If the 2020s have taught us anything so far, it’s that some things are beyond our control. Pandemics, wars, natural disasters, and recessions to name a few. But thankfully, there’s a saving grace…
With recessions in particular, people just like you have experienced the challenges that an unhealthy economy poses for a small or local business. And we can learn from them to be better prepared.
To get us all on the same page, a recession is a sustained period of sluggish economic activity that’s reflected in metrics like gross domestic product (GDP), income, industrial production, as well as wholesale and retail prices.
It’s one thing to operate a business when the economy is booming and your sales are through the roof.
On the other hand, when the economy’s down in the dumps, recessions often do more harm than good for the average local business owner.
But one thing remains true: they present an opportunity to closely examine your operation(s) as a whole and see if or how you can restructure things like spending.
What Should You Not Do In a Recession as a Small Business Owner?
As a small business, you have the power to find creative ways to survive – and thrive in – an economic downturn. However, there are a few things you should not do when there are tough economic times ahead, so let’s dive into those first:
- Don’t broaden your product or service offerings: This is probably not the best time to increase risk or expenses. Instead, focus on your bestsellers and your most profitable offerings. Your latest product or service extension can be put off for a year or two till the recession passes.
- Don’t stop marketing: While the onset of a recession might force you to cut costs in some areas, don’t stop marketing and advertising your business. Continuously looking for new clients is the best help you can get for your business during tough times.
Good news is that while you might have to stop running paid ad campaigns for a time, you have organic marketing tactics at your disposal. For example, you can use reputation marketing to acquire and amplify positive brand reviews with ease, which will enable customers to do the marketing for you.
- Don’t neglect your personal credit score: While it may be slightly harder to get funding now, don’t borrow against your personal name. Instead, play to your strengths and think outside of the box. For example, you could use coworking spaces or shared warehousing, or consider outsourcing some routine tasks.
You know more than anyone that everyone’s industry, business, and customers are different. So one of the points above may not make sense for your own company, but they’re a helpful guide as you navigate tougher economic times.
What is a recession-proof business?
The idea of a “recession-proof” business is a mild exaggeration. Recessions, past or present, have revealed that even the biggest businesses are not always recession-proof. But what they can try to be is resistant to negative impacts.
You, too, can take steps to make your business resistant to a recession’s economic impacts. As it’s used in everyday conversation, a recession-proof business is one that's not as deeply impacted by the negative effects of a recession as others.
Usually, businesses that provide basic products or services that people cannot do without – like grocery stores, pharmacies, or laundromats – fall into this category.
However, the term can refer to any business that manages to weather a financial crisis through the power of smart strategy and resilience.
7 Small Business Strategies You Can Use In a Recession
Now let’s discuss seven strategies that you can use to ride out whatever challenges the economy may throw your way.
1. Leverage reviews to get into the Google 3-Pack
The Google 3-Pack is a format the search engine uses to display the top three results for a search of local businesses.
Google bases these results on the prominence and relevance of the business and its proximity to the user.
One way to appear higher on Google rankings is through positive reviews. Online reviews improve your search engine rankings and make your business more discoverable. That, in turn, can improve footfall and increase sales.
Over 70% of consumers report they are willing to write a review, but haven’t been asked for one.
With over 97% of consumers trusting and relying on reviews, you need to leverage them as a marketing tool.
And that’s where NiceJob comes in! Their reputation marketing platform can help you automate the review collection and management process.
It’s the reason why one family-owned home service company saw a 113% increase in reviews in just a few months after signing up.
2. Start a loyalty program to increase customer lifetime value
Customer lifetime value (CLV) is the total revenue you can expect from a customer over time. One way to improve this metric for your business is through a loyalty program.
A great loyalty program can be used to encourage repeat business and referrals.
All you need to offer in exchange are benefits such as coupons, rewards, discounts, product previews, and so on.
Loyalty programs can bring terrific returns at low costs. Research shows that 66% of customers are willing to change purchase behavior to get the most of these programs.
A loyalty program can go a long way to help your small business through tough economic times.
3. Engage with your community
Small businesses are uniquely positioned to engage with the local community.
Finding creative ways to engage with the community allows you to build new contacts and deepen your relationships with existing customers.
This could look like:
- Partnering with a local charity
- Holding a contest or giveaway
- Participating or sponsoring local events
- Volunteering as a company for a community project
These are just a handful, but all these initiatives can help you earn people’s trust, gain popularity, and increase customer loyalty.
Being involved with the community and making a social impact, no matter how small, is likely to pay both intrinsic and extrinsic dividends now and in the future.
4. Reinvent your customer service
Happy customers stay on with businesses that treat them best.
Research shows that 83% of customers base their purchase decisions on good customer service experience.
Customer service is a great way to acquire loyal customers at little or no extra cost.
Loyalty can translate to higher revenues, as loyal customers spend more than new customers and are a great source of referrals.
Providing exceptional customer experience can also help set you apart from the competition and help you get through trying times.
Listen to our interview with marketing expert, Jay Baer, about how to deliver great customer service.
5. Concentrate on core competencies
If you’ve thought about diversifying your business, adding new products or services, or opening a second store, now may not be the best time.
Even during a booming economy, breaking into new markets or operations can be challenging.
New ventures or operations can affect your primary business by eating up your time and money. So stow away that great business idea for a better time and focus on your core competencies instead – at least, for now.
6. Listen to your employees
It might be hard to accept, but there could be things about your business that you don’t know.
Employees are more involved with the day-to-day details of your business than you can afford to be. And that’s okay – it’s why you hired them.
Therefore, they are likely to have valuable insights into opportunities to cut costs and maintain or even increase profits. It could be something as simple as switching off a few lights in your storage area during the daytime, for example, to shave a few dollars from your power bill.
And not just savings! Because of their ground-level involvement, employees can also have great ideas about growing your business.
Maintaining effective channels of communication with your employees and rewarding profitable business ideas, inputs, and insights from them is a mutually beneficial exercise.
It allows you to be more efficient while showing your employees that you value them deeply.
7. Try to reduce overhead
Overhead can become challenging during a recession because these costs remain constant regardless of your revenue. During inflationary periods, these costs may even rise so cutting down on overhead requires a strategy with a phased approach.
Tackle the low-hanging fruit first to prepare your business for an economic downturn.
This could involve renegotiating with suppliers for better rates, approaching vendors that offer lower costs for business services, and reevaluating salaries or employee perks. In the latter, for example, you may consider pausing the purchase of in-office snacks.
The second phase could be outsourcing some business activities and trimming expenditures wherever possible. According to a Technavio press release, “the global virtual assistant market size is expected to grow by USD 4.12 billion by 2025, growing at 11.79% CAGR.”
If that is not enough, some businesses might be forced to take more extreme measures like layoffs or shifting to remote work.
Planning is key in cutting overheads, so focus on costs that can be reduced without disrupting your operations.
Recession-Proof Your Small Business Today, Because You Can
The world outside your business is constantly changing, and you may not be able to control it.
But what you can do is make your small business resilient to temporary periods of uncertainty and economic downturn.
The best practices we’ve discussed so far will help you maximize operational efficiency during a period of low economic growth.
Beyond these steps, you also need to concentrate on building your cash reserves and lowering your debt.
This way, your small business can weather difficult times and come out of them stronger.
And if you need some inspiration, check out this NiceJob podcast episode featuring Scott Baermann to see how his small business made it through the pandemic, and what he learned along the way.