A recession usually means a decrease in profits. For small businesses, this can be scary. Most businesses depend on reaching a certain quarterly financial goal that is necessary for them to keep their doors open.
Even though it’s difficult to increase your profit margins during a recession (or even keep it the same), there are some things you can do to ensure you’re still in business when the economy bounces back.
1. Focus on your primary services or products
A recession is not the time to start expanding your products or services. You need to save the capital needed to launch new products (or promote less popular ones) and apply it to your strongest sellers. Concentrate on the products and services your company is known for. These are the ones you want to continue promoting to past, current, and potential customers.
Businesses also want to start looking for ways their core products and services can be used to generate additional revenue. Consider offering subscriptions to services and benefits if a customer opts to automatically renew. Or, release an economy version of a popular product or service.
2. Don’t forget about marketing
It might seem like good financial sense to cut back or temporarily forego marketing when profits are down, but this is a mistake. You don’t have to ramp up a marketing campaign, but you also don’t want consumers to forget about your company. A recession is a frightening and confusing time for everyone, and it’s easy for consumers to forget about their favorite businesses.
Marketing also doesn’t have to be expensive. Take advantage of your online platform. Send short, creative emails to customers, and follow up with consumers you haven’t heard from in a while. You can also advertise on social media platforms.
3. Protect your company’s cash flow
Along with temporarily halting the production of new goods and services, there are other ways you can protect your business’s cash flow.
- Perform an audit of your current expenditures. You will find areas you can cut back on or temporarily eliminate spending.
- Ask your third-party vendors if the contract terms can be renegotiated. Most will be willing to reduce prices rather than risk losing your business.
- Be prepared to apply for a small business loan. During a recession, financial institutions are aware that many companies are struggling and they’re ready to offer loans to qualifying applicants. It is a good idea to start the loan process early so the money is there when you need it.
4. Take care of your existing customers
There’s nothing wrong with targeting new customers with email and social media campaigns. It’s a low-cost way to promote your small business. But you still need to concentrate on keeping your existing ones coming in.
Find out what your customers need and expect from your business. An email questionnaire is a quick and easy way to do this. Not only are you learning how you can better serve your customer base, but your consumers will feel like your business cares about them.
5. Delegate more responsibilities
Business owners, CEOs, and upper-management will find that there is a lot on their plate when the economy starts down sliding. Instead of focusing on daily business matters, staying on budget will take up a large chunk of your time. But a recession isn’t the time to let other items slide—You will need to delegate mid-level responsibilities to other team members.
6. Use automated services whenever possible
If you haven’t already implemented some automated services, it’s something you should consider. The best POS systems streamline customer payments, making it easier for both of you. Customers will enjoy the convenience, and you can reduce costs by eliminating unnecessary payment processing steps. Take it a step further: Automated email systems will make it easier to stay in contact with customers and ensure no one is left out.
7. Don’t reduce staff
Most small businesses do not have extra personnel. Your employees have specific tasks to perform that keep your company running smoothly. Reducing employee overhead is an easy way to streamline operating costs, but it also affects how well you can serve your customers.
During a recession, companies are in greater competition for consumer dollars. You might have a superior product or service, but if your competition can provide better service, your customers could take their business elsewhere.
If paying employee salaries is difficult, it could be time to start thinking about a small business loan.
8. Keep an eye on inventory with an automated system
You can reduce operating costs by reducing your backstock. However, you don’t want to cut back on product ordering to the point where you have to inform consumers you’re out of stock. An easy way to ensure you have the product ready to sell without over-ordering is to use an automated system. It will track your inventory automatically in real time, and it can even alert you if stock is low.
9. Get current with outstanding invoices
It’s never pleasant pressuring people to pay overdue balances, especially in a recession. Everyone is worried about their financial future and a bill they owe your company probably isn’t at the top of their list. But these outstanding invoices can bring in cash flow when your business needs it the most. Start by politely asking for payment. Work with the customer to bring their bill current. Even if it is a payment plan, revenue will still be trickling in. You can also implement a software program that will track overdue invoices to help you keep track of who is falling behind.
10. Keep employees involved
Even though it’s your business, any decision you make affects your employees. To keep anxiety levels down and employees productive, you need to be completely transparent about any difficulties the company faces during a recession. Hold weekly meetings and listen to employee input. Not only will this help strengthen employee morale, but you might also find that your staff has some good ideas on how the business can survive.
Take Advantage of Technology Whenever Possible
A recession doesn’t have to mean the end of your business if you’ve planned ahead. Even if you’re not fully prepared, there are still steps you can take to ensure your doors stay open. Take advantage of technology whenever possible, and don’t forget about continuing your marketing strategies. You will have to make cutbacks and you might have to take out a small business loan, but when the economy bounces back your business will still be there.
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