A recession is defined as a significant and widespread decline of economic performance across an entire economy lasting at least several months. In Canada, there have been about twelve recessions since the late 1920s, and in the U.S. that number is around thirteen. There’s been a lot of discussion lately about another recession being imminent, so I wanted to point out that as unpleasant as that news may be, recessions have happened before so there’s no need for rash actions.
I’ve always been an advocate of preparedness over panic, and the key to helping your business weather an economic downturn is to prepare. To that end, I wanted to share with you some strategies you can deploy that will ensure your business weathers the storm. First, here are four points to keep in mind:
- Recessions are a normal part of a business cycle.
- Becoming recession-proof requires advanced planning.
- Focus on building brand awareness through strategic marketing.
- Monitor and measure business activities and cash flow.
Check out these seven strategies to help insulate your business from the next recession.
- Create a business emergency fund.
Just as every financial advisor encourages individuals to establish a cash reserve to cover expenses in times of crisis, the same is true for your business. This is especially important for smaller businesses. Try to create a fund that can cover business expenses, including payroll, for up to six months.
- Increase the number of revenue streams.
This is another tactic that’s applicable to both individuals and businesses. Having a variety of income sources, at a wide range of price points, is necessary to maintain your revenue even in good times. For example, if your business typically offers physical products, or in-person services, consider adding digital or virtual options. If you operate primarily in the online space, you could begin offering one-on-one consultation or monthly memberships. The point is to not have all your eggs in one basket.
- Spend it only when you make it.
In other words, pay as you go. Even if you’ve set up a sizable emergency fund, try to tie business expenses for a certain period to sales you’ve made during that same time period. Whether it’s office supplies or payroll, avoid pulling from your cash reserves if possible. If there aren’t enough sales to cover expenses, focus your efforts on ways to better reach and grow your market.
- Ramp up your marketing.
It might seem counterintuitive, especially when you’re trying to save money, but promoting your business is crucial to surviving a recession. Evaluate your marketing strategy in light of the current economic environment, examine your social media and website analytics. Ensure they’re doing their job of providing fresh leads. Even minor tweaks to your marketing strategy can make a big difference.
- Provide the best customer service experience possible.
This strategy should be in place at all times, but when you’re facing the possibility of a shrinking market, it becomes even more important. Especially when you consider that attracting brand new customers often cost more than keeping existing ones. I can’t overemphasize the importance of being genuine. In the age of the Internet and nonstop marketing, people can spot fake concern a mile away. There’s no replacement for truly caring about other people.
A stalled or down economy affects everyone. If your business has employees, be sure to communicate openly with them regarding the challenges faced by the company. Assure them you’re doing whatever is necessary to keep their positions and income secure, and allow them to express their thoughts and concerns. There’s little more that will make people work harder and be happier than knowing they are valued. Show them you care. Communicate with your partners and suppliers too. They’ll be facing similar challenges, so it’s good to ask about their game plan and ensure you can both avoid pitfalls before they happen.
- Reduce expenses.
Overhead expenses and the costs of operating a business are constant, regardless of revenue. This can become increasingly problematic during a recession, but a scorched-earth approach toward cutbacks usually does more harm than good, so carefully identify areas using a three-tiered method: easy reductions, cuts that require changes in processes, and drastic cutbacks. Easy reductions could be as simple as using a different cleaning company or vendor. The next stage might be outsourcing certain tasks or reducing business travel. The drastic stage (employee layoffs, selling of assets) can offer the biggest savings, but is far more disruptive. The more advanced planning you do, the less you’ll have to resort to taking drastic measures.
These seven strategies are just a start, but if applied they’ll go a long way toward keeping your business alive and well. Don’t hesitate. The time to position your business for success is now. If a recession doesn’t occur, or is short-lived, the worse that could happen is your business grows and becomes healthier. Plus, you’ll be better positioned to leverage any opportunities that inherently arrive with a recession.
For more information or if you’d like to set up a free strategy call, contact Candice at email@example.com.