Recession-Proof Your Business: Your Guide To Making it Through a Recession and Coming Out on Top
Though the National Bureau of Economic Research has yet to make an official declaration, the U.S. is, by the standard definition, in a recession. However, it could be months before the NBER sounds the alarm if it ever sounds it at all. Historically speaking, the bureau will hold off for months on announcing a recession until one of two things happens: The recession passes with few people the wiser, or it becomes exponentially worse. Regardless of the NBER’s reasons for waiting, you don’t want to wait months to find out the latter outcome has occurred. As a small business owner, it is crucial that you take steps sooner rather than later to recession-proof your business against the likely storm to come.
Understandably, your knee-jerk reaction to news of a recession is to cut costs any and everywhere you can. Don’t be so hasty. While it is smart to reduce unnecessary spending in the coming months, you don’t want to make cost-cutting your sole survival strategy. You must be strategic in where you cut costs and how drastically. Without a strategy, your business is unlikely to survive the recession. If it does, it is unlikely to flourish when times do get better.
Case in point: Per the Harvard Business Review, firms that cut costs quicker and more severely than their competitors had the greatest likelihood of failure during and post-recession. Firms that invested boldly had the second-greatest probability of failure. The businesses that mastered the delicate balance between cutting costs and investing for the future fared the best.
So, what can you do to strike that delicate balance? The experts weigh in with a few recession-proof strategies.
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Recession-Proof Your Business: 5 Proven Strategies
As you can glean, recession-proofing your business is an art form. You don’t have to be an artist, though, to master it. Rather, you just need to do a bit of paint-by-number. These tips can help you get started.
1. Maintain Your Marketing Budget
You’re probably thinking, why in the world would you continue to market to consumers who have put spending on hold for the foreseeable future? There are a few good reasons why.
For starters, your customers cannot shop with you if they do not know you exist. Business closures are common and expected in recessions. If you disappear — at least, in terms of marketing — your customers will assume you closed shop. Instead of looking for you to confirm their assumptions, they are more likely to seek out your products or services elsewhere.
Second, your competitors are reducing their marketing spend. This gives you ample opportunity to shine during the downturn. And when the economy picks back up, your brand will be the one consumers recognize, positioning you to become a leader in the post-recession market.
Finally, modern marketing is inexpensive. Content marketing costs 62% less than traditional means of marketing but is three times more effective. It also boasts six times higher conversion rates than traditional advertising and leads to higher average sales per customer over time, making it a fool-proof way to recession-proof your business
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2. Make Yourself Indispensable
Depending on your industry, becoming indispensable may prove difficult. However, where there is a will, there is a way — and finding that way could mean the difference between your brand thriving through and after the recession or it becoming obsolete.
In a time when businesses and individuals alike are looking to cut costs any and everywhere they can, pivots in terms of what you offer are necessary. Position your product or service in such a way that customers categorize it as a need. If you can’t do that, make yourself and your team indispensable. Strengthen customer relationships, offer moral support via all channels, and provide value via free resources, such as how-to videos, eBooks and blogs. Make it so that even if customers can live without what you have to offer, they won’t want to.
3. Capitalize on Your Current Customer Base
During a recession is not the time to try to attract new customers. Rather, focus your time and energy on strengthening the relationships you have already built. Aside from the fact that doing so is just good customer service, it’s also cost-effective and a great way to recession-proof your business.
Customer retention costs five times less than customer acquisition. Not only that but increasing customer retention by just 5% can boost your profits anywhere from 25% to 95%. Additionally, repeat customers spend, on average, 67% more than new customers, are five times more likely to make a repurchase and are four times more likely to refer your business.
Customer retention doesn’t have to be difficult or costly. This is particularly true with content marketing. To retain customers, keep the following tips in mind:
- Stay in touch with them, even if it means doing so via email or social media.
- Remind customers of upcoming events, such as sales or product releases.
- Offer value via advice, tutorials, self-help tips, etc.
- Reach out to customers you lost over the years.
- Ask for referrals.
This last point is important. Most customers won’t refer a business unless they are incentivized to do so — and, often, that incentive is as simple as you asking. Referrals are free, and referred customers are almost as valuable as returning customers, with a 16% higher lifetime value than non-referred customers.
4. Focus on What You Do Best
Yes, you need to innovate to stay in business. But when times are tough, focus on what you do well and only that. By focusing on your core competencies, you can avoid siphoning precious (and likely limited) resources away from them, which would ultimately damage your business.
5. Get Control of Your Finances
An article about how to recession-proof your business would be incomplete without a section on managing your finances. Managing your finances does not necessarily mean cutting costs — rather, it means being smart about how and where you spend your money and knowing where it’s coming from.
For instance, it’s crucial that, if you have yet to do so, you streamline your invoicing processes. Late payments alone cost U.S. small businesses $3 trillion annually. As many as 40% of small businesses experience a direct negative impact because of late payments. If your customers are routinely late, revamp your invoicing process ASAP. It is important now more than ever that you get your customers to pay on time.
Another way to get your finances under control is to be smart about your debt. While you may need to finance your operations until the economy turns around, you do not want to take on more debt than you can feasibly handle in steady times.
Finally, identify non-cost-efficient areas of your operation and explore ways to make them cheaper. Can you order the same products from a different vendor for less? Are there ways to reduce overhead costs? Is your accounts receivable team spending far too much time chasing late invoices? Often, cutting costs entails changing up what you’ve been doing for years out of convenience.
Boost Sales and Revenue During the Economic Downturn
Though it may seem an impossible feat, it is possible to not only survive the impending recession but also to thrive during and after it. You just need to be strategic in how you recession-proof your business. Content marketing can help you accomplish goals one, two and three — marketing, making yourself indispensable and capitalizing on your current customer base. Given how cost-effective it is, it can also help streamline your finances. If you haven’t yet invested in a content marketing strategy, or if you’re looking for something more flexible, check out our monthly blog writing services. Blogging is good a place to start with your recession-proof plan.
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