This is a question on the minds of many as the COVID19 Pandemic has changed our needs and the way we do business. During this crisis, the economy has seen the most highs and lows since the 1930s. Historically starting a new business in response to a recession has proven a good idea in many cases, yet only a few remain today. Will your new business continue to flourish as the effects of the pandemic wane?
Prior to the virus, economists were already forecasting a recession in late 2020. Due to this, articles started circulating recommending that people prepare for an economic downturn. While most weren’t ready for this magnitude of events there is still time to help your business be recession-proof.
Before going over how to be ready for a recession, it’s important to understand what a recession is. An economic recession is defined as two consecutive quarters of negative economic growth. It tends to be accompanied by a significant drop in the stock market, increased unemployment, and a sump in the housing market. While some recessions can occur back-to-back, others can occur up to ten years apart. Since the Great War, recessions last an average of eleven months each, apart from the ‘Great Recession’, which occurred in 2007 and lasted for 18 months.
Now let's explore a few tips to help us protect our businesses and make them recession-proof
Grow your customer base: This is the most important one. Having a large customer base will help you in the case of a recession, as most businesses lose some clients, it’s best to have a larger customer base.
Win the competitions’ Offer something different or a benefit that they won’t get from other similar businesses.
Focus on your finances: Having solid financial management is vital to ensure that your company is ready for an economic downturn. Try to set up a cash flow planner, you can use a spreadsheet to record projected revenues and expenses and then update it each week.
New products and services: broadening what your business can offer could be a key to surviving during the recession. You might not need to come up with something new, perhaps just repurpose one of your products. This new take could be an opportunity in other markets.
Start a recession Fund (and strategy): In good times, make sure to save part of your revenue and create a recession fund. If there is one, this capital will help you continue generating revenue through marketing campaigns, diversifying your business, and more.
Diversify revenue: This will enable you to create multiple opportunities at different times to generate revenue. A recession could hit any of your buyers, and their problem becomes yours. That’s why your revenue shouldn’t depend heavily on a few customers. Go over your customer mix and different economic conditions that may arise to see where you could expand your customer base or expand to other markets.
Focus on Marketing: A common mistake many small businesses make is cutting their marketing budget in difficult times, that is if they don’t eliminate it entirely, but this is the time where you need marketing the most. Customers will be looking to make changes in their buying decisions and will need help to find products. So having a good marketing campaign that puts you as their first choice over others will help you at this moment. Don’t quit marketing, focus on it.
Prepare for stress: Being prepared to make difficult decisions, like reducing your workforce, or handling a sharp drop in sales will help you be ready and know what to do. It is important to run through various scenarios and prepare contingency plans
Focus on your customers and make the most of them: In the end, every business comes down to its relationship with its customers. A loyal customer who already knows about you and loves your products will support you through difficult times. Be sure to have excellent customer service and ensure that they are happy. Identify their needs, solve their problems and they’ll be there for you through the hard times.
The economy is a hard concept and a roller coaster, with unpredictable ups, downs, and turns, that can affect multiple businesses. It’s important to be ready no matter if there is a recession in sight or nowhere to be seen. Instead of trying to fight against the storm, prepare yourself for it. You won’t be able to prepare for everything or cover yourself completely but taking a few preventative steps can and will help you navigate the storm without sinking your boat
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