Our current economic state is stressful. As the word “recession” floats all over the news, it seems we are in a sort of “will we or won’t we?” debate between those who believe a recession is unavoidable, those who think it can be side-stepped and those who feel it could go either way. Given that it’s hard for financial analysts to know what will happen, small business owners have little hope of being able to pinpoint precisely what economic turn the country will take and when. The best option is to prepare our businesses.
Certain businesses are nearly recession-proof just by what they do or sell. These companies meet basic needs: food, clothing, housing, healthcare and utilities. Whether in one of these fields or not, the vital thing to remember is that recession-proofing your business benefits you regardless of whether the recession hits.
So how do you do it? Here are some top moves to make.
Consider what products you could add to your line-up at a minimal cost. If you’re already making soaps and bath bombs, consider adding products like salt scrubs or body washes. Consider expanding to baby blankets if you specialize in knitted hats for infants.
Think about your market. Is it possible to reach customers in different ways? Consider selling your products through a large online retailer like Etsy, Amazon or eBay. See if the local grocery store will carry your soaps or if that cute baby boutique will sell your hats. Consider if there are populations of customers you are not currently targeting. Think about how customers access your products. Add delivery, business-to-business sales, bulk pick-up or even subscription services.
Finally, you might be able to diversify your offerings by adding new price points. If you usually make all leather bags and boots, consider offering a similar line in faux-leather options that are more affordable (which might appeal to vegan customers — a whole new market!) If you make sweaters from alpaca wool, consider adding a synthetic version of the same style to catch the customer who loves your look but has a tighter budget.
2. Understand your cash flow
Even if you have an accountant handle your financials, now is the time to sit down with your statements and know your cash flow. Take a look at your documents month by month. Based on your historical spending, you should be able to create a realistic monthly budget. Develop a spending plan, factoring in worst-case scenarios based on what you come up with. Check in on your cash flow every single month and adjust as needed.
As you review your budget, think about the purchases you’re likely to make in the next 18 months (sure, the average recession is only 11, but they can last up to a year and a half.) Consider delaying major expenses like new office space or new furniture. At the same time, review your ad buys and costs and identify which are earning you the most significant returns. Drop any that are not paying off. You must keep investing in your company via advertising, even during a recession. Fading into the background as you try to save money is a surefire way to run into trouble. In addition to reviewing your budget and expenses, take the time to renegotiate with your suppliers, especially if it’s been a while since you’ve done so.
Finally, consider preparing to open a line of credit or apply for a loan. You may never need it, but training the documents you need takes time, so go ahead and collect them now. Ensure you have the most up-to-date financials, business plans, references, organizational charts and resumes. Do prospect research to identify possible grants related to your business or peruse loans with the best interest rates. Keep them in your mind and be prepared to pull the trigger on an application if necessary.
3. Prepare your team
Make sure each team member does the work best suited to their strengths. If someone is underperforming or you realize you don’t need an absolute position to fulfill a specific task, make the edits. If you downsize, be aware that those remaining may fear for their jobs. It is essential to explain the situation carefully, reassure your team of their value and offer cross-training or other professional development.
It is essential in a recession to keep your crew happy. Replacing employees costs financially and in terms of workplace morale. A great way to keep employees happy is to offer opportunities for remote work if your business can handle it. This will give them more time at home with their loved ones and save you money if you can close the office or shop from time to time and save on utilities.
4. Strengthen your customer relationships
The best move you can make to recession-proof your business is to convert one-time customers into repeat visitors. There is a slew of ways to do this, but here are some of my favorites:
Offer a rewards program. You know how these work, and you’re likely part of several. You spend money and earn rewards for every dollar you spend, whether it’s $5 off a bag of coffee or a free candle. Rewards programs keep customers returning, make them feel special, and encourage them to spend more on each transaction.
Start a subscription program. Did someone buy gourmet dog treats from your online shop? If that bag of goodies is meant to last a month, why not offer your customers the option to have treats auto-delivered on a regular schedule? Offer a small discount, and your customer will save money, and they won’t go elsewhere for Fido’s snacks.
Personalize. Make recommendations for customers based on what they’ve already bought. Offer to curate boxes of goods. Offer to monogram that pricey dog bowl or bathrobe. Allow customizations on clothing or handbags.
Give your customers a voice. One of the best strategies I’ve seen for this is inviting frequent customers to join an “advisory panel.” Let them know their opinion is vital and ask them to join, then send them regular surveys to solicit their feedback on your offerings. Give them a chance to write in any ideas for new products or how you could improve. You’ll not only make your customers feel valued, but you will also receive valuable information about their spending habits. They may even give you some great ideas.
Offer free samples. We’ve probably all added extra items to an order to get a freebie, but this strategy works even if you don’t require that the customer spend a certain amount! Even if they only order one bar of soap, throw in a sliver of that new solid perfume you just created. If your customers like your products, they’ll likely enjoy your new offerings too, and you might earn back-to-back orders.
5. Be willing to change your mindset
Sure, maybe a gourmet cotton candy store is your dream business. But during a recession, realize that you must be flexible and adapt to a changing market. Unless you serve only the wealthiest customers, you will likely need to change or add to your offerings. So maybe you have to start hosting children’s birthday parties for a little while. If you hate it, you can always drop that service once things look up financially. You’ve just added a permanent revenue stream if it’s not so bad.
A recession doesn’t have to mean panic — keep focused, flexible and financially aware. This is an opportunity to get to know your company better and get creative with your offerings.