The coronavirus pandemic is wreaking havoc on the global economy. According to the latest statement by Kristalina Georgieva, Chief of International Monetary Fund, the global economy is in recession now because of COVID-19.
Needless to say, during a recession, small businesses often get affected the most. So, have you made your small business recession-proof? If you haven’t yet, this is high time to make a plan so that your business can avoid the choppy waves of the worsening economy.
In today’s article, I’m going to discuss five easy-to-implement tips to prepare your business for when the recession hits.
1. Amp Up Your Marketing Efforts
The natural tendency of most small business owners during the recession is to cut back on marketing. However, the companies don’t reduce their marketing budget and tweak their core marketing messages go a long way when the hard time hits.
During a recession, you may find your sales dropping, but that should not encourage you to stop putting efforts into marketing.
Do you know why? Because this is the time when you market your business to make it stay in the mind of your target audience, show them your brand’s stability even during a challenging situation. Eventually, they will come back and buy your products or avail services from you.
Whatever marketing effort works for your business, continue doing that. If you don’t have enough budget to outsource everything, keep a few things such as social media management, writing, email marketing, etc. in-house.
2. Check Your Financials
A recession is a difficult time, especially for small businesses. If you want to prepare well for a recession, you should make a daily habit of checking your financials. This will help you prepare financially for a difficult time.
You can opt for a key indicator system to track your daily, weekly, and monthly financial reports. Also, you should try to look into profitability per product, per customer, and per job. And start weeding out things that don’t add to your profit.
Furthermore, you should try to reduce inventory and overhead costs in order to avoid financial burdens during the recession.
3. Nurture Your Existing Customers
You should put effort and spend funds on nurturing your existing customers who spend their money on your products and services from time to time. This doesn’t mean you should not market your brand to new customers. But when the economy is worsening and the budget is restrained, you should focus more on customer retention than customer acquisition.
A report says it can cost up to 5 times more when a company focuses on customer acquisition instead of keeping an existing one. In fact, mostly existing customers spend around 67% more on their purchases as compared to new customers.
There are multiple ways to take care of your existing customers. Giving your customers dedicated after-sales assistance, engaging with them through social media, harnessing the power of content marketing, offering discounts are some of the effective customer retention strategies that you can work on.
4. Try to Minimize Operating Cost
During a sluggish economic situation worldwide, every penny counts for small businesses. So cutting down operating costs is a necessary step to take for surviving in such a scenario.
Some of the effective ways to minimize operating cost are:
- Have control of your office supplies. Do not buy any new office furniture and minimize spending on discretionary items.
- If you own your office space and have an excess area, rent that to any other small business.
- If there is an urgent need for any office item, opt for leasing than buying.
Whatever steps you take to cut down your operating cost, do not do it too aggressively and compromise in operation efficiency. You need to find a balance between minimizing cost to survive in the current situation and making investments to grow after a recession.
5. Work on Your Credit Score
When hard times hit, it becomes more difficult to secure loans. With a good credit score, you will stand a good chance to get approved for loans. So you should start working on improving your credit score.
To get better prepared for a recession, you should work on the credit scores for both personal and your business one. Doing so can improve the probability of getting money in the time of need.
Final Thoughts
Following the above-discussed steps can make your small business withstand the impact of an economic downturn. Take action now before it’s too late.
What about you? Do you want to share more tips on how to successfully navigate through a recession? Please leave it in the comment section. I’d love to know about them.