How Can a Small Business Manage During a Recession?
The news about rising inflation in New Zealand has brought to my mind the issue of managing a small business during times of recession. Being surrounded by powerful brands, it’s nowadays already increasingly challenging for a small business to survive. If you also add the variable of recession to this equation, the odds are definitely not in favor of minor brands. For this reason, I think every business ought to develop a strategy for handling a future financial downturn.
How can entrepreneurs increase their chances to hold their heads over the water during a recession? Can they not only survive, but also flourish in the process? My name is Ofir Bar, an experienced investor with a special interest in young startups and innovators. Let me share my insights with you, small business owners. I hope you will find my notions beneficial.
Keep your head down, but look ahead
The most basic step to be taken during a recession is to focus on what you do best and avoid unnecessary risks. This means putting effort into your core service or product, the ones you already know that perform the best. This means cutting down all unnecessary expenses and examining ways to lower fixed charges. Try to find ways to generate a larger revenue using your existing leading products. This can be done, for example, by offering different deals for big-spending clients and small spending ones. Put an emphasis on promoting your chosen services to current, past, and potential future clients.
It’s true that during a recession, consumers try to spend less than they would normally do. For this reason, consider offering discounts or allowing payment by installments. Don’t forget to be sensitive and empathetic to your customer base. Be sure to remind them why your service is their best choice. More importantly, be careful not to push your potential clients to make purchases. Money is tight for everyone during a recession, including consumers.
Consistent marketing is a MUST for a brand at any given time, no matter what happens out there. However, marketing efforts can exist only when you have sufficient cash flow — which, of course, isn’t easy to generate during tight times. Try to ask yourself: Are there any services or resources used by your business that can be given up for the time being? You can start by cutting expenses that aren’t helping your business make money. In addition, try to bargain for services that you can’t function without. For example, ask suppliers to give you discounts in return for long-term contracts.
It’s cheaper to maintain existing customers than to acquire new ones. This is even more true when speaking of times of recession, since people are cutting down on expenses. Therefore, it would be even more difficult for you to persuade new consumers to purchase your services. For this reason, invest your resources in maintaining your existing customer base. Treat them respectfully by giving the best service you can. This period of time can also be a great opportunity to engage with past clients and persuade them to rejoin.
As times are tight for businesses and clients, they affect your employees respectively. That’s why maintaining your staff’s motivation should be a top priority. It’s true that employees don’t tend to leave jobs in times of recession, but that doesn’t mean you should take them for granted. On the contrary. For example, if you decide to cut salaries down, instead of quitting, your employees will probably lose their motivation, or settle for doing a bad job. If you treat them well, it’s probable they will give you beyond what’s expected from them. Having said that, cutting down overtime is legitimate, and it’s not likely that your employees would protest against it or perceive it as harmful to their working conditions.
An engine for mental growth
Managing a small business during a time of uncertainty is a great challenge, yet I believe it’s not only possible for a small business to survive it, but even to grow in the process. It’s most important to remain optimistic and not lose hope. Remember that you are not the only one who suffers from this situation, and learn how to make the best of it. It might sound like an absolute cliche, but I truly believe that rough times are the best engine for mental growth — both for individuals and businesses. I hope we won’t have to deal with a recession anytime soon, but it’s always a good idea to be prepared.