An economic recession or just even thinking about it can be overwhelming, particularly for small business owners who don’t have the same financial reserves or cushions as large companies. In a survey conducted last fall, 85 percent of small business owners said their company will be impacted by an economic slowdown, but only one-third felt completely prepared to break a dip.
Unfortunately, a recession is no longer an uncertainty; on June 8, the National Bureau of Economic Research or NBER officially declared a recession following an economic expansion that began in February 2020 as of June 2009.
Severe economic effects arising from travel bans, closure of non-essential enterprises, home quarantines, and policies of social isolation profoundly affected world economies.
That is why there is no better time for your company to be recession-proof than when the tides are still high. When the economy is already weakening, turning back could be too late to take steps and prepare for impact. The current economic impact of the COVID-19 experience brings lessons that can be learned from small businesses, especially in battling a downturn. And here are some ways to protect your small business against any recession:
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1. Strengthen your customer base
In a recession, the number of company clients or consumers is expected to fall. Small business owners may believe the acquisition of new customers is the best form of defense before an economic meltdown. However, according to a study conducted by Bain and Company, improving customer retention by just 5 percent can result in a profit increase of 25 to 95 percent. This is due to the propensity of the return customers to buy more or use more services from a company or corporation over time.
Similarly, company sales consultant and performance advisor, Susan McVea advise maintaining and improving current clients rather than wasting too much money to attract new customers. Regular customers are easier to obtain by outstanding service. Happy return customers often attract new clientele through testimonials and word-of-mouth marketing to your company.
2. Protect your cash flow: Save up and be a smart spender
It is important for small business owners to conserve cash reserves, whether there is a recession or not. Having extra cash that is readily available or accessible is particularly helpful when you need to pay off utilities and other bills, compensate your suppliers, cover salaries, and so on when there is a difficult economic situation or business hiccup.
Build other revenue streams to generate income whether or not the economy is taking a dip. Multiple revenue streams will flexibly and recession-proof you and your small business.
Smart spending is also necessary to prevent the bankruptcy of businesses and to enable your business to build on its cash reserves. Small business owners continue to invest in extra equipment, ads, new items, etc. on prosperous and more secure days. However, spending only on required goods and services is a safe idea, particularly when there is no economic downturn, which can improve revenue or increase the customer base. Cut down on wasteful spending, something you can do away with without at least temporarily when the waters are hard to walk. Pay off loans, cash advances, and other pre-recession credits so you can protect yourself when the recession hits because it’s more difficult to make money.
3. Nourish core competencies
In a company, there is one or other stuff you are fantastic at, such as a product or service. Those key skills will help you navigate through an economic recession. Your core product or core service is the reason the clients or consumers want to come back. Their loyalty to your business is because of your excellent and reliable services or products.
Best-performing goods and services should be further emphasized, especially where the economy is not doing too well. Some company owners want to venture out and try new things that can raise revenue and profits. A recession, however, is not the safest time to carry out new projects or launch new goods or services.
This chance can not deliver the returns you ‘re looking for. Although in a previous recession Microsoft had to lay off thousands of employees and many other tech firms experienced the brunt of the economic crisis, Apple’s revenues rose thanks to the laser focus they put on their core goods. So instead of spreading yourself, protect your small business from any recession by focusing on strengthening the best products and services available to your business and promoting them to your customers.
4. Continue marketing your business
The coronavirus pandemic has caused many institutions to temporarily shut down, particularly those considered to be providing non-essential products and services. In a recession like this, where social distancing and temporary business closure are a must, many small companies have either diminished marketing activities or have fully scrapped them. The explanation behind it is that there are many shops that have to shut down anyway, or that marketing is a place where you can cost-cut during lean times.
But marketing and advertising are still critical during a recession. This is one way you can remain on top of the game while being still respected by loyal customers and exposed to new prospects. Scaling down but keeping the brand and message consistent is a must. But always remember to be sensitive and not too pushy, particularly when everyone is struggling in a recession.
One way to keep your brand intact and to keep your customers in mind is to create a strong online presence. You can want to concentrate your marketing on promoting your material, emailing lists, posting appropriate and sensitive material on your social media, checking clients and providing deals, publishing targeted advertising, etc.
5. Embrace loyalty
Recession stirs fear not only among company owners but among employees as well. This is not just consumer satisfaction or cash flow that you need to think about securing your small company from recession. You ought to keep the staff or team members in mind as well. We will probably feel anxious and will fear going down with the boats. This is why making your workers know you have their back is important. Give them, if possible, a raise in pay to keep their morale stronger, so they can feel your sincere love for them as an employer.
If the pre-recession bump in salaries is not possible then remind your employees that recessions are temporary. If you can create flexible arrangements to make them stay, help them to provide and feel secure, while at the same time trying to balance your income and expenses. A research has shown that spending 10 percent of a company’s employee revenue enhances employee morale and improves business efficiency by an 8.5 percent average. Therefore, getting employer loyalty first helps the team continue and be successful despite financial difficulties due to an economic downturn, in order to have employee loyalty.
6. Delegate and systematize
You need to reduce unnecessary tasks during a recession that can expend your energy or affect your productivity. Or, if your schedule is hectic because of a multitude of tasks, you may not be able to complete tasks that require your attention. One recommendation is to assign some of the work to your workers in order to clear your list of tasks that might take too long but have no financial gain. As an employer, focus on the tasks that will effectively utilize your most valuable resource-your time and deliver a significant positive impact on your small business.
Also, try to find cost-effective ways to automate different repetitive tasks to hurry to their results. There are innovative but simple ways to systematize similar functions that can be generated within various online platforms. If you haven’t yet, you can quickly automate appointment schedules, order forms, payment methods, and schedule bursts of content or publications. In the long run, this will also make your life more comfortable, as the pandemic has also produced a new standard that emphasizes less physical contact.
No entrepreneur would want to experience bankruptcy in the business. That is why financial decisions that will protect your small business from the effects of an economic downturn are essential. Please do not wait until it’s too late to make any significant and crucial changes. To any company owner, a recession is overwhelming but note that slowdowns are temporary.
Persevere and prepare contingencies not when the economy is deteriorating but even before a recession strikes. Nourish your company assets, and secure your cash flow. Remember to be faithful to your customers and employees; finally, you’ll see your interest and presence returns. It will equip you with the requisite battle gear to withstand economic storms, laying the foundation before a recession hits.