How To Survive A Recession: Strategies to Help Your Small Business Remain Alive
Time to read 6 min
Time to read 6 min
First things first, do we really know what a recession is or how it looks like? Bear with us as we get a bit technical.
In simple terms, a recession means a decline in economic activity. While a technical recession is formally defined as two consecutive quarters of declining or stagnant gross domestic product (GDP), it's important to focus not only on the duration, but also the severity of the economic downturn.
Consider the COVID-19 crisis, for example, where GDP dropped for a shocking 31%, one of the most significant declines in modern history, only to rebound by an impressive 35% in the following quarter.
Nowadays in 2023, in much of the western world the primary concern is inflation, largely attributed to disruptions in the supply chain during the post-COVID era, coupled with a surge in demand.
To combat high inflation, the Federal Reserve announced a raise in interest rates, making credit more expensive and creating cash flow challenges in the local market. This has raised fears of widespread business bankruptcies, unemployment, and, inevitably, a decline in overall well-being for families.
Believe it or not, this also delivers an opportunity to grow stronger than your competitors. Here are some fundamental strategies to achieve that:
First of all, it's crucial to keep in mind that recessions, while challenging, are typically temporary.
Historically, recessions have lasted from 6 to 18 months. This presents an opportunity to assess your business's profitability and identify areas for potential growth.
Begin by creating a budget and sticking to it .
Examine how your profits are used.
Craft a business plan that can provide insights into the real profitability, accounting for both peaks and valleys in sales, which will help you make informed business decisions.
A quick note: It's worth noting that government investment is not exclusive to the United States; many countries offer inflation-protected bonds that typically pay returns on fixed dates. However, it's advisable to seek guidance, as interest rates and benefits may vary.
During periods of economic uncertainty, many small business owners have to deal with tough decisions that sometimes may be to the detriment of employees, suppliers, or even their own financial well-being for the sake of an enterprise.
However, this can also be an opportunity to grow and improve. Reducing expenditures, while it's one of the first actions many businesses apply, has to be done carefully.
During a complicated economic climate, everyone feels the impact. There's a chance that your vendors could be struggling with cash flow as well. In light of this, there's a possibility that they might be willing to renegotiate your contract conditions, such as prices and payment terms, instead of risking the loss of your contract entirely. In the end, it could be mutually beneficial.
Now let's consider the scenario where your supplier is reluctant to renegotiate; in such cases, it's worth exploring alternative options in the market. Remember that many potential suppliers are often eager to welcome new clients in the middle of a recession. However, always keep in mind that delivering good quality products always represent the best option in the long run. Your clientele will be more satisfied and will be more inclined to return.
One of the main issues of a business during a recession is the lack of cash flow. Taking on new debt could exacerbate the situation especially considering that the difficult economic scenario was partially caused by the high-interest rates.
Try to pay expenditures on time to avoid extra charges and penalties.
Another effective strategy to save money could be to move away from conventional marketing approaches, such as printing flyers or running newspaper ads, to online platforms and popular social media networks. This alternative offers affordability while its results become easier to monitor its reach and performance.
Online media allows for diverse content creation, including posts, live transmissions, videos, and topic-related discussions, significantly increasing business visibility.
Moreover, businesses can cultivate a dedicated online community by running promotions or contests, encouraging followers to share posts and tagging the business.
Building a solid foundation of regular existing customers is a cornerstone for a strong business, particularly during a recession. Loyal customers have developed an emotional attachment to your enterprise and they're an invaluable asset that should be nurtured.
In addition to the previously mentioned marketing strategies like running special sales or offers on social networks, consider implementing loyalty programs and extending special discounts to returning buyers or recommended clients, depending on the state of your inventory and financial numbers.
Offering quality products is essential; your customers will know that their business is genuinely valued. Also, don't overlook post-sale strategies; actively encourage feedback and business reviews and be prepared to honor warranties or address any issues with your products.
While it's impossible to maintain a perfect experience for each and every customer, your response to those situations can mean the difference between an occasional customer and a loyal one. Investing in customer satisfaction is not only a short-term strategy but also a long-term commitment that can dramatically fortify your business.
Take advantage of your work team and their insights; your employees possess a unique understanding of how your company operates and involving them to identify potential areas of growth and solutions can be invaluable.
Letting them know that they play an integral role in the organization's success could lead to substantial improvements in terms of efficiency. Consider reorganizing functions based on your employees' talents and interests to optimize their contribution.
Just as customer retention strategies are important, maintaining a positive work environment is equally crucial. The difference between having an occasional employee and a loyal one can be as significant as the impact of customer loyalty.
By emphasizing teamwork, recognizing individual strengths, and encouraging a positive workplace culture, your business can build resilience and efficiency, essential elements to recession-proof your business.
We hope these tips can help you deal with any economic distress that may arise in the future, though we hope it won’t be necessary.
Here at HØJ we are dedicated to helping your business, so we invite you to stay connected with us on our social media platforms and through our blog, where we share valuable information about the cannabis industry.