Small businesses are always hit the hardest during an economic recession. Customers cut down on expenses, which leads to reduced sales. Reduced spending power, unpreparedness for recession and budget constraints make it challenging for businesses to survive.
According to the NBER, a recession is a drastic decline in economic activities that can last more than a few months. Recessions affect both large and small businesses, but it’s always hard for small businesses.
Customers who owe you money may make payments slower or not at all. There will be declined sales, reduced revenues, and your business’s ability to service its debts can get impaired.
Undoubtedly, a recession can be scary for every business, but there is still hope. With a few tweaks and strategies, your small business can survive and thrive during tough economic times.
So, what are the tips and tricks to sail through a recession?
We have compiled six strategies to help your small business weather the turmoil.
Focus Beyond Layoffs
During the 2008/2009 recession, 2.1 million Americans got laid off. But organizations that looked beyond layoffs emerged the strongest and thrived afterwards. Why? Because their focus leaned towards operational enhancements.
Companies lay off employees with the hope of saving money on payroll. But the organization will incur more costs by paying overtime and outsourcing wages.
Laying off will also affect customer retention. This is because customers will get a signal that the company is in a crisis. It also means a delay in service delivery.
The worst thing to do during an economic recession is to offer poor and delayed services. It leads to decreased customer loyalty, which causes a sharp decrease in sales. Layoffs can also dampen productivity and hurt morale at a time when the business is on its knees.
You can cut labor costs in many ways rather than laying off your employees. Consider things like reducing furloughs, overtime payments, and hour reductions. You can give workers unpaid or partially-paid leaves.
Automate and Delegate
When a crisis hits, you need to steer the ship. You need to plan strategically, make tough decisions, and think creatively. If you’re in a recession or preparing for a downturn, it’s time to get innovative.
AI and Machine learning help you convert business metrics to optimize digital marketing and prices. Automation does not necessarily have to be complicated. A sophisticated system is expensive to maintain, which may not be an effective decision during the recession.
You’re likely to get overwhelmed with your to-do list, from managing workers to making payments and still being attentive to your customers. The appointment reminders keep you on your toes to ensure the to-do list is accomplished. The communication with your customers is instant and non-invasive.
You can also assess tasks that can get handled by other employees and delegate duties. This way, you’ll manage to focus on other crucial business projects. Focus on tasks that will deliver a positive impact on your business.
Focus on Core Competencies and Competitors
Get to know your competitors, what they offer, their services, and what keep them at a competitive edge.
Taking a considerable risk can lead to a big reward. But this should not apply during the recession.
This is not the right time to pour your efforts into a new, unknown path with uncertain ROI. Instead, scale back on services and products you already have. Don’t spend your budget supporting weaker products.
Rather, focus on promoting services or products that are doing well to current and past customers.
Marketing is Crucial
During a recession, most businesses focus on cutting marketing expenditures. The notion that there are decreased sales doesn’t mean marketing will be futile.
Advertising during a recession is crucial and vital to the success of your business. A reactionary slash on ads might look good in books, but it will be for a short while. Instead of decreasing your budget, you should tap into how customers are absorbing information.
Well-executed online marketing campaigns will deliver excellent results. More so, you get to understand consumer’s behavior. During an economic turmoil, almost everyone gets affected in one way or another.
Some of the consumers might lose their jobs and have financial struggles. It’s, therefore, essential to assess the situation and offer tailored services for your consumers. For instance, you can reduce the prices of your services or products without compromising quality.
Protect Your Cash Flow
When the recession hits, you tighten the belt and steer the ship through the tides. During economic downturns, companies are challenged to generate cash and maintain desired profits margins. If the cash flow stops, that’s the end of a business.
Reduce or completely cut down unnecessary expenditures. You’ll find there’re memberships, resources, and services that you don’t need. So you can funnel that money back to boost business operations.
See if your vendors are willing to negotiate and give you products at competitive prices. You may also approach lenders and negotiate for flexible or extended payment terms.
More so, apply for small business loans and grants to keep your business afloat.
Focus on Customer Retention
It costs you more to acquire new clients than retaining the current ones. During the recession, consumers slash their spending, even persuading new ones becomes a challenge. So, consider investing in your current customers.
Think of offering a surprise package or offer without going hard on your finances. You can send your clients a handwritten note to show how much your brand values and appreciate them.
Understand the desire of your consumers and use these pointers to intimately set expectations. Remember, clients need to get empowered and not be controlled.
Cultivate trust through relationships to build a reliable brand. When you’re marketing services and products, use authentic information and images. Nothing scares consumers away like unscrupulous deals and bad experience.
You can also learn to create communication with clients. Look beyond selling products and cultivate a solid bond.
The Bottom Line
A recession can be scary, and running your business during an economic crisis is challenging. But this doesn’t mean you give up. Your small business needs to be flexible and agile to adapt to a new reality.
With these six strategies, your business can survive through a recession and thrive afterwards.
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