With a recession looming, what are smart businesses doing to stay safe?
A global recession is not only coming, but some economists argue that it's already here. The indicators were already pointing that way even before the pandemic threw the global economy for a loop. If a recession, by definition, is several consecutive months of negative economic growth, then we are most definitely there.
Interest rates, inflation, GNP, the stock market, and consumer confidence are all indicators of a recession. Additionally, the jobs market for the months ahead is equally bleak.
What is an Economic Recession?
Recessions occur when people and businesses stop spending. In the case of COVID-19, this is due to high unemployment and uncertainty about the economic future. The pandemic continues to threaten global supply chains, shipping, and services. However, there is a silver lining. Recessions come in cycles, and as tough as times get, they always pass into a period of economic recovery.
It’s not too late to protect your business from the devastating economic effects of a full-blown recession. Here’s what smart businesses do during times of recession.
All Hands on Deck
Running a business during a recession can feel like piloting a ship during a severe storm. Your skills as the captain are needed in the wheelhouse, so you’ll need to delegate tasks to your crew and trust they’ll accomplish them successfully.
Also, your crew must be flexible and willing to take on additional tasks during times of crisis. Even the ship’s cook may need to grab a bucket and start bailing water during an extreme storm to prevent the ship from sinking. Similarly, your team will need to tackle new assignments with the tenacity of seasoned pros.
How do you get that level of loyalty and commitment from your employees?
Listen to them.
Give your team a voice in the decision-making process. They’ll go the extra mile for you if they feel invested in the company beyond just a paycheck.
Good leaders are good listeners. They hear what their employees are saying and they respond (even if the answer is a polite smile and a simple, “No”). If you want your team to listen to you, you need to listen to them. Be authentic and transparent when it comes to business operations, and let your employees know how important they are to the company’s overall success. Employee trust is built on honest sharing.
Control Your Cash Flow
Keeping a tight rein on financial strings is important even during the best of economic times. During a recession, it’s absolutely essential to your small business’s survival.
Ideally, you want to reduce or spread out debt while strengthening capital reserves. There are several factors to consider when weathering the economic downturn.
Tighten Your Spending - Now is not the time to buy new office furniture or renovate the marble lobby. Eliminate all unnecessary expenses and shore-up your company’s cash reserves. Sell unwanted or surplus office supplies. This is especially true for home offices that get cluttered quickly. Get rid of that old printer and surplus toner (this one is quick and easy)! Make your workspace lean and mean. (Lean and friendly is okay, too!) Tighten that belt!
Reduce Your Inventory - Do you usually keep hundreds items in inventory? Can you reduce that to 75 or 50? Lowering inventory is a viable way to free up cash. Just make sure you still have enough to satisfy demand.
Shed Your Debt - There are many ways to shed assets and reduce debt without damaging the overall structure of your company. Keep a close eye on your income streams, fixed costs, and variable expenses. Do you need all those subscription services? What outsourced services can you bring in-house? Cutting expenses is hard, but it’s easier than cutting staff. Consider reducing hours or even payroll before resorting to layoffs.
Renegotiate with Your Vendors - On the other hand, try to get some leeway from your suppliers. Rather than Net 30 terms, some vendors may be willing to expand those terms to 45- or 60-day payment cycles. Keeping that cash in your company for an extra few weeks can be important during tough times.
Lower Your Payroll - Nobody likes to cut staff, and some studies show that companies who cut too deeply during recessions never fully recover. Consider hour reductions before salary reductions, and consider salary reductions instead of layoffs as a way to lower your overall payroll. Work furloughs and hour-reductions will help you retain staff post-recession.
Get Help - There are several programs designed to help small businesses survive tough economic times. Consider reaching out to the local Better Business Bureau or SBA to see what kind of financial assistance may be available for your business.
Embrace New Technology - Not only can this lower your overall costs, but it can also increase company transparency, productivity, and efficiency. Automation can save you money. Digital solutions like VirtualPostMail can help you manage your mail digitally, deposit checks, act as your registered agent, and give you a business address to use for registering your LLC. Be open to new and technology to make your life and business better.
Focus On Your Core
Owning your own business may not be all it’s cracked up to be, but if you look at the small business trends and extrapolate from there, you can predict beyond the recession.
What is your core service or product? This is what your company needs to focus on during a recession. If you make lightbulbs, don’t worry about your line of lamps and lampshades. Focus on meeting the needs of your lightbulb customers first and foremost. This will help you the most because it will help you keep your market share to get through a recession.
One important thing NOT TO DO during a recession is cut your company’s marketing efforts.
They are needed now more than ever!
How else do you build and maintain the trust of your customers?
Normally, you always need to stay in front of customers. During recessions, this need is of particular importance. Develop a strong online presence, create your website (if you don’t have one), and start driving traffic through business blogging and social media. Keep those content-rich emails and offers coming! Follow-up with past customers and customers who have abandoned their shopping carts. Use target marketing to bring old customers back in.
Most importantly, invest in your customers.
Don’t neglect your current customers who already love your business. Getting repeat orders from loyal customers can be vital to surviving a recession. Consider these tactics for customer retention:
- Trust your data. Keep an eye on metrics like repeat customer rate, purchase frequency, and average order value.
- Focus on fast, effective, and friendly customer service.
- Reward customer loyalty.
Use customer retention strategies that work. Send a personal email expressing how much you appreciate your top customers and their loyal patronage. Is there anything your company can do to make the recession a little easier on them? Let your top customers and biggest clients know that you care about their needs by using some of the following tactics:
- Use surveys to collect customer feedback.
- Don’t sell...educate. Teach your customers something they need to know.
- Over-deliver. Give more than you promised, either through outstanding customer service, discounts, and customers will keep coming back.
During tough economic times, customers need their products to last longer and perform better. They need great value and quality. Convince them that your products are necessary. Focus on lasting value.
Also, keep an eye on what your competitors are doing. If they cut back on marketing during a recession, this could be your opportunity to grab and retain a bigger share of the market!
For more smart marketing ideas you can check out 14 Best Low-Budget/Free Marketing Ideas for Small Business.
How To Make The Recession Work For You
Tough times create opportunities. To do this follow the above strategies to work smarter. As we mentioned before, during a recession, you may be able to gain an advantage over your competitors or find other business opportunities that were never there before.
Also, evaluate your budget and optimize your operations because it will put your company in a better position to prosper once the market turns around again.
Have the right team to help you get through these rough times. How do you do that? It starts with creating a specific work culture within your remote team.
Be sure to stick to your core competencies and don’t stray as it will help maintain your market share. You must think beyond the present and visualize a long-term plan. What tools, training, and technology do your employees need to be their best?
Don’t just react to changes. Be proactive.
Recessions are scary, but the small businesses that prepare ahead of time are the ones who survive and often thrive. Smart businesses find new ways of approaching problems. Entrepreneurs rise to the challenge, look beyond tradition, and keep a hopeful watch on the economic horizon.
Ready to Automate Your Mail?
VirtualPostMail is the most efficient and fastest way for you to manage mail and packages. Your incoming business mail is digitized to easily accomplish productive record-keeping, taxes and paperless filing.
Get your mail delivered to us and we will sort and open your mail, as well as scan your correspondence and packages, which saves you time, money, and energy.
Junk mail is completely eliminated before it gets anywhere near you.
VirtualPostMail can help you achieve a paperless office, where you can store all your documents.