Some say a recession is coming, while others say it’s already here. And while recession is a scary word for every business, it’s particularly worrisome for small businesses that may not have the same financial cushioning as large companies. That’s why it’s important to develop a plan to recession-proof your business today. As the economy takes a deeper dive, it will be much harder for you to respond in a timely manner and keep your business afloat. Don’t panic. Here’s a look at five actions your small business can take to respond appropriately in times of economic hardship:
1. Focus on core competencies.
Your business has something that it’s really good at. It’s most likely the core product or service of your business, and that’s what will carry the company through a recession. Scale back to the products and services you know to perform the best, and don’t waste your budget trying to support weaker products or services. And, if possible, find ways to generate multiple streams of revenue promoting your core product or service. You can also increase your revenue streams by introducing VIP and economy versions of a service you already offer. Consider a subscription option with added benefits for automatic renewal.
2. Don’t stop marketing.
During a recession, more than ever, it’s important to do whatever you can to stay top-of-mind for customers. Despite the financial hardships you may be experiencing, be sure to budget funds for marketing (and the cost to create a strong online presence) and do your best to stay in front of your customers. Here are a few ideas to get you started:
- Send regular, content-rich emails to the current customers on your mailing list.
- Follow up with prospects who have ghosted you.
- Check in on the past customers you haven’t heard from in a while and make them a compelling offer to win them back.
- Post consistently on social media and consider holding social contests, sales or events.
However you choose to engage with your audience, be sensitive to the times. Keep your messaging relevant and keep your company’s brand identity front and center. Furthermore, don’t push a hard sell. Read the room — money’s tight for everyone during a recession.
3. Protect your cash flow.
Recessions lead to slimmer profit margins, which can make maintaining a healthy cash flow tricky. Therefore, let’s get uncomfortably real for a minute. If cash flow dries up, that’s likely the end of your business. So to survive a recession, it’s essential to plan ahead for ways to cushion your cash flow. Here are a few options:
- Cut back on any unnecessary spending. Audit your current spending. Are there any services, memberships or resources that your business can function without for a while? If so, then live without and funnel that money back into necessary spending for your business.
- Renegotiate vendor agreements with more favorable terms if possible. Remember that your vendors may be struggling to get by, too. They would probably be happy to renegotiate the terms of your contract rather than lose out on your business entirely. See if they’re willing to give you a more competitive price or more flexible payment terms while the economy is challenged.
- Arrange for financial assistance. Look into a small business line of credit. Apply to small business grants and small business loans to help keep you afloat. Timely financial assistance from small business loans like Kabbage could mean the difference between survival and going under. Check out this list of the best small business loans and visit the Small Business Administration to learn about its funding programs.
Lastly, make sure you understand your cash flow situation. If you don’t have a firm grasp on the numbers, you won’t know how best to protect yourself.
4. Invest in your existing customers.
It costs more to acquire new customers than to maintain existing ones. This is true even during the best of times. During a recession, however, people clamp down on their spending — making it even harder to persuade a new customer to give your business a try. Therefore, investing in the customers you already have becomes even more important. Now is the time to build real relationships with your customers. Show them that you have their back. Treat them with respect and value their patronage with your actions.
5. Delegate and automate.
If you’re preparing for a recession, it’s time to start delegating. Assess what tasks can be handed off to other employees, and determine if there are cost-effective automated solutions that can complete repetitive tasks more efficiently than you or your staff. Prioritize delegating the tasks that take the most time with the least financial return. Try to clear your plate of any task that’s not within your wheelhouse or that yields little financial gain. As a leader, your time is one of your business’s most valuable resources. Make sure you reserve it for the tasks that will deliver the biggest positive impact on its bottom line.
Running a small business during a recession is challenging. However, a recession doesn’t have to spell the end. Your small business will need to be agile and flexible to adapt to its new reality. If you plan, execute well, and keep your focus, you can recession-proof your business and come out stronger on the other side.