In the current economic climate, beset by pandemics, disruption and instability, thinking ahead to establish innovative strategies for recession-proofing your small business is a wise way forward.
85% of people say a recession would impact their business, and many business owners can relate to this. But with some strategic planning in place to protect your downside, you can avoid becoming another somber statistic. Here are 8 tips to help you recession-proof your small business.
What is a recession?
A recession is, according to the Oxford Dictionary, “a difficult time for the economy of a country, when there is less trade and industrial activity than usual and more people are unemployed.” Doesn’t sound good for small businesses, does it?
A recession could hit anytime, as could natural lulls in your small business revenue. Of course, there is no one way to completely recession-proof a business —however, with these tips, you can protect your downside and have a better shot at surviving an economic downturn. Here’s how.
1 - Diversify your income streams.
Diversification is a key to sustainable success when it comes to running a business in uncertain times.
The world can be unpredictable and what was working yesterday may not work tomorrow, but if you diversify—or at least have a plan in your back pocket—you can rise above the risk.
Take Earls for example: their creative income diversification allowed them to overcome the pandemic, even as a food service business, by pivoting to offer a robust meal delivery service, innovative meal kits and take home cocktails.
Other companies took similar leaps like investing in new industries, offering online classes and services, or completely re-designing their business models.
Diversification is a good way to protect your downside, and when it comes to new income streams, recurring revenue options will protect you the most.
Does your business have the opportunity to monetize a service? Are you able to create a monthly package based on your existing offerings?
These are both great ways to protect the downside in the event of a recession.
2 - Invest in technology to recession-proof your small business.
Technology is a powerful tool when it comes to your success as a small business owner, because it can help you save time and money, by automating and streamlining your operations, and provide transparency to your business.
Depending on your industry, your technology needs may vary—however, streamlining your operations and back end to run as lean as possible is a great way to be ready for anything.
It’s important to invest in productivity tools that help you do more, in less time, as well as eliminating any extra time, or labor spent on arduous tasks.
Software for small business owners can be found all over the web—we recommend connecting with others in your specific industry to learn about what tools they are using to help streamline their business, manage their people, and save them time.
3 - Consider financial assistance options.
If you feel a recession starting to brew, and want to batten down the hatches to protect your downside, you might consider getting a line of credit, or a small business grant, before things start to get wild.
These are both great ways to recession-proof your business, because they give you more runway and opportunity to weather the storm.
Typically, lines of credit are loans you can get from the bank and hold until needed—you won’t have to start paying interest on them until you activate them. Planning ahead and having something in your back pocket as a business owner is a great way to stay ahead of the game.
Alternatively, getting a small business grant is a fantastic opportunity for any small business to acquire more capital to grow, scale, or protect their business, often without having to pay any of it back.
4 - Consider the built to sell methodology.
If you have ever heard of the book Built To Sell, by John Warrilow, you are familiar with the concept of building your business with the intention of selling it.
Although you may not be interested in selling your business at the present time, building your business in this manner is a sure-fire way to ensure that you have optimized your income streams to their fullest potential.
Built To Sell explores the concept of productizing your service, developing systems around those services, and focusing on that specific income stream.
The example given in the book is of a company that had been doing general graphic design for all kinds of clients, turning itself into a company that specialized only in logo design for specific clients, using a specific system, and asking for a specific, set price. In short, productizing a service, and charging a premium price, to a niche market, for a premium product.
In a service-based business, having a set of systems, guidelines and operations that you follow will save you from going outside of what you are best at—ensuring that you deliver your product or service at its highest quality possible.
Consider this book, and how you might apply some of its principles to your business.
5 - Create a loyalty program for your clients or customers.
“Support local business” is a saying that carries more weight than ever during these challenging times in the economy.
Small and local companies depend on their loyal customers to keep them afloat, so why not make it easy for them to come back again and again by launching a loyalty program.
A loyalty program could be anything from a punch card to an online mailing list where you share weekly deals or giveaways with your loyal followers.
People love to feel special, and in making them feel like you care for them as much as they care for you will help keep those loyal customers coming back again and again.
6 - Access all costs and spending.
As a small business owner, every dollar counts.
Reviewing all costs and getting a real hold on your spending is a key activity that should be done regularly.
If you operate a product-based business, consider if you can increase margins on your inventory through switching suppliers, or increasing order quantities.
If you run a service-based business, be sure to measure the real cost of your services after expenses, staff, travel, and advertising, to make sure your profit margins are safe.
Remember, as a small business owner you aren’t just charging for your product or service. You also have to factor in all the expenses surrounding those finished products, including advertising, operational costs, product costs and regular expenses.
Another way to stay on top of your costs is to invest in integrated and automated technology that can run the numbers for you, to ensure you aren’t making any costly mistakes while doing manual calculations. If you run a business with hourly employees who clock in, you should most definitely invest in time-tracking software that streamlines to payroll. This has saved business owners tens of thousands of dollars on labor and time saved.
7 - Make sure your online game is on point.
Although building a business off of word of mouth, or based on your geographic location, is admirable, in 2021 having your company show up in an online search isn’t just a bonus, it’s essential. With over 3.5 billion Google searches being conducted every day, not having your online game on point could be costing you.
So how do you get your online game on point? It depends on what type of business you run—however, these 10 simple tips are a great place to start:
10 ways to grow your business online
- Register a URL, and build a basic website.
- Set up a Google account, and claim your geographical location.
- Request reviews, via Yelp, Google Reviews, on your website, or other.
- Make your offerings clear, concise, and easy to acquire.
- Create your social media accounts and link them all back to your website.
- Make sure your contact information and location are easy to locate on your site.
- Ensure your website is mobile-friendly.
- List your products, services, or offerings.
- Consider setting up an online store.
- Consider an online loyalty program or promotion to encourage business.
8 - Invest in marketing.
According to the American Marketing Association, marketing is the process of “creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
In other words, understanding who your customers are, what they need, and how to communicate that to them should be the building block of your marketing strategy.
Marketing is a blanket term and there are many ways you can go about it depending on whether you own a restaurant, dispensary, small business, or something else.
The key to remember, especially during hard times, is to connect with your audience in an authentic, and consistent way.
This can be through social media, a newsletter, or a creative campaign. Whatever medium or method you choose, be sure to provide value and give before you ask.
You can also consider partnering with others in your industry, or parallel industries—sharing audiences and supporting one another at the same time.
In conclusion, we don’t know when the next recession will come—hopefully not for a very long time—but the great news is these tips can help you manage, grow and simplify your business during any economic climate. We hope this article helps you streamline your business so that you can get back to doing what you love.