Preparing Your Small Business for a Recession:Best Practices
Small Business | Transcend Digital Solutions
Introduction
A recession can be a difficult time for businesses of all shapes and sizes. However, with decreased consumer spending, increased competition for market share, and a reduced pool of resources to call on, problems can specifically arise for small businesses. What makes matters worse is a whopping 44% of all small business owners, in America, are not actively preparing for an economic downturn, according to goto.com. With that said, it is worth emphasizing that with the right strategies and preparations, small business owners can weather the storm and come out on the other side better for it. So, throughout this article, we are going to tackle a variety of tips and topics that, hopefully, will spark meaningful discussion about your readiness as well as prompt you to start mitigating your risk as much as you can.
Tip #1: Diversify your revenue streams
When it comes to recessions, the importance of diversifying your revenue streams can hardly be overstated. Having a wide-spectrum of value that you offer can help your small business broaden its ability to take in revenue. Consider expanding into new markets or offering unexpected new services to create additional sources of income. This can help reduce your reliance on any one particular stream of revenue which is of paramount importance. The last thing you want to do, in times of uncertainty, is put all your eggs in one basket.
Tip #2: Build cash reserves
Having a financial cushion to lean on when times get tough may just be your knight in shining armor... Building up cash reserves through careful financial planning and saving can provide a buffer to help you ride out a recession. You should constantly be reviewing your business’s financial projections and make necessary adjustments to ensure that you have the funds to get through. It is absolutely worth noting that you must not leave this sort of analysis to the last minute; the sun may be high right now; however, things can change quicker than you may think.
Tip #3: Foster strong relationships with customers and suppliers
Having strong relationships with customers and suppliers should go without saying, but you would be surprised how quickly relationships can change when things hit the fan. A recession or not, building rapport with your customers and suppliers is something that takes a continual effort across weeks to months to years. We know what you may be thinking, I already do everything that is expected of me; well that is great and all, but truly making meaningful connections is about going above and beyond in order to serve others. Take five minutes, and truly ask yourself if you can do more. Think about offering loyalty programs or incentives to encourage repeat business from your current customers while also continuing to build strong partnerships with suppliers to ensure that you have access to the resources and materials you need to continue operations.
Tip #4: Stay agile
The key to successfully getting through a recession is to be agile and adaptable. This means staying attuned to subtle changes in the market and your industry and being willing to pivot as needed. This can include re-evaluating your current business model, introducing new products or services, or changing the way you do business/render services. There's an old business adage that quite simply says, “adapt or die.” Maybe you think this is aggressive, but we think this is the one certainty you have in times of uncertainty.
Tip #5: Re-evaluate your marketing efforts
Obviously, you had to expect this tip was coming, after all, we are a digital marketing agency. However, marketing agency, or not, we truly think marketing plays one of the most vital roles in attracting and retaining customers during a recession. During recessions consumers can be more hesitant to make purchases, which means businesses need to work harder to convince them to choose their products or services over their competitors. What you say and how you say it can have a profound impact on your eventual marketing return. You must think about creative ways of positioning your goods and services as “needs” rather than “wants” or luxuries. Re-evaluating your strategy can allow you to effectively communicate the value of your offerings and, ultimately, differentiate yourself from the competition.
In addition to attracting new customers, marketing can also help businesses maintain relationships with their current customer base. When consumers are facing economic uncertainty, they may be more likely to turn to brands they trust and have a long-standing relationship with. By continuing to engage with customers through marketing efforts, across touchpoints, businesses can demonstrate their commitment to meeting their needs and building long-term relationships.
Conclusion
In conclusion, recessions can be a daunting time for small businesses; you have to take a variety of contingencies into account and tackle challenges head on, but when you decided to start your own business this is what you signed up for. Being an entrepreneur is about taking action, solving problems, and managing risk, and I doubt whether you would have made it through your first few weeks in business if you didn’t do these few things effectively. We are confident that if you carefully plan, diversify your revenue streams, consider your financial standing, foster strong relationships, pay careful attention to your marketing strategies, and stay agile, you will come out on the other side stronger than ever.
