Black Friday sale: Up to $1400 off bookkeeping, 100% tax-deductible.
Key takeaways:
- Stay up-to-date on local and national landscape
- Brush up on your business finance basics.
- Examine your cash flow and take steps to adjust, if necessary.
- Go all in on your existing customers.
- Invest in automation to give yourself more time.
What's happening in the U.S. economy in 2024?
The first step to thriving in a slow-growth economy is understanding the external landscape. After all, you can control a lot of things when it comes to your business, but you can’t control things like inflation, new legislation, or the labor market.
The economic trends affecting businesses right now include:
- Inflation rates. Consumer inflation is currently at 3.27 percent, higher than the Federal Review Board's 2.5 percent target. But that doesn’t mean consumer expenses have risen only by that much—actually, between 2020 and 2024, expenses rose more than 20 percent.
- A tight job market. Unemployment is sitting around the low rate of four percent, meaning it may be harder to find staff.
- Stock market growth. The S&P 500 has shown strong growth in 2024, which generally is taken as a measure of strong consumer confidence.
In other words, the trends are a mixed bag—some, like the inflation rate, can be a negative, especially if you sell consumer products. However, the growth in the stock market is a positive indicator that can inspire confidence in both investors in your business, and your potential customers.
Strategies for thriving in a slow-growth economy
When the economy is slow, it pays to go back to basics. The strategies we’ll cover in this section are:
- Organize your books.
- Examine your cash flow.
- Diversify your revenue stream.
- Reduce costs.
- Invest in innovation
Organize your books
Without updated books, you’re really only completing a surface-level health check. If you’ve fallen behind, your first step should be getting completely up to date (Bench's catch-up service is designed specifically for business owners who’ve fallen behind on their books—it’s a common problem!).
Once your books are updated, you can run financial statements that show your revenue, expenses, assets, liabilities, and equity for the period you fell behind on. This information can help you make informed decisions about your business's future and plan for the long term.
Examine your cash flow
Cash flow is always one of the most important factors that determine your business’s success, but when you’re navigating economic challenges, it’s priority number one. Of all the businesses that fail due to financial reasons, 82 percent fail as a result of cash flow issues.
Managing cash flow isn’t just about having enough funds in the bank to run your business. It’s also about controlling expenses, timing your invoices correctly, and knowing when it makes sense to invest in your business’s growth.
Luckily, there are several types of tools that will help you manage your cash flow.
Analytics tools
Your data is extremely powerful—it’s what will help you make the smart decisions that keep your business moving. Square Analytics shows you how business is going, both at a granular and a much broader level.
You can examine the seasons, months, days, or even times of day you typically ring in the most sales, which products or services are your best performers (and worst), and how your staff is performing. This type of information can be instrumental in making strategic decisions that impact budgeting.
Bookkeeping services
Most business owners would rather spend their time designing new products, connecting with customers, and strategizing growth—not keeping up with their books. That’s why there are several different services out there, including Bench, that take the bookkeeping off your hands. When your bookkeeping is accurate, you can rest assured that your cash flow statements are also accurate.
Scheduled deposits
The more control you have over the timing of your deposits and withdrawals, the better. Some payment processors allow you to schedule your deposits so there’s always cash in the account when you need it.
For example, you can customize your deposit schedule to occur just after the close of your business day. That way, if you’re open until 6PM on weekdays and 8PM weekends, you can assign each day’s deposits to hit your account when it makes sense for your business.
Inventory management software
Inventory management is directly linked to cash flow, as ordering too much or too little can disrupt how much you have in the bank at any given time.
By using a point of sales (POS) with integrated inventory management, you can easily track what’s in stock and what needs ordering, as well as set up alerts so you’re never caught off guard.
Digital invoices
Digital invoices can go a long way toward streamlining your invoicing process, so you’re not waiting months to collect. These invoicing tools can even help you automate your invoicing, so that customers are getting reminders at specific intervals according to your payment terms whether they’re net 30, net 90, or a different interval.
Not only do digital invoicing tools allow you to quickly create custom invoices, but they also allow customers to pay online (instead of over the phone or by mail). You can also set up automatic payment reminders and schedule recurring invoices, which can help you cut down on late payments.
Here’s an example cash flow statement:
The cash flow statement has three parts:
Cash Flows from Operations. This is what you make and spend in the normal course of doing business.
Cash Flow from Investing Activities. This is money you invest—in this case, by purchasing new equipment for your business.
Cash Flow from Financing Activities. This includes money the owner invested in the business, as well as taking out and repaying loans. In this case, the business got additional financing in the form of a $1,200 bank loan.
Diversify your revenue stream
Diversifying your revenue stream by adding products or services can help spread out your business’s risk—as long as doing so doesn’t take away resources from your existing services or products.
One example is adding sales channels. If your main sales channel is brick-and-mortar stores, it could make sense to add an online store to reach customers in different geographical areas. Typically, this can be done through a platform like Shopify without a huge investment of time or funding.
Another way to diversify your revenue stream is to create a product or service in partnership with another business. Partnerships can be a great way to share both the benefits and risks of branching out into a new market.
Reduce costs
Cost reduction strategies for your business must start with creating a detailed budget if you haven’t already. If you have, it’s time to revisit it.
Use your financial statements, like your balance sheet, cash flow statement, and your income statement to see where your costs are greatest and how your asset/liability ratios look.
If there are tools or subscriptions you have that you no longer need, cancel them. If you have assets that could be sold without harming your day-to-day business, consider doing so.
Automating certain tasks is another way to cut down on costs. If you’re paying an accountant, but not utilizing their expertise in an effective way, you may want to consider choosing an online bookkeeping service like Bench or switching to a fully DIY system like Quickbooks.
Invest in innovation
If you have time and funds to spare, consider investing in something that will help your business reach the next stage of growth. That could be an innovative new process, better equipment, streamlining your operations, or an overhaul of your distribution.
Ultimately, putting this time and money back into your business will help you both ride out any slow economic periods, and be better prepared to take advantage of strong economic times.
The power of automation—buy yourself more time
Automation can make many workflows a whole lot simpler—and the less admin and data entry you do, the more time you can spend making money. That’s what small business automation is all about.
As mentioned above, automating your bookkeeping can be a good place to start. Other areas that are ripe for automation include:
- Payroll
- Mileage tracking
- Invoicing
- Receipt and document storage
- Expense tracking
- Employee scheduling
Here’s a longer list of 30 different tasks you can automate and the best tools to do so.
Building resilience and agility
Resilience and agility are two qualities that every business owner needs in abundance when times get tough—whether because of a slow economy or one of the thousands of other reasons businesses face challenges.
Building business resilience means building up an emergency fund, also known as capital reserves or retained earnings. Saving a percentage of your revenue on an ongoing basis will help you be ready for any potential economic slowdowns, business setbacks, or unforeseen circumstances. You can also improve your business’s resilience by diversifying your revenue stream, staying on top of your books and finances, and creating—and sticking to—a budget.
Agility, or the ability to adapt quickly when needed, can also help your business thrive in hard times.
Pay attention to market and economic trends, as well as local market conditions, so you’re able to respond to changes fast.
Focus on providing exceptional customer service and responding to customer requests thoughtfully and always in a timely fashion.
Looking ahead: opportunities in an unstable economy
Lean into your niche
Because slow economies can mean greater competition for customers, it’s a perfect opportunity to identify and lean into your niche. Who are your products and services really for?
Some examples of niche markets within larger industries include:
- Cat-specific toys, treats, and accessories
- Financial advising for Gen Z customers
- Legal services designed to serve communities of color
- Athletic wear for plus-sized athletes
By establishing your niche, you immediately reduce your competition, while also differentiating yourself from other businesses within your industry. If you’ve already decided on a niche, consider adjusting your marketing to appeal even more to your specific target audience.
Explore emerging industries and innovative business models
Just like establishing a niche, entering an industry that’s still fairly small can decrease your competition and help you stand out—as long as you have the expertise needed to succeed.
Hubspot published a list of the top industries for entrepreneurs in 2024, which includes:
- Niche consulting
- Niche ecommerce
- User-generated content
- Personalized health and wellness products and services
Innovative business models, like subscription-based services or products, are also worth considering. In a slow economy, subscriptions can help ensure you have an ongoing influx of cash. You may also want to consider what kinds of incentives, discounts, or thank-yous you can offer your existing customers for sticking with you through the downturn.
In the new normal of our slow-growth economic landscape, it’s important to stay agile and resilient. By streamlining your operations, automating what you can, cutting costs, and embracing innovation, you can set your business up for success—no matter the economic climate.
