Some predict a recession, while others claim it has already begun. While a recession is a terrible phrase for any firm, it’s especially concerning for small enterprises, which may lack the financial cushioning of larger corporations. That’s why it’s critical to start planning now to recession-proof your company. As the economy worsens, it will be considerably more difficult for you to respond quickly and keep your firm afloat. Don’t be concerned. Here are five steps your small business may take to respond correctly during a downturn in the economy:
Focus on core competencies.
Your company excels at one thing in particular. It’s most likely your company’s main product or service, and it’s what will keep it afloat during a downturn. Reduce the number of goods and services you support to the ones that you know perform best, and don’t waste money on those that don’t. Find ways to produce numerous streams of money through promoting your core product or service, if at all possible. You can also boost your earnings by offering VIP and economy versions of a service you already provide. Consider a subscription option that includes additional perks and is automatically renewed.
Don’t stop marketing.
During a recession, it’s more crucial than ever to do everything you can to keep on customers’ minds. Regardless of your financial situation, set aside funds for marketing (including the cost of establishing a good internet presence) and do your best to keep in front of your clients. To get you started, here are a few suggestions:
- Send content-rich emails to your present customers on a regular basis.
- Make a convincing offer to past customers you haven’t heard from in a long time to get them back.
- Consider conducting social competitions, sales, or events, and post regularly on social media.
Be aware of the times in which you choose to engage with your audience. Maintain relevance in your messaging while keeping your company’s brand identity front and center. Also, avoid making a hard sell. Observe the crowd – during a recession, everyone is strapped for cash.
Protect your cash flow.
Recessions result in narrower profit margins, making it difficult to maintain a stable cash flow. So, for a moment, let’s get painfully genuine. If your cash flow stops, your company will most likely shut down. So, in order to survive a recession, you must plan ahead for measures to protect your cash flow. Here are a few possibilities:
- Reduce any unneeded expenditures. Examine your present expenditures. Is there anything in your business that you can go without for a period, such as services, subscriptions, or resources? If that’s the case, then do without and put that money toward business expenses.
- If possible, renegotiate vendor agreements to include more favorable conditions. Keep in mind that your vendors may be struggling as well. They’d probably prefer to renegotiate the terms of your contract rather than lose your business altogether. While the economy is shaky, see if they’re ready to offer you a lower price or more flexible payment terms.
- Make arrangements for financial help. Examine the possibility of obtaining a small company line of credit. To keep your firm afloat, apply for small business grants and small business loans. Small business loans like Kabbage might make the difference between survival and bankruptcy. Check out this list of the finest small business loans, and learn more about the Small Business Administration’s funding options.
Finally, make certain you are aware of your cash flow condition. You won’t know how to protect yourself unless you have a clear handle of the figures.
Invest in your existing customers.
Getting new clients is more expensive than keeping old ones. Even in the best of circumstances, this is true. People cut back on their purchasing during a recession, making it even more difficult to persuade a new customer to try your firm. As a result, investing in your existing consumers becomes even more critical. Now is the moment to establish genuine connections with your customers. Demonstrate that you are on their side. Treat them with deference and demonstrate that you appreciate their patronage with your actions.
Delegate and automate.
It’s time to start delegating if you’re planning for a recession. Determine which duties may be delegated to other employees and whether there are cost-effective automated solutions that can execute repetitive jobs faster than you or your team. Delegate the jobs that take the greatest time and provide the least financial return first. Try to get rid of any tasks that aren’t in your wheelhouse or that don’t bring in a lot of money. Your time is one of the most significant resources in your company as a leader. Make sure you save it for the projects that will have the most influence on the company’s bottom line.
It’s difficult to run a small business during a recession. A recession, on the other hand, does not have to be the end of the world. To adapt to the new reality, your small business will need to be agile and flexible. You can recession-proof your firm and emerge stronger on the other side if you plan ahead, execute properly, and stay focused.
Increase Marketing and Advertising spend
When done correctly, business executives understand that marketing and advertising bring in more customers. They also realize that during a recession, the majority of other firms, including many of their competitors, will cut marketing and advertising budgets.
As a result, astute, proactive business owners and/or management teams ramp up their marketing and advertising campaigns. That’s correct. Rather than contracting, marketing should be enhanced during a recession. Implementing a marketing plan that is more aggressive than competitors’ provides a compound positive effect and concrete outcomes. During a recession, companies that slash their marketing and advertising spending would lose even more revenue, producing a self-fulfilling prophecy of failure.
When it comes to which businesses do well during a recession, it’s those that promote themselves aggressively and engage in advertising and other forms of digital marketing.
Cut the Bottom 20% of their Worst-Performing Customer Base
While it may appear paradoxical, significant organizations use this strategy to prosper. We’ve all had clients or customers who are late to pay, difficult to deal with, or take a disproportionate amount of your staff’s time in relation to the revenue they bring in. Now is the time to eliminate these customers.
Increased marketing efforts will attract new business, which will necessitate increased internal personnel. Cutting the bottom 20% of your client base frees up resources and capabilities of your existing labor force, allowing you to avoid adding new staff to your payroll.
Improve Operating Processes and Deliver Better Services and Customer Experience
This is the ideal moment to examine your processes from a quality control perspective, brainstorm with your employees, and figure out how you can better serve your clients. You must stand out from the crowd, and if you provide subpar service, potential clients will look elsewhere. At this vital juncture, this should not even be a possibility. You’ll get even more consumer loyalty if you provide better customer service.
Look for ways to optimize and streamline your business operations so that your staff can work more efficiently. This will assure your success in the following crucial step:
Service More Customers with the Same or Even Fewer Resources than You Are Allocating Now
You will now have the resources needed to support the increased number of consumers achieved by following the preceding steps, thanks to the enhancement and improvement of your operating procedures.
Fire Your Worst Employees, while Assuring the Rest of Your Staff that You Are Committed to them and their Well-Being.
We’ve all had employees that didn’t deliver what was expected of them. Perhaps they only put in 50% of their effort, or they are a toxic person that destroys your team’s unity. We do not always fire these employees because they perform a critical service for the organization, and we believe that keeping them on staff, even at a cost, is easier than training a new employee or eliminating the position entirely.
Whatever the situation may be, now is the moment to act. It’s essential for your company’s success. It’s crucial for your team. It is required by your customers and clients. During a recession, there is no tolerance for self-defeating behavior. Consider the larger talent pool that a recession affords if you are able to fill the position with someone new. You don’t have to be stuck.
Good employees, on the other hand, are priceless, which is why you should reassure your core team that you will support them during the crisis. That the company can go into the red this year if necessary to keep the team together (and preferably every corporation has reserves or a line of credit to do so).
If you fire a good employee, your entire team’s morale will suffer because each employee would wonder, “Am I next?” Fear, understandably, lowers productivity. Assure your team’s good people that you’ve got their backs. They will have yours if you do so.
- To strengthen brand loyalty and expand the client base, improve the customer experience.
- Improve your operations processes to increase efficiency, which will allow your staff to better serve the needs of your growing customer base.
- Remove underperforming employees to free up cash for high-performing staff and the resources needed to meet rising demand. Also, reassure your core team that you’ve got their backs. This assures that they will put in the same amount of effort for you and the company.
Did we ever imagine that the globe would be hit by a global epidemic like the one we’re seeing today at the start of 2020? No. However, recessions and severe economic downturns have occurred in the past, and some enterprises have thrived in the face of adversity.
It does not require inexhaustible financial resources. All it takes is the right plan, an offensive posture, and a growth attitude.
Remember that throughout this recession, people all over the world, including your consumer or client base, rely on you to provide them with the goods and services they require. Make yourself available to them. Let them know you’re still around, and that you’ve improved your products, services, and customer service. In the same way, we are here for our clients and team members.
How do firms react to a downturn?
As sales revenues and profits drop, the manufacturer will reduce or stop hiring new staff altogether. The firm may stop buying new equipment, decrease research and development, and halt new product rollouts in order to reduce costs and improve the bottom line (a factor in the growth of revenue and market share). Marketing and advertising expenses may also be decreased. These cost-cutting initiatives will have an influence on other businesses, both large and small, that supply the items and services that the huge company need.
Which industry is recession-resistant?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
Is it possible to establish a business during a recession?
Downturns and bear markets give an opportunity for entrepreneurs to start a new firm, which may seem contradictory.
Why? Because “uncertainty,” which traditional corporations and financial markets are said to despise, isn’t an issue for entrepreneurs. They are unconcerned about assessing and meeting demand for currently available goods and services. They’re working on something you didn’t even realize you wanted or needed.
How can a small business endure a downturn in the economy?
Customers want what they want when they want it, and customer service is all about giving them what they want when they want it. Customers are more inclined to stay with a company that provides excellent customer service. This implies you’ll have a better chance of keeping and growing your clientele. This could imply shifting your company’s focus to new markets, goods, or services.
- adjusting your products and services to meet the current wants of your customers
- diversifying your business to mitigate the impact of a major customer loss.
It’s also vital to identify strategies to keep your existing customers by offering excellent after-sales support during a financial slump.
How can a company get out of a financial bind?
5 Ways to Get Through a Business Financial Crisis
- Determine the origins of the financial crisis. The first stage in resolving a financial crisis is to pinpoint the source of the problem.
How do you get through a downturn?
But, according to Tara Sinclair, an economics professor at George Washington University and a senior fellow at Indeed’s Hiring Lab, one of the finest investments you can make to recession-proof your life is obtaining an education. Those with a bachelor’s degree or higher have a substantially lower unemployment rate than those with a high school diploma or less during recessions.
“Education is always being emphasized by economists,” Sinclair argues. “Even if you can’t build up a financial cushion, focusing on ensuring that you have some training and abilities that are broadly applicable is quite important.”
How can I keep my company in Covid?
Take advantage of these seven contingency and business planning recommendations to keep your firm healthy throughout the coronavirus outbreak and well-positioned for success once it’s done.