First of all, let me be clear that I don’t know if we’re already in a recession or how soon it might happen. There has been a lot of talk but I don’t believe it’s confirmed at this time. Just in case though, I wanted to look into how we can all prepare our courier businesses to survive any possible financial downturn.
Preparing your small business to survive when times are hard is good practice no matter what’s up ahead. We can all learn things from difficult moments that can help make our lives easier even when it gets good again.
One thing we can take some comfort in is that, just like the COVID lockdowns taught us – goods will ALWAYS need moving. Couriers will always be needed to help get items from A-to-B (at least until vehicles start delivering goods on their own).
So without further delay, what would I recommend as some of the best ways to prepare as an operator of a small courier business.
1 – Don’t put all your eggs in one basket
I have to admit I have learned this one with the harshest of lessons. I’ve always known the saying about keeping all your eggs (invoices) in one basket (customer), but it’s far to easy to take your eye off the ball when business is good.
I was guilty of allowing one major customer make up almost 80% of my total invoicing and when they suddenly decided they didn’t want to pay any more, it made life almost impossible. Luckily I won in court and eventually got paid, but if your customer goes into Administration then it’s game over.
Really you should not allow one customer to make up more than 50% of your total invoicing. And that customer should also have limits set for how much you will allow to go unpaid before you start putting restrictions on their account.
Learn from my mistake and protect yourself from a situation like this.
You could also look for ways to diversify your revenue streams. Have an alternative source of income that protects you in the event of losing one of your main customers.
2 – A bird in the hand is worth two in the bush
I know this is another cliched saying, but it’s something I’ve also come to learn from 10 years of transport work.
If you do a lot of sub-contracting, or if you allow your own customers to pay on account, then you run the risk of not getting paid on time… or at all.
And if you’re already waiting 30-60 days for payment and it runs late, or doesn’t arrive at all, it can be months before you even get to court. I can tell you from experience that I had to wait almost 2 years to get paid by a customer owing THOUSANDS.
I would happily consider taking a less money early, rather than wait for bigger payments later.
Why not offer your customers the option to pay faster in return for a small discount.
This is especially useful if you already know a company that is struggling. Tell them that you can cut their delivery costs if they are willing to pay up front. It’s not always possible, especially if you have drivers or are already running tight margins on a contract. But it’s worth looking into, surely? Wouldn’t you rather have £50 paid direct into your bank today, than wait 30-60 days for an invoice of £60?
Get that bird in your hand, instead of waiting for the bush to show up in 2 months or not at all.
Another way to bring cash in faster is to use and invoice financing service. It does come at a price, but it can rapidly change your cashflow so that you can pay your own bills on time. If all your customers are on 30-day invoice terms then it really is a good option. I’ve used an invoice financing service myself. They are not always the right answer for every business and you should make sure to ask questions before signing up for anything.
3 – Cut your cloth to suit
My dad told me that saying many years ago and it has stood me in good stead through the years.
In case you’re not entirely sure what it means, it encourages you to adapt the way you do things to fit what you can afford. Reduce what you waste on unnecessary expenses.
The best ways to do this are to look at what expenses you can change. How much are you paying on things like your courier van insurance? Between vehicles, insurance and fuel – if you can cut costs there then you will increase your margins. That will give your business the breathing room it needs if anything happens to your customer base.
With fuel costs still at incredibly high prices as I write this (January 2023) every penny you can save is money in your pocket. We have partnered with UK Fuels to help couriers get access to their leading range of fuel cards that offer discounts between 3p-10p per litre on diesel.
4 – Many Apps make loads work
That was supposed to be a play on ‘Many hands make light work’ but I think I butchered it.
So instead I’ll just tell it straight. The more avenues you can source work from, the better your chances are of keeping yourself busy.
If you stick to only one source of finding delivery work, even if it’s the Courier Exchange, then you’re limiting yourself. For the small amount of money it would cost to also join Same Day Courier Network, you give yourself access to so many more chances of finding extra loads.
Then there are services like DeliveryApp and Gophr which are free to use.
Do you have any alternative ways to protect your business from economic difficulties
I don’t have all the answers. If you know any better ways to run a business when trading gets difficult in a recession then why not register on Couriers TV and share your opinions? Or you can join us on one of our social media networking groups