Table of Contents
There’s a lot going on in the economy right now, and businesses are grappling with a host of issues, including problems finding workers and rising costs.
During difficult economic times, it’s key to find creative ways to stay competitive, even if you can’t spend a lot more money.
From showing clients you appreciate them with small gifts to identifying new problems to solve, there is a lot you can do.
The following is a guide for businesses to not just survive but perhaps even thrive during a downturn or full-blown recession.
How the Economy Is Affecting Businesses
Small businesses are feeling the squeeze of immense inflation right now, and owners are reporting low levels of optimism. In fact, recently, the percentage of small business owners expressing optimism about the next six months was at the lowest level recorded in the nearly 50-year history of the NFIB monthly survey.
There’s not a lot of response to small businesses’ offers for higher wages, and inflation is also disrupting business operations in significant ways.
More than half of small businesses said they have job openings they can’t fill, which was up four points from the previous month of the survey.
Of businesses attempting to hire employees, 93% of owners said they could find few, if any, qualified applicants for available positions.
The performance of the stock market has been highly negative, and conditions in the domestic money markets are softening substantially. There is not enough liquidity driving markets and the economy, according to analysts.
Leading indicators for the economy were down in April and have declined for May. They’re also likely to decline in June. There was a big decline in consumer expectations already in June.
With all of these things going on and ongoing supply chain issues continuing, it’s difficult to see a future without a recession at some level.
Some are forecasting a turbulent time but ultimately a soft landing for the economy. At the same time, some feel a recession is inevitable as the Fed tries to tamp down on inflation.
So what does all this mean for businesses?
It means they are going to have to buckle up for some continued tough times ahead, and consumer sentiment is likely to continue falling. Consumer spending is also down with record-breaking inflation.
Businesses are going to have to be smart about how they weather the short-term future.
Prioritize Cash Flow
When the economy is in a downturn or period of instability, as a business owner, one of the most important things you can do is prioritize your cash flow. You want to be extremely mindful of the money coming in and going out of your business.
A lot of businesses that go under during recessions do so because they can’t maintain a positive cash flow.
You can find yourself in this situation even if you look profitable on paper.
If you want to keep a positive cash flow, you have to issue invoices promptly. When they aren’t being paid, follow up. Have a plan for how you’ll make it up if customers can’t pay, and reign in your spending as much as you can.
You also want to find ways to delay sending out payments until you absolutely have to.
Focus On Your Current Customers
When the economic situation is difficult, you want to focus on what you do best, and you also want to invest your time into your current customers more so than ever. You don’t want to invest in a lot of new areas that your business isn’t familiar with. You’re going to be exposing yourself to additional risks.
You want to put your attention on the core competencies of your business and cultivate stronger relationships with your current customers. Current customers are cheaper to market to than trying to acquire new ones.
If your core competencies are strong and you have solid, loyal customers, this may be able to pull you through tough economic times.
Your loyal customers are also less likely to leave you during a downturn or recession as long as you keep up with providing them the service they expect from you.
Be Smart When Cutting Expenses
You may need to cut some things, but you have to be strategic and don’t just start cutting out of fear without any real plan.
A lot of businesses will cut their marketing or sales budgets, but that’s going to end up making your financial situation bleaker.
Instead, think about cutting things like your technology. Look at the subscriptions and tech services you’re paying for, and figure out what you really need.
Pay attention to your inventory and how much product you’re keeping—try to reduce what you hold.
How much of your office space is being wasted? Could you work fully remotely or at least move to a cheaper space?
Go over all of your expenses carefully and look for waste that’s not adding value to your company.
These are cuts that can end up being a good thing for the long-term, even once the economic storm passes.
When there’s a downturn or recession, it’s easy to go into crisis mode and focus only on the short-term. You need to be thinking about making decisions that are smart for the long-term, though.
For example, maybe you put some of your focus more on search engine optimization.
SEO is something that you can do a lot of the work on your own, even if you aren’t highly experienced. It’s also something that can have a great long-term pay-off, but you have to be patient because you’re not going to see results immediately
If you do focus on long-term but also low-risk and low-expense ways to build equity, you might be able to find a path out of economic problems for your business.
Refocus on Marketing
We already mentioned above that, if at all possible, you should eliminate the urge to cut your marketing expenses during economic downturns. If possible, you might even want to increase what you’re spending on marketing.
Advertising and marketing will show customers that your business is going to stay viable and will be around for the long haul.
You can also identify new opportunities to capture market share from your competitors who perhaps are reducing their marketing spending or may be closing their doors altogether.
There’s research that shows us continuing to market during economic downturns is going to give you a more sustainable advantage over competitors who instead take a hunker-down approach.
You want to try and adopt a growth mindset. That’s what’s going to set you apart from other businesses that are simply trying to cost-cut their way through a recession.
You need to work with less, yes, but you also need to work smarter. Cost-cutting alone isn’t the equivalent of working smarter, dynamic creative optimization vendors can help with that.
A term you might want to explore instead is cost transformation—focusing on strategy and efficiency instead of cuts.
The objective of cost transformation is to optimize every penny you spend using data to maximize your long-term profit potential.
Invest In Your Customer Experience
We’ve briefly touched on this, but your loyal customers can be what carries you through a recession, so invest in them and the experience they have when working with you.
During economic downturns, it’s inevitable that consumer buying habits will change. How you deal with these changes and differentiate yourself will set the tone for your business for years to come.
Working to gain timely and relevant insights about your customer base will help you spot the ways you can meet challenges.
A lot of how you’re going to invest in your customer experience is going to rely on the use of data-driven insights.
You can work to find the best channels to engage your current customers, and if you’re prepared, also identify new customers. You can develop pricing strategies that are recession-friendly, and you can improve loyalty and retention through a frictionless experience.
If you’re only looking at tactics like cutting your staff to the bare minimum, yes, you might cut expenses, but you’re going to see negative effects on your customer experience. Use technology and automation here instead, as well as predictive analytics.
Have regular brainstorming sessions and think about what challenges your customers might be specifically facing during the downturn. How can you position yourself to help them weather the storm?
If you aren’t even sure where to start, reach out to some of your key customers and ask them.
With the time you have available, perhaps due to decreased demand, you can begin to improve your internal processes and make your deliverables more high-quality.
It seems easier said than done, but ultimately if you handle a downturn in smart, thoughtful ways and you don’t do anything out of a sense of emergency, you can come out of the experience with a stronger business that doesn’t just survive but does thrive.
It’s important to avoid the temptation to just start cutting across the board when you see economic trouble on the horizon.