How To Survive a Recession as a Business: Your 4-Step Survival Guide
Talks of a recession have been circulating since early 2020, when the pandemic shut the world down and unemployment rates skyrocketed. However, here we are, nearly three years later, and the National Bureau of Economic Research has yet to declare a recession. That does not mean, though, that you shouldn’t prepare as if we were heading for one by learning how to survive a recession as a business owner.
Despite the lack of an official declaration from the NBER, all signs point to severe economic downturn. In fact, over the past two quarters, the U.S. has experienced negative GDP growth which, definitionally speaking, is a recession. Given this information, it makes little sense for you to put off recession-proofing your business until it becomes “official.” As you can see, the economy is not in great shape, and you stand to benefit from taking steps to shore up your finances and protect your business in the coming months.
How To Survive a Recession as a Business
The very thought of a recession can be terrifying, especially for small business owners who don’t have a fraction of the financial cushion of larger corporations. Although it may be easy to feel like panicking, know there are steps you can take to weather the impending storm. Below are some top tips for how to survive a recession when you own a business.
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1. Preserve Your Cash Flow
As more people catch wind that the U.S. is likely already amidst a recession, they’re going to stop spending. When your customers stop buying from you, your profit margins are going to shrink, which will make it difficult to maintain a healthy cash flow. Yet, cash flow is absolutely necessary for your survival, as without it, you don’t have a business. Given this thought, it’s crucial that you take steps now to protect your cash flow during the worst of times to come. Here are a few ways you can do just that:
- Identify Areas of Monetary Waste and Cut Them: It’s important to note that you should not cut spending across all areas. Businesses that did this in earlier recessions had the greatest likelihood of failure compared to businesses that merely learned to manage costs better. To make strategic cuts, audit your spending for unnecessary expenditures or areas where you’re paying too much. Cease all superfluous spending for the time being and, for items on the “necessary” list, look for cheaper alternatives.
- Renegotiate Vendor Agreements: If your financial audit revealed that you’re paying more than you should for your inventory, approach your representative about renegotiating for a lower price. Chances are your vendor is hurting too — or, at the very least, showing concern. To avoid losing you as a customer, they will likely be willing to offer a more competitive price or, at a minimum, better terms.
- Finance Larger Items: Though the average recession lasts for about 17 months, there is no telling how long this impending downturn will continue. Play it safe. If you need new equipment at any point, try to finance it so as to keep as much actual cash in the bank as possible.
- Reevaluate Your Invoicing System: Non-payments and late payments cost small business owners trillions of dollars each year. The average small business owner spends at least $6,000 and 15 days chasing down unpaid invoices. If you can relate to these numbers all too well, it may be time to assess your invoicing system and revamp it.
These are just a few tips for how to survive a recession as a business by preserving cash flow.
2. Invest in Your Existing Customer Base
Your existing customers are the bread and butter of your business, and there are dozens of statistics to prove it. For example, attempting to obtain a new customer will cost you five times more than what it would cost you to maintain an existing one. If you can increase customer retention by just 5%, you stand to increase your profits by between 25% and 95%.
Customer retention aside, existing customers spend more than new customers. Per the data, existing customers spend, on average, 67% more than first-time shoppers. They are also five times more likely to repurchase an item and seven times more likely to try a new product or service.
The bottom line is, your current customers are the people who will keep you afloat if and when the going gets tough. If you don’t have retention strategies in place now, you should start working on them ASAP.
3. Keep on Marketing
One of the worst things you can do at any point during business ownership is to cease all marketing efforts. This is particularly true during a recession.
When the economy takes a hit, many business owners eliminate unnecessary spending. Unfortunately for many of those business owners, “marketing” falls into this category. Yet, marketing is an absolutely necessary component if you are searching for how to survive a recession as a business. Without marketing, there is the very real risk that even loyal customers will forget about your brand or, if they don’t forget, assume that your business went under with countless others. When you continue to market through a recession, you can keep your brand top of mind. Not only that, but you can get an edge over your competitors, who have likely eliminated or drastically reduced their marketing budgets.
At this point, you may be wondering how you can afford to advertise your brand as your cash flow shrinks. The answer is simple: content marketing.
Content marketing costs 62% less than traditional marketing methods but yields substantially more impressive results. It is three times more effective, promises six times higher conversion rates and often produces larger sales.
Blogging alone has significant promise. Businesses that blog see 67% more leads than those that don’t. If you blog just five times a month, you stand to receive 3.5 times more traffic and 4.5 times more leads than brands that blog zero to four times a month. If you’re going to invest in any type of marketing during the recession, make blogging the heart of your strategy.
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4. Don’t Try To Innovate Now
A recession is not the time to try new things — unless, of course, new things make you indispensable. If you already have one or two great products or services, though, focus solely on those for the time being. Scale back on the others so that you don’t waste your budget trying to support offerings that bring in little revenue. If you’re worried about eliminating revenue streams, investigate ways to generate more money from your core competencies.
For example, by creating economy or VIP versions of your core offerings, you can raise or lower the price as you see fit. Additionally, you can sell your products or services on a subscription basis, which is a great way to guarantee income.
Invest in Your Business’s Success
As a business owner in today’s economy, it’s understandable if you feel stressed about the future. After all, recessions historically hit small business the hardest. However, don’t let that stress prevent you from doing what you need to be doing to keep your business not just alive, but healthy. Take these tips for how to survive a recession as a business to heart. Let us help. For scalable content marketing and blogging solutions, shop our Content Shop today.
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