The ongoing coronavirus pandemic has led to the shutdown of major sectors of the economy, so many countries around the world are now facing an economic slowdown. As businesses clamor for subsidies from the government, the unemployment rate continues to rise.
Some experts warn of an impending recession, while others argue that it’s already here. Recession is a scary word for any kind of business, but it’s especially worrisome for small businesses that don’t benefit from the same level of financial cushioning as larger companies. We only have to think about the dot-com bubble from the early 2000s and 2008’s Great Recession to be reminded of the impact such events can have on the future of small businesses.
In this article, we will go through some of the most effective strategies for ensuring the continuity of your business in a less than predictable economic environment.
Focus on Your Core Competencies
Every business has something it excels at – its core products or services. This is what will carry you through the recession. There are times when you can invest resources in new paths since bigger risks can also mean bigger rewards. Unfortunately, this is not the best time for this strategy.
During a recession, the smartest thing you can do is scale back and focus on the products or services that perform best. Don’t channel any of your budget to perfecting or marketing weaker products.
If possible, try to generate extra revenue by providing goods and services that people generally associate with basic survival and safety or to products that have been shown to attract customers during this time. If your company is not specialized in these sectors, you can also support and partner up with another small company in return for some of the profit.
Another way to increase revenue is to offer VIP or economy versions of your products or services or to introduce subscription options with added benefits.
Adapt Your Commercial Strategy
Companies that have survived previous recessions often attribute their success to their ability to carry on longer than their competitors. This is because customers that can no longer get their products and services from the providers they were familiar with will switch to alternatives, and around 15% of them will not switch back post-recession.
This means that customer service should be your top priority so you can reduce churn while acquiring new customers. You’ll want to continue your marketing efforts while changing your delivery model. The pandemic has caused a unique type of recession where buyers prefer home deliveries and want to place orders online or by telephone. Make sure you have enough staff resources to handle orders and customer inquiries. Use on hold music to keep your customers from hanging up and maintain the level of professionalism they expect even if they have to wait longer than usual.
Your marketing strategy should also be sensitive to the times. Remember that your customers are also feeling the pressure which will be reflected in their spending habits. Your advertisements should emphasize how your products and services can benefit them right now. To improve brand perception, you can associate yourself with efforts to help your community overcome challenges caused by the pandemic. Don’t push for sales and keep your messages relevant while you place your brand front and center.
Protect Cash Flow
It’s no surprise that recessions result in slimmer profit margins that make it more challenging to maintain healthy cash flow. We know that if your cash flow dries up, you’re likely to have to close down your business.
To carry your business through the recession, you’re going to have to audit your current spending and cut back as much as possible. See if there are any resources or services that you can function without at least for a while or if you can renegotiate your contracts with collaborators or suppliers. Look for cheaper alternatives for the items you consider necessary and funnel the money you saved into keeping your business running.
Remember that any companies you collaborate with will also be struggling to stay afloat, so they’d rather renegotiate terms than lose your business. If you can’t get lower prices, you may get more flexible payment options or discounts for early payment. You won’t know unless you ask.
You’ll also want to look into financial assistance. You can either get money through government support to keep your employees on the payroll or search for other funding programs and lines of credit for small businesses. The most important aspect is to get a clear understanding of your financial records, so you know where to cut back and how to protect yourself.
On Managing Staff
As with any economic downturn, you may need to consider adjusting your staffing arrangements. It’s never an easy decision, but even the strongest companies may have to opt for layoffs. You’ll want to have a thorough understanding of your staffing costs. If possible, reduce hours before considering any layoffs. Of course, if you’re going to cut costs this way, you’ll want to lead by example and start by reducing your own income. Your employees will respect you more for it, and it improves morale.
As with any changes in a company, communication is key. You need to communicate early and clearly not just with your employees but with any stakeholders, including suppliers, creditors, and customers. Rash decisions that go against company values and public expectations can lead to a backlash that will hurt your profit margins and our chances of surviving the recession.
Regarding your staff, you’ll want to keep them up-to-date and involve them in the decision process. This creates an atmosphere of solidarity, and together you can come up with solutions that benefit everyone involved. They may be open to job-sharing arrangements or additional training so they can undertake more duties.
If you have to let some of your employees go, never do it in rounds as this will make the rest of the team more unproductive since they’ll be worried about what’s coming next, and you also want to make sure you understand your obligations when ending a contract.