The Great Recession of 2008 left many business owners in the US feeling helpless, angry, and overwhelmed. As signs point toward another economic downturn, business owners should pause, reassess their activities, and devise ways of becoming recession-proof. No company is immune from an economy cooling off – Google and other giants see advertising spending decline to smaller firms where marketing may prove less successful as consumers cut spending.
The Federal Reserve’s plan to gradually raise interest rates to combat rising inflation has meant fewer loans and financing will become available to business owners if needed while making food and gasoline more costly for everyday people.
There are various strategies business owners can employ to become recession-proof and remain profitable, and even expand during tough economic times. While you shouldn’t panic, now may be the time to adjust so your organization can weather any storm. Here are eight places where business owners should start.
Prepare Early for an Economic Recession
It is well-known that economies tend to experience fluctuations, so what should you do about it? One effective strategy would be preparing early for any potential recession by spending less and saving more, including building your emergency savings and paying any outstanding debts.
Economic research can help you decide when is the ideal time and place for you to purchase inventory or make strategic moves that will support your business. Doing this can keep you ahead of the curve and position your firm for growth – discount retailers such as Walmart are known for successfully using similar strategies during a recession by offering reduced prices; similarly, any system should align with your overall goals.
Ensure you have sufficient insurance and a backup plan during an economic downturn, including changing your business model or increasing prices. Being an entrepreneur provides more opportunities than most to prepare for such scenarios – you could alter both models or increase costs as needed.
Even traditionally recession-proof industries, like construction or advertising, may not be immune from recession’s effects. Their clients may be unable to afford their services during such an unstable period or may reduce spending altogether.
Prepare for more challenging times to ensure financial security when they inevitably arrive.
In today’s economy, it is crucial to think long-term when making intelligent decisions that might later prove regrettable. Keep an eye on the future when making business decisions; be open-minded enough to change course instantly and think quickly on your feet if needed.
Competitor analysis should become part of your business plan during economic instability; competition for consumer spending can be fierce, so doing what others are doing doesn’t guarantee its efficacy; make sure you conduct sufficient research before jumping into any new marketing strategies or partnerships with other companies.
Don’t spend beyond your means just because the stock market is soaring. Economic cycles come and go quickly, so saving as much money during good times is wise – you never know when it could come in handy!
Ascertain what customers require of you during a recession by engaging them directly – and be surprised at how willing they are to pay for products and services that help them survive an economic slowdown.
Diversify: Maintain Cash Flow
Small businesses often struggle with maintaining adequate cash flows during an imminent recession. As economies slow down, companies will need to conserve funds to survive; one effective strategy for doing this is diversifying your income sources.
Your business can expand by adding services or products unrelated to its core competencies. For example, retail store owners might consider opening an online shopping section on their website and selling items over the web; or service businesses like accounting or law could add another service that complements what they already provide.
Investment in commercial real estate during a recession can be wise, provided that markets continue to hold or recover. Real estate will retain or increase in value. Therefore, becoming an early real estate investor gives you an excellent revenue growth chance.
Focus on Your Employees Recession-proof jobs may be scarce, so businesses can diversify their employment activities by adding part-time staff or freelancers to increase resources while freeing up time to focus on other parts of their business. If this approach sounds appealing to you, hire part-time staff now to free up resources while giving yourself more time and energy to focus on other parts.
Labour statistics compiled by the National Bureau of Economic Research revealed that during 2008’s recession, over 30 million employees lost their jobs. Employees fear losing their livelihood during such times; thus, they’ll welcome any opportunities that offer extra responsibilities at secure wages.
Offer incentives like flexible hours or bonuses for accomplishing specific tasks to maintain morale and leverage existing resources more effectively. This will enable your staff to get more done within limited resources.
Protect Your Existing Customer Base
In times of economic difficulty, it may be tempting to seek growth by offering discounts and special promotions to new customers; however, this strategy is often not the most prudent.
Focus instead on satisfying your existing customers by making sure they’re happy with what your products or services can provide them, encouraging them to continue using your business and recommend you to their friends and family members.
One way you can accomplish this goal is through:
Establish discounts to existing customers; arrange events and promotions (e.g. birthday parties); create loyalty programs to thank repeat business; offer loyalty discounts when new business comes in.
Remember that existing customers are the backbone of your business and should always come first in your thinking.
Prioritize Quality over Quantity
In times of economic uncertainty, it may be tempting to prioritize productivity over quality. But this can have dire repercussions; for instance, if your budget only allows you to hire one worker, ensure they provide superior services compared to a less experienced worker who requires training – this could cost more in terms of time and costs overall than hiring an experienced pro who can hit the ground running immediately.
As in previous steps, don’t cut corners regarding quality control. Now is the time to focus on building up your company reputation and ensuring that the product meets customer standards as intended. Spending extra on quality control may cost more initially, but in the long run, it could save money and increase demand by preventing costly mistakes or recalls that cost extra.
Innovate and Adapt
Staying innovative during an economic downturn is one way to remain relevant and avoid rapid decline. Innovation also prevents employees from abandoning your company in favour of competitors offering better products at more attractive prices.
Unemployment tends to rise during a recession. Instead of cutting corners with your employees, use it as an opportunity to find and build more efficient teams. Doing this proactively means positioning yourself for when the recession might end – something which many businesses don’t do effectively enough.
Consider creating new products, services, or business methods to distinguish your company from its rivals. Now could be the ideal time to expand into a new market or introduce a product line of its own!
Flexible thinking is vital at this point; don’t be so preoccupied with daily survival that you miss opportunities for growth and expansion.
Prioritize Company Culture
While it can be tempting to focus on controlling costs and cutting employees’ wages, remember that your employees are your most excellent resource. Without their happiness, their performance won’t meet your standards – and without that dedication to work for your success, neither will your success.
“The Occupational Outlook Handbook” can be an invaluable insight into which skills and qualities employers look for when hiring employees. You can use this data to help determine which skills your company should highlight and which it may opt out of utilizing.
Keep your team motivated and engaged instead of cutting costs at every opportunity. While this might cost more initially, investing in their happiness will pay dividends long term by having a committed workforce that sticks by your side even during an economic downturn.
Many job seekers prefer companies with attractive benefits and strong reputations; offering them this will attract better candidates while keeping employees satisfied – this will also reduce turnover costs altogether – plus they’ll stay with you longer to help onboard new employees as the economy falters.
Many small businesses seek partners as part of their growth strategy, whether tough times are ahead or things are looking up. Although making these investments can sometimes be challenging when reducing customer acquisition costs. But often, finding partners to assist with marketing or operating the business will save them time and money. Here are a few ways partners can aid.
Marketing Services: Partnering with an external firm for your marketing can increase lead flow while cutting costs by not devoting enough time and attention to it internally. Plenty of companies are available that specialize in SEO, website management, social media strategy and brand building, and other related services such as brand building.
Business Management: Many owners find managing payroll, scheduling, and operations tedious; therefore, bringing on staff or partners to help can increase efficiency and speed up business with more appointments being scheduled faster and quicker lead follow-up.
Technology: Technologies once available only to large corporations are now widely available and can help automate your business and free up more time for appointments, lead follow up and lead generation. Companies such as Scorpion, Hubspot, Salesforce and many others have developed technology specifically tailored for small businesses like yours; often, partners and services companies will include access to these valuable technologies as part of the services you purchase; when selecting services, partners be sure that they offer advanced technologies to boost SEO rankings, scheduling, billing operations and other operations processes.
Thriving during Recession
An old business proverb warns us against following in everyone else’s footsteps when dealing with recessionary conditions. You could see tremendous success by finding new opportunities and breaking away from their concerns about recession.
Preparing for a recession requires careful preparation and finding ways to outshout competitors during uncertain economic environments. Your positioning during strong economies will ultimately dictate where you stand during economic uncertainty.