The great recession of 2008 forced several entrepreneurs to shut down their businesses. Numerous individuals lost their job, had to find alternative ways of earning a living and filed for unemployment. And, these days, owing to so many unsettling economic news it seems like another recession is making its way. These economic indicators are becoming a serious matter of concern for many small businesses but how many of them are thinking of a strategic plan to survive if the recession actually hit them hard in the future? Recessions are highly unpredictable and drastically impact businesses especially the small ones. Entrepreneurs struggle to retain their assets whereas many fail to continue their ventures. Thus, whenever there are warning signs of an economic crisis, it’s best to take adequate precautions so that the business can endure and survive the downturn. The steps taken to make the organization recession-proof might look troublesome for now but they definitely pay off in the long run.
Take a look at 5 strategies that can help small business owners make their businesses recession-proof:
- Broaden Your Product Range
When consumers begin to feel the economic crisis is approaching, they tend to restrict their expenditure until the economic conditions improve. Considering this, the small businesses must diversify their product range and offer multiple pricing options. This requires a close examination of the market to determine what kind of products are in demand with a focus on the necessities instead of luxuries. Expand your business in the areas that are likely to remain stable in case of an economic crisis and also streamline your product costs. This will help create a recession-proof revenue stream for small businesses.
- Enhance Efficiency
Prepare your team to achieve more even with fewer resources. This requires enhancing the efficiency in daily operations. For this, organizations need to improve their management skills and train the team to work in tight schedules. Also, task automation should be considered wherever possible by analyzing the current workflow. There are numerous cost-effective ways of increasing work efficiency and automating routine tasks so that employees can support other critical business functions.
- Stabilize Your Financial Condition
Many entrepreneurs start ignoring the best practices for cash-flow management when their business starts booming. With plenty of cash in hand, keeping track of all the cash flow no more remains a priority. And, such practices can severely impact the business in times of recession. Thus, it’s extremely important for businesses to have a clear picture of their financial condition. Reviewing the cash-flow regularly and preparing a plan of action to fight recession, in case there is one, is important. Anticipate the need for financial loans and get them while the market is still healthy. Analyze the type and size of your business and plan for a strategy that works as a cushion for your business during a crisis. Business lines of credit, term loans and personal loans with lengthy repayment schedules are commonly opted by small businesses. Also, clear your outstanding tax liabilities and debts as soon as you can.
- Step-Up Your Marketing Practices
A large customer base often protects a business during a recession. And, to create that you need to step up your marketing practices to boost sales and have more and more loyal customers. According to the U.S. Small Business Administration, small businesses must spend 7-8% of their gross revenue on marketing. However, if you consider an approaching economic downturn, you may need to increase it to 10-12% or even higher. With good marketing strategies, such investments pay off greatly. Also, invest in local and hyper-local marketing campaigns which usually get you the highest ROI. Businesses also need to reserve some funds for customer loyalty programs to increase customer retention.
- Invest Wisely
Think carefully before making big investments that could become a financial burden in case of an economic crisis, when the revenues slow down. This includes multi-years office lease and extended vendor contracts. Also, be careful while investing in growing your team. Hire people that can actually support your company’s visions and mission. Layoff sound like an easy option when there is poor performance or economic crisis, but it takes a toll on company culture and team morale.
All these strategies are not only helpful for making the organization recession-proof but also in developing healthy business practices, which in turn assist in staying ahead of the competition and business growth. Recession often comes unannounced. Thus, putting some extra efforts today would help you protect your business from economic turbulences tomorrow.