The U.S. economy has been humming along for many years since the recovery started in 2009. Is another recession coming? For a while, many businesses refused to believe it.
April 7, 2020 UPDATE: Due to the global COVID-19 pandemic, millions of Americans have lost their jobs as businesses are forced to close their doors. The worst may be yet to come. Instead of just another recession coming, the next Great Recession may occur. Hopefully, it won’t turn into a global depression.
By preparing your small business for the coming recession, you can boost its chances of survival. Learn 10 ways recession-proof businesses can survive and thrive even during tough economic times…
Is another recession coming? A recession can be worrisome for entrepreneurs, but it isn’t all bad news for businesses. It can also bring some opportunities. Recession-proof businesses can survive and thrive during tough economic times.
The Great Recession in 2008 was a financial meltdown that ruined the global economy. The Global Financial Crisis marked the worst business conditions since the Great Depression and the longest recession since World War II (the global war lasted from 1939 to 1945).
Over 170,000 small businesses closed between 2008 and 2009.
Whether the economy is going strong or struggling, you need to run your business well. But during a recession, you will face big challenges that will test the strength of your business…
Good preparation can mean the difference between struggling to survive and thriving.
Just like in other recessions, many small business owners will be unprepared when the downturn hits… and their businesses will not survive.
“Take advantage of the enemy’s unpreparedness.” – The Art of War by Sun Tzu
Is another economic recession coming?
A recession isn’t all bad news for businesses. It can also bring some opportunities.
Recession-proof businesses not only can survive but they can also thrive during tough economic times…
Did you know?
You can still boost your sales and profits during a recession. Your business can even EXPAND while the rest of the economy is shrinking.
Most of your competitors will not be prepared for the recession and they will end up losing customers. With effective marketing, you can get their customers and gain some of their market share.
Do not wait for the downturn to hit…
It’s crucial that you start implementing these recession-proofing strategies to help your small business survive and thrive during the next global economic meltdown…
10 Ways Recession-Proof Businesses Can Survive and Thrive During Tough Economic Times
1. Use Effective Marketing Strategies to Win Competitors’ Customers and Expand Your Market Share
Especially if they didn’t prepare for the recession, most of your competitors will be struggling with dwindling sales and resources…
If your competitors’ customers are not being served well, they will be more open to making changes in their buying decisions… You can take advantage of this opportunity to entice them into becoming your customers.
Some businesses cut back or eliminate marketing during tough times.
This is a big mistake!
Your business needs effective marketing even more during tough times. Instead of cutting back or eliminating marketing, you can focus on low-cost and high-impact marketing strategies.
You need to use effective marketing strategies not only during tough economic times… but also during good times.
The recession will present opportunities for boosting your sales and expanding your customer base. The most effective way to take advantage of these opportunities is by marketing effectively.
Dealing with common marketing misconceptions will be covered in the next section…
Effective marketing is one of the most important strategies used by recession-proof businesses to survive and thrive during economic challenges. You can boost your sales and profits during tough economic times… as well as during good times.
2. Instead of Lowering Your Prices, Boost the Value of Your Products and Services
During a recession, most customers become more price-sensitive.
Most of your competitors will be desperate to boost their sales. So, they will offer potential customers ridiculously low prices.
Do not do this!
Participating in a price war is a bad idea…
Businesses that participate in this race to the bottom end up hurting their bottom line. They also end up creating a lot of work for their staff… while minimizing their profits.
You can find creative ways to increase the value of your products and services… WITHOUT lowering your prices
By adding buying incentives to your offers, you can increase their value. This can boost your sales by making your products and services irresistible to buyers.
Buying incentives can include bonuses, upgrades, discounts for multiple orders, limited-time special offers, premium support for no additional cost and guaranteed satisfaction.
The most price-sensitive customers are usually the first to go when recession hits. But, your best customers may be willing to pay more for the additional value that they get.
You can lock in more valuable customers by adding massive value to your offers… and increasing prices. You can boost your margins and distinguish yourself as a premium option in the market.
NEVER assume that your ideas will work. Always run marketing tests to find the best-selling and the most profitable offers for your business.
3. Increase Your Brand Equity and Loyalty: Build Relationships and Build a Deeper Bond With Your Customers
Identify what your most valued and potential customers want… and give it to them. You can offer it to them as freebies to generate leads or you can sell it to them.
Do your best to exceed their expectations by adding more value to their purchases. For example, you can offer extended service hours and terms, deliver customized experiences, provide added value services at no additional cost, etc.
By demonstrating your commitment to your customers, they’re more likely to reciprocate and demonstrate their commitment to your business.
Motivate your customers to act as ambassadors for your brand…
To encourage positive word-of-mouth and increase referrals, you can extend special invitations and special offers to their family and friends. You can reward your loyal customers as well as their referrals.
By increasing the ACTUAL value of your offers, you can also increase the PERCEIVED value of your brand.
Increasing your brand equity can increase loyalty to your brand. This can shift customers’ buying decision in your favor.
Unlike competitors that rely mostly on lowering their prices, the competitive advantage of building your brand equity and brand loyalty can be more sustainable.
By deepening your relationships with your most valued customers, they are going to be more likely to stay committed to your brand and remain highly profitable during the downturn. You can also develop deeper relationships with new customers that fit the same profile as your most valued customers.
The relationships you create and the emotional bonds you build with your customers are the most valuable assets for your business… especially during a recession.
Strong relationships with customers contribute significantly to your brand equity and brand loyalty. This can give your business an advantage that your competitors can never take away from you.
4. Provide Excellent Customer Service While Delivering High-Quality Products and Services
By providing excellent customer service, you can turn loyal customers into your brand ambassadors who can help you get more business.
- Focus on meeting your customers’ needs and exceeding their expectations. This is the best way to get repeat business and new referrals.
- Make follow-up calls and emails to customers to make sure they’re satisfied with the products or services that they have purchased from you.
- Be highly responsive to customer’s complaints, problems, concerns and issues.
- Always throw in some bonuses and extras that show your customers that you appreciate their business.
5. Improve Communication With Your Customers: Show Your Appreciation for Their Business and Loyalty
During tough economic times, your customers may also be dealing with financial problems and challenges.
- Talk to your most valued customers to understand their biggest challenges and figure out ways you can help.
- Consider adjusting fees for long-term customers, if they’re having financial difficulties.
- Pamper your best customers to keep them from switching to your competitors. Why? During tough economic times, your competitors will be desperately trying to lure them by offering ridiculously low prices.
- Reward existing customers with special offers, gift certificates and loyalty cards.
- Offer potential customers special offers, discounts and freebies. The initial cost is minimal compared to the lifetime value of your customers. Your new customers may continue to buy after the recession ends. They can also bring in referrals to your business.
6. Manage Your Business Finances Effectively
- After providing goods or services, send out invoices as soon as possible.
- Always follow up on invoices you’ve sent. You can make this easy by creating templates for email or text follow-ups.
- Follow-up promptly with customers falling behind on payments. Start collections at 30 days past due.
- Make a list of all expenses that could be cut down or eliminated.
- If you need additional financing, consider applying for a business loan when your financials are still in a good state. If you wait until your business is in financial trouble, you will be less likely to receive financing.
- Instead of buying, consider renting or leasing equipment. It can help you avoid maintenance costs. It can also prevent you from paying for equipment only needed for a short period of time.
- Consider renting your office space to make it easier to relocate to a better location or cheaper office as needed.
- Don’t lock yourself into long-term financial agreements, including, commercial leases, large inventory orders, vehicle and equipment acquisitions. Instead, remain financially flexible. So, you can cut costs quickly as needed.
7. Eliminate Wasteful Practices and Improve Efficiency
Get lean by trimming your processes and optimizing operational efficiency.
You don’t have to cut too many corners and be cheap. Instead, find a sweet spot where you can deliver the most value to your customers using the least resources.
Manage your inventory efficiently. Have enough stock on hand to meet customer demand, but make sure you don’t have excess inventory stuck in the warehouse tying up your working capital.
8. Switch to a Flexible Workforce to Lower Payroll and Other Employee-Related Costs
- Outsource work and use freelancers to handle some functions
- Work with independent contractors. This will allow you to reduce or eliminate labor costs quickly as needed.
- Adjust your mix of full-time, part-time and fixed-term employees based on production needs and workload demand.
- Consider hiring salespeople and pay them commission only.
9. Update Your Employment Contracts
Get expert business and legal advice to update your employment contracts.
Evaluate existing terms and conditions of employment. Based on expert advice, consider making LAWFUL changes by adding any of the following:
- Consider adding a clause that allows you to require employees to undertake other duties (if reasonable and necessary). Employees usually have narrow job descriptions, but they have other skills and attributes that are useful.
- Consider adding a clause that allows you to temporarily decrease contractual days or hours.
- Consider adding a clause which allows temporary reduction or cessation of pay when you can’t provide any work for employees.
- Consider providing employees some time-off during quiet periods in exchange for working additional hours during busier times.
10. Improve Communication With Your Employees to Increase Morale and Performance
During tough economic times, employee morale is often low and stress levels are high. Keep lines of communication with your employees open to help them deal more effectively with the challenges related to the economic downturn.
- Recognize employee’s contributions and hard work. You can use non-cash ways to reward and motivate your employees.
- Keep your best employees through performance-based bonus programs. If your business makes more money through their efforts, then you can afford to give them more money.
- Flexible scheduling may be more cost-effective for your business. Some employees may be willing to embrace a more flexible schedule to achieve better work-life balance.
- Communicate, consult and collaborate with employees before implementing any workplace changes. Give employees the opportunity to raise concerns, present their views and suggest alternatives.
- Make every effort to reassure your staff that their jobs are safe (if applicable).
“In the midst of chaos, there is also opportunity.” – The Art of War by Sun Tzu
A recession isn’t all bad news for businesses…
By preparing well for any changes in the economy, recession-proof businesses can boost its chances of survival… and thrive during hard times.
Yes, this can happen to you…
With good preparation, your small business can EXPAND while the rest of the economy is shrinking.
The recession will present opportunities for boosting your sales and expanding your customer base. The most effective way to take advantage of these opportunities is by marketing your business effectively.