3 Tips for Small Businesses to Survive and Thrive During a Recession
Times are tough, but the right moves can put you ahead in the coming months and years.
As a small business owner, the idea of a recession can be scary. Many businesses have not been through a recession. It's much easier to make money when things are good in the economy than it is when times are tough, but that doesn't mean a small business can't survive and even thrive during a recession.
There are three important things a business should do during a recession to ensure they last and end up better off in the long run:
- Focus on cash reserves
- Find your most profitable activities and double down on them
- Emphasize delivery and client retention
By focusing on these three things you'll find that the idea of surviving a recession and even thriving after it becomes a lot more palatable.
1. Focus on cash reserves
If you don't have a large amount of cash on hand in your business, it would be smart to figure out where you can find it. Cash reserves are something that is generally built with foresight and planning for the future, but that doesn't mean that you can't build them up if you're feeling weak in your cash reserves.
Look at your current invoicing and try to find any outstanding invoices that clients might be late with. Follow up with any clients that might be struggling to pay their invoices and try to work out payment plans with them. Do whatever you can to ensure any money that you are owed will make it into your accounts as soon as possible and do everything you can to hold onto it.
Another place to look is treasury assets. Most small businesses don't hold treasury assets like larger corporations, but if you're large enough to have a CFO and treasury assets, see how readily available those assets can be liquidated. If needed, liquidate a portion of them to allow a larger runway if sales drastically decrease.
The focus here is to increase your runway and plan for the worst. Of course, this depends on how fundamental your goods and services are for your clients. No matter how necessary you are for your clients. Expecting and planning for the worst will be in your best interest.
2. Find your most profitable activities and double down on them
Often times in a thriving market, we can become complacent. Sometimes we allow our employees to pursue different types of activities — some profitable, some not. Going into a recession is a great time to do an audit of our employees' activities and get a very clear understanding of what's most profitable.
Let's say you're a roofing contractor and you've been experimenting with different types of marketing. Doing an audit of these marketing techniques and doubling down on the most profitable is one of the best ways to streamline your business. An example would be if you have an employee who's been focusing on writing articles for your blog in hopes of helping your SEO, but the fruits of their labor aren't being productive and you also have teams of employees doing cold outreach door-to-door, which is extremely effective. Shift your efforts over completely from any sort of SEO to cold outreach door-to-door.
While this may seem obvious to many business owners, we often find extraneous expenses in our client's books. When questioned about them, it becomes obvious that the fat can be trimmed, but oftentimes, there is so much going on for a business owner or manager of finances that small things are overlooked. Focus on the most profitable parts of your business during a recession and when the economy turns again, you'll be even better set up for success.
3. Emphasize delivery, client retention and referrals
Happy customers create more business. Repeat and referral business is extremely important in a recession. Ensuring that your clients are happy is vital in any economy but especially in a recession. When money gets tight, everyone looks for ways to cut expenses as I talked about above.
A recession is a great time to increase touch points with your clients in order to ensure client satisfaction. Sometimes when the economy changes, so do your client's needs. Utilizing this opportunity to discover any additional or change in the pain points of your customer can lead to more profit, satisfaction and referrals.
Often times people are on the defensive instead of the offensive in their business during a recession. If you serve B2B, look at ways you can help them defend their business while adding to your own. If you are in a B2C business, look for ways to help your customers spend slightly more now to save later. Play to the psychological state of your clients and customers in order to help them feel heard and solve their problems.
Recessions can be scary as a small business owner but often times they can help you find places to optimize your business and when you come through a tough economy, you're able to build confidence in your ability to run your business as well as increase profit.
Buckle down and focus on what you can control, the right moves now will set you up for success in your business now and in the coming years.
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