Right now, talk about a recession is growing. A CNBC survey of CFOs found that 68 percent believe a recession will happen during the first half of 2023. Meanwhile, consumers getting squeezed at the grocery store and gas pump say the recession is already here. Talk like this tends to bring about fear in small business owners. I want to calm those fears and offer you support in this article.
Vigilance is wise, but fear can paralyze you. You can do many things to prepare your small business for a recession. But these aren’t things you do once and then forget until the next recession comes along. The items below require a permanent mindset shift and continual application to build a resilient small business. Follow these tips to prepare your small business for a recession, and you’ll fortify your business for this coming recession and any recessions after that!
How to Prepare Your Small Business for a Recession
To prepare your small business for a recession, you’ll want to:
- Deceasing spending
- Increase cash flow
- Get creative with marketing
- Pay attention to sales
- Prioritize relationships with customers
The list below will give you plenty of ideas to try!
Cut Unnecessary Costs
Cutting unnecessary costs is a way to prepare your small business for a recession, but it’s a good thing to think about even in days of prosperity. For example, you may:
- Pause or stop recurring subscriptions that aren’t essential for the business.
- Eliminate services you don’t need or negotiate a price reduction. If the company does not lower the price, you may decrease the scope of the work for a cost reduction.
- Negotiate a decrease in rent, deferred payment, or both.
Be Careful with Spending
To prepare your small business for a recession, you’ll want to hold on to as much cash as possible. Now is not the time to make large purchases on items or projects that can wait for another year. You may also want to delay hiring additional employees.
As you work to eliminate your discretionary spending, you’ll want to evaluate everything and only purchase things that are essential to running the business. If it can wait, don’t buy now!
You’ll want to buy more carefully for the things you do need to purchase. Buy smaller quantities to conserve cash. Negotiate lower prices. Ask for bids from several suppliers. Shop around to make sure you are getting the best price.
You must have cash in the bank during a recession to sustain your business and get you through the economic downturn. To prepare your small business for a recession, you’ll want to think of new ways that you can increase cash flow. Here are some ideas:
- Get creative with excess inventory. Give it more exposure in your business, put it on sale, or bundle items.
- Think about short-term deals you can offer, including price cuts, lowered delivery fees, etc.
- Promote the purchase of gift cards.
- Experiment with new marketplaces. For example, now may be the time to list your products on Etsy, Facebook marketplace, eBay, Hauldrop, or Craigslist.
Rethink Sales and Marketing
Sales is a priority at all times, especially during a recession. Look closely at your sales process to ensure you are driving in new leads daily and following up with each lead. What problems do you see? In what ways can you improve? Set aside two hours per day for sales activities (or two half-days a week). Ongoing sales is what will keep you afloat during a recession.
Meanwhile, you’ll also want to rethink your marketing and find ways to lower the cost while increasing the results of your efforts. Of course, you won’t want to eliminate paid ads if they are working for your business. However, many cheaper marketing alternatives also produce great results.
- Build your email list and nurture your subscribers to build relationships and sales.
- Implement a referral program to reward your current customers for bringing new customers your way.
- Strategically use social media to build relationships with followers and promote your products and service.
- Network more, using social platforms like LinkedIn or in-person methods like conferences, tradeshows, and community events.
Stay Close to Your Market and Customers
As you prepare your small business for a recession, you‘ll want to stay on top of your industry and market. A slowdown in sales could become a trend for the entire industry. Analyze your industry to discover what is happening so you can anticipate changes and adjust. Often you can mitigate risk if you are proactive about it.
You’ll also want to stay close to your customers so you can anticipate their needs and continue to win their business. The recession will impact them too, so it’s important to know what they are thinking and doing during this delicate economic period. If you know your customers well, you’ll know if they’re about to take their business elsewhere—and why. You may be able to solve problems so they will stay with you. If money is an issue, there may be a chance to negotiate price or create payment plans. Consider interest-free plans to reward loyal customers and keep their business.
Over Deliver on Value
A recession is a perfect time to shine for your customers. Before you battle it out in a price war with your competition, consider the customer service you offer that justifies your higher price. If you focus on adding value, providing quality products or services, and consistently outperforming the competition, your customers will keep coming back.
Prepare Your Small Business for a Recession
The list above is somewhat of a ‘package deal.’ For example, it won’t help to increase cash flow if you can’t bank that cash because you’re overspending. Similarly, cutting costs is good, but if you stop all marketing efforts because of it, your leads and revenue will drop dramatically. Take some time to consider all the tips above and how you can blend them into a workable recession plan for your business. How to prepare your small business for a recession is a matter of strategic planning. I’m rooting for your success!