserves, or if it is a better time to apply for a loan and free up capital that you might not otherwise have.

 

Tiny houses are becoming big business in Australia. Ideally, these small but perfectly formed lodgings are two to three hours’ drive from major cities. Smart landowners are popping them into secluded corners of their idyllic properties so guests feel a million miles from their everyday lives.

It’s no surprise, then, that many Australian vineyards tick all the boxes in providing the perfect tiny house vibe. More and more vineyards are installing their own tiny houses or partnering with tiny house accommodation providers to access an additional income stream. For guests, it’s a win-win, as they can enjoy sampling wine without worrying about who has to volunteer as the designated driver.

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Tiny Away, a Singapore-owned company that manages more than 70 tiny houses across four Australian states, offers several tiny houses on commercial and private vineyards. Lake George Winery near Canberra (the Australian capital is a three-hour drive from Sydney) is home to two pet-friendly tiny houses: Little Edgar and Little George (available through Airbnb).

Winery owner Sarah McDougall says that initially, a tiny house provided a solution to an unexpected problem.  The winery she runs with winemaker husband Anthony had featured Airstream accommodation – until “she was purchased by a couple who wrote a cheque that night and drove away with her.”

“We had bookings but weren’t sure what to do,” says Sarah. “So, our friend built us one, and we kept getting booked out every three months. We then stayed at a Tiny Away [house] in Mudgee (a wine region a 3.5-hour’s drive northwest of Sydney) and loved it. So, within three weeks, Edgar arrived. It’s been almost one year, and it’s been such a hit.”

Most guests, she says, “book in for lunch on weekends, do a wine tasting and literally roll up the hill, put the fire on for the night and enjoy an early morning walk. People really enjoy not having to drive far after a long lunch,” she says.  “There’s something magical about watching the sun set over Lake George or watching the moon rise and the stars come to life at night. Some people even get up to watch the sun rise or to feed the horses a carrot or two and enjoy the quiet times in the vineyard.” Guests can also visit neighboring Lerida Estate to sample its notable pinot noir and shiraz.

 

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The award-winning biodynamic Gemtree Wines is near South Australia’s McLaren Vale region south of Adelaide. The region famously has Australia’s highest percentage of vineyards – some 38 percent – that are certified biodynamic and organic. CABN, which launched its first tiny house in 2017, has installed several of its cosy retreats on the property, including two next-level versions under the CABN X brand. T

These luxurious options, Giles and William, include indoor and outdoor bathtubs, a sauna, king bed and fireplace. Gemtree co-owner and chief viticulturist, Melissa Brown, says partnering with CABN has proved fruitful in more ways than one.

“Having the CABN accommodation on-site is bringing people to Gemtree that may have never heard of us and is building brand awareness,” she says. “Initially, we were looking into glamping as we thought that would be a good fit for our ethos, which is strong on environmental initiatives and connecting people to nature.  We heard about the CABN business model, and this was attractive as we had no experience as accommodation providers.

“CABN has a similar philosophy to our own, which is operating a business with a focus on the minimal detrimental impact on the environment and encouraging people to enjoy time together and engage with nature. The Gemtree Ecotrail, a 10-hectare area in the heart of our vineyards, is an area devoted to native flora and fauna. It’s an added attraction to guests.  The CABNs are also off-grid, which complements our commitment to renewable energy.”

 

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In Pokolbin, the heart of the historic wine-growing region of the Hunter Valley two hours’ drive north of Sydney, is another Tiny Away property. Tiny House 888 is set in a working shiraz vineyard. The closest cellar door to this tiny house is 500 meters away. Stroll to Audrey Wilkinson Vineyard, established in 1866, to taste its top-notch Semillon (the Hunter Valley’s signature wine), chardonnay and shiraz. Tulloch Wines, Usher Tinkler Wines and Ben Ean wineries are also nearby.

 

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One of Australia’s lesser-known wine regions is the Shoalhaven Coast, stretching from Kiama to Milton-Ulladulla and inland to Kangaroo Valley. A blue tiny house named India, part of the In2thewild Tiny Holidays portfolio, is squirreled away in bushland below the summit of Cullunghutti (formerly known as Mt. Coolangatta) and above Coolangatta Estate. Guests staying at this semi-secluded, forest-cloaked hideaway enjoy views over this much-awarded winery that incorporates a convict-built village and can wander down to the cellar door to indulge in a tasting session.

 

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Recently, Cupitt’s Estate at Ulladulla on the NSW South Coast opened 10 tiny lodgings they’ve dubbed “pods.” Measuring a cozy 47 square meters, the pods are on par with the Australian definition of a tiny house (which can measure up to 50 square meters).

Guests will receive a complimentary bottle of Cupitt’s Estate sparkling wine, a tasting experience at the cellar door of this multi-faceted enterprise that includes a restaurant, brewery and fromagerie, access to the kitchen garden and farm walks. They can also take a vineyard walking tour to learn more about the estate’s history.

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4. Secure capital early when the future is unclear

Businesses should secure capital early and not wait until crisis strikes to take remedial action. Once a recession hits, credit and capital from commercial banks become much harder to secure. The entry of neobanks on the market and fintech startups have expanded lending options for small businesses, however these carry their own risks. Just last month, Volt announced it was closing down as they couldn’t raise the capital to keep growing the company.

“Investment is all about the deployment of capital and choosing where you spend your expenses,” Trent says. You can have a look at appraising assets and how they might be used as collateral or renegotiate extended payment terms on existing loans.

Back in 2008 when the Great Financial Crisis hit, there was a saying that “cash is king”.

But there’s also a suggestion with inflation that holding cash is not a great thing, because it’s only going to go backwards in value. This depends on what your perspective is but it’s really about whether you are going to knuckle down and weather the storm and try to survive? Or if you are going to see it as an opportunity to thrive and be aggressively competitive,” Trent says.

Since business loan interest rates often track with the Reserve Bank’s benchmark interest rate, it is expected that rates for many types of small businesses will also increase. So if you think your business will need capital, you can either apply for a loan now before interest rates go up even more, or start building your credit.

5. Cut back on expenses

While it’s important to cut back on expenses in an economic downturn, it is essential that you don’t compromise on the quality of your product. When deciding where to cut costs, it’s helpful to start with those that are not visible to your consumers. You can look at ways that can result in big expense reductions, such as taking advantage of early pay discounts from suppliers, or shifting the mix of labor between FTEs and contractors.

You can also reassess your inventory and decide whether to keep a low inventory, keeping in mind this could translate into lost revenue and affect customer relationships. Alternatively, you can start by phasing out the less profitable products or inventory that you can easily replace to increase your cash flow, all while you’re evaluating the supply chain and taking advantage of discounts and specials.

In many cases, a business’ working capital is of pivotal importance.

“Working capital refers to the measure of a company’s short term financial health and operational efficiency. It essentially measures the company’s assets over a their liabilities and provides insight into the overall liquidity of an enterprise i.e how much cash or cash equivalents it has at its disposal ,” Jimmy says.

“So to ensure that working capital remains an asset for you, you need to make sure that you have great oversight on both ends – dynamic reports like accounts receivable and the accounts payable. And no other system does that better than QuickBooks Online because you get both at the same time.”

6. Master your craft and niche down

You can niche down your offering to only goods and services that are perceived as essential by your target market. This is because goods or services deemed essential have an inelastic demand. This is similar to how people behaved towards essential goods such as toilet paper during a recession. By narrowing your offering, you’d be catering to a specific targeted audience that is more likely to be loyal in supporting your business. However, you need to ensure that your product or service has a unique value disposition as it may alienate customers if not done well.

7. Keep investing in your company. But be strategic about it.

During a recession, you want to avoid operational costs that do not generate revenue. This is why using the right technology can help you run the business better during challenging times, while also saving you money. You can automate some of your processes to prevent your team from spending time on non-revenue-generating activities. When used correctly, automation can help to recession-proof your operations without lowering customer service. Using automation can also reduce the risk of human error and enables you to shift your focus on your customers – which should be your number one priority in a recession.

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This article originally appeared on the QuickBooks Resource Center and was syndicated by MediaFeed.org.

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10 ways to advertise your business for free

 

Your budget as a small business owner may not always have room for advertising, but you still need a strategy for building brand awareness with potential customers. Thanks to online resources and digital tools, there are plenty of ways to advertise your business without spending a single dollar. And don’t worry, you’re not alone in looking for low-cost marketing hacks — 42% of small businesses invested only 3% or less in marketing last year, according to small business software company Wasp Barcode Technologies. Here are 10 options to get you started.

 

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Small business owners can create free pages and accounts for their businesses on Facebook, Twitter, Instagram and other social media platforms. You can create posts to promote your business, and most platforms may offer special insights for business account holders. For instance, Facebook and Instagram let you explore the reach of your posts, including impressions, interactions and the number of times people follow the link to your website. Such tools are free, though it will cost to place ads on social media platforms that may reach more people.

By the way, even though it costs to use Google Ads, it’s free to use the search engine’s analytics to see who’s visiting your business’ website and what customers do when they get there.

 

Some email marketing platforms offer free services or a no-cost trial period. Using a free service like MailChimp, you could send messages about your business to anyone on your contact list, as long as it doesn’t exceed 2,000 names. Email marketing platforms not only allow you to send thousands of emails notifying your customers of deals, news or changes, you can also track which ones draw the greatest response. You’ll know when customers open an email — or delete it — and even when they click on a link to buy.

 

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Review sites like Yelp can get your business name in front of many potential customers. To use these sites to your advantage, you should make sure your profile accurately reflects your business and brand. Yelp encourages business owners to respond to customer comments with a direct message or public comment. Uploading photos, links and hours of operation to your business’ Yelp profile would help customers find you. Yelp also offers analytics and tracking to provide insight into how users engage with your business.

Looking for business financing? Check out our top picks for small business loans here.

 

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Online platforms like Thumbtack connect businesses with people searching for certain services. Creating a listing for your business would put your company in front of people in your area looking for your specific services. Registering your business with Thumbtack is free, and you’d only pay when a customer reaches out to you to schedule an appointment or request a quote.

 

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Make sure your business is registered with free local business directories and that all listed information is accurate. If you are willing to pay some fees, you could also register with your local chamber of commerce or the Better Business Bureau.

 

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Responding to reporter inquiries would help you get your name – and your business’ name – in front of an audience. Signing up for a sourcing service like Help a Reporter Out would give you the ability to connect with journalists who are covering topics related to your industry. You may be able to get featured in smaller and larger publications.

 

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LinkedIn Groups allow people to connect over a shared interest or industry. You could join a group and start or contribute to conversations, forming connections that may be valuable to your business. If you’re willing to jump through a few more hoops — and are a freelancer experienced in your field — you could apply to become a LinkedIn ProFinder. ProFinder connects consumers with professionals in such fields as accounting, software development and business consulting. The service is free to try, but a Premium Business subscription is required after the first 10 proposal responses.

 

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Free trials or samples would give prospective customers a risk-free opportunity to interact with your business, which could lead them to feel more comfortable purchasing something down the road. Giving out coupons could generate return visits to your business and help you expand your customer base.

 

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Getting involved in your community would allow you to connect with potential customers in your immediate area. While you’d likely have to pay to sponsor an event or set up a booth, simply attending could be a useful networking opportunity. Be sure to choose events that your target customers would most likely attend.

 

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To build credibility, you could set up a blog on your website to showcase your industry knowledge. You could explain trending topics in helpful posts that address common challenges in your field. Contributing to trade publications and making guest speaking appearances at educational institutions or local events would help you establish yourself as an expert and bring attention to your business.

You don’t need to have a large advertising budget to market your business — you just need to think creatively about the resources at your disposal. Taking advantage of social media and free online resources would help you build awareness of your business without breaking the bank. You could focus on connecting with your local community or broaden your reach outside of your area. If you remain resourceful, the opportunities to advertise your business could be endless.

This article originally appeared on MagnifyMoney.com and was syndicated by MediaFeed.org.

 

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