Many experts have stated that 2023 will bring significant economic difficulties. Among them is Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), who believes the recession will touch a third of the world. The first months of 2023 showed that these assumptions have become true, and now the world economy faces hard times.
However, if large entrepreneurs have the resources to survive turbulent periods, many small businesses are at risk of collapse. Severe market competition aggravates the situation and makes people ask: “How to withstand it?”.
This article is going to disclose mentioned points and also give you tips on how to make your business grow:
Tip 1. Protect your finances and cash flow
Tip 2. Don’t pause marketing
Tip 3. Nurture existing customers
Tip 4. Implement technologies wherever possible
Tip 5. Take care of your employees.
Before starting with practical pieces of advice, we need to disclose what is behind the term recession. Someone can perceive it as a challenge, and another can use more dramatic nouns, such as a disaster. However, Forbes Advisor defines a recession as a significant economic decline that can last months or even years.
Multiple factors cause the global downturn: technological change, excessive inflation, deflation, or debts. However, for the 2023 case, the reason is a sudden economic shock.
The world economy, weak after the Covid-19 decline, faces new troubles due to the full-scale Russian invasion of Ukraine. Experts believe that the current recession will have serious consequences as entrepreneurs haven’t recovered from the previous one yet.
During world crises, small businesses suffer the most since they don’t have significant financial reserves to withstand. However, company closure isn’t an option for the majority of their owners because too many are at stake: money, effort, dreams, and even personal life. That’s why we offer you tips, which can help not only to save your business but also to build the basics for its development even during economic decline.
Let’s start with the financial side of your business since it suffers the most during the recession. Your entrepreneurship survival depends on whether you’ll have costs to operate or not. So, to withstand the decline, you have to ensure stable cash flow for your business for at least 6 months.
Actions to take:
1. Analyze previous invoices and forecast approximate expenses for the next few months or even a year. This financial data analytics will give you a clear vision of how much money your business will need to operate during tough times.
2. Prepare worst-case and best-case scenarios for your business development to be ready with strategy and actions once they’re needed.
3. Reduce unnecessary expenses. Check what spending your business can function without a while and still bring profit. Then, cut them back or find a cheaper alternative.
Example: If you’re a cafe owner, you can use flowers from the garden or fir branches instead of expensive flowers from famous boutiques nearby. They’ll bring the same or an even more natural atmosphere to your establishment but will cost you nothing. Saved money will serve more urgent business needs
4. Create a savings fund and build a reserve to survive hard times with possible unstable profit. Especially it’s crucial if you have seasonal products or services.
5. Consider credit options while your company gains profit. Apply for a small loan or grant offer to keep your company afloat.
6. Conclude only legal contracts with your clients to ensure on-time payments and reduce the risk of outstanding balances.
7. Make sure you’re able to provide the invoice to your customers since it increases your credibility and gives you clarity on your finances. To create the document in proper format and with all required data, you may use our Buildu Invoice Generator. It perfectly works for small businesses and is affordable even in recession periods.
8. Renegotiate agreements with vendors with more favorable for you terms wherever possible. You can get better prices or invoice payment terms. If you think they won’t go with it, you should count that it’s a difficult time for vendors as well, so they’ll want to keep you as a client.
9. Consider advanced payment possibilities for high-cost and time-consuming services you provide to your clients. You’ll get the insurance that your work will be paid.
Good marketing is always a friend of your business and during the recession especially. While big companies are trying to reduce costs spent on advertising, you can win from your product or service promotion.
As your business grows, it is crucial to invest in a well-designed logo that communicates your brand’s message and values effectively. It can help your business stand out in a crowded market, build trust with potential customers, and ultimately, contribute to your company’s success and growth during a recession.
Actions to take:
1. Don’t roll up active marketing campaigns because, in the nowadays world of modern technologies and social media networks, customers want your constant presence on their radars. So, be with your customers every day, and actively use social media to let them know more about you, your company, and what you offer. Organization of some sales, giveaways, or similar events via mentioned channels can also highlight your business and bring new clients.
2. Carefully analyze marketing KPIs and find how you can improve your advertising strategy based on this data. Be flexible and don’t hesitate to change even ongoing campaigns if it’s required. An ad management platform will keep you on track of your campaigns and ad spend.
Example: You’ve launched a social media marketing campaign to promote the business phone service you provide. January results have shown that Facebook advertisements require more investments and bring fewer clients compared to LinkedIn (analysis based on the chart below). So, probably, your Facebook marketing campaign wasn’t properly built, or your audience doesn’t use this social network to search for a business phone provider.
To reach out to the maximum of potential clients next month, you can reduce Facebook marketing costs and increase investments in promotion via LinkedIn.
3. Launch email marketing campaigns since they have one of the highest ROI among other initiatives. You can reach out to existing customers, remind them about your business and let them know you’re waiting for their purchase. Use a regular and content-rich email strategy to make this marketing option effective.
4. Present your values and uniqueness. Both new and existing customers will choose your product or service in hard times if it distinguishes them from others. Point out the features the others don’t have or the values, like green energy solutions, the others don’t show.
Relationship maintenance with existing customers is quite easy and doesn’t require significant costs. However, the recession makes everyone cut their spending, so keeping clients requires additional efforts.
Actions to take:
1. Build closer relationships with your clients and let them feel your support and understanding of their difficulties. Even small discounts or loyalty programs make people see you care about them and stay with you.
2. Ask more for customers’ feedback to analyze the issue they are facing with your product or service. Prioritize fixing those problems and let people know once it’s done. That’s the way to be better and fulfill the requirements of clients.
3. Re-engage inactive clients. The ones who used to be your customers may need a reminder about you or an attractive offer to come back.
4. Avoid the rise in prices. Though a price increase may seem an easy way to higher income, it’s also a fast option to lose existing customers. Of course, when everything becomes more expensive, including direct materials for product manufacturing or service provision, you’ll need to raise the price to cover their value. But, don’t make it unaffordable, and you’ll save your audience and may even get new clients switched from the ones whose prices have become too high.
Remember, economic decline affects purchasing power of almost everyone. So, don’t push too hard on those who delay buying and ensure that your marketing and re-engaging efforts show the benefits you may provide to your customers.
Technologies are an integral part of modern business and life. So, if you haven’t used it yet, it’s high time to do it and reduce manual work.
1. Check the possibilities of technology implementation for low costs and do it. You’ll decrease the time for goods production or service provision and may even increase its quality. In addition, you can diversify your market offer and attract new customers.
2. Revue if there are activities that can be automated, and automate them. You’ll release people for other important tasks or for creative thinking on the different ways of gaining profit. Usually, the simplest way to do it is to find software for small businesses that can replace manual work.
Example: You’ve got nearly 150 customers and you’ve been monitoring birthdays manually and sending emails with special offers on the eve. A scary amount of work, isn’t it? However, there are plenty of tools that allow just setting up the message, and it will be automatically sent on the necessary date and at a stated time.
Employees are your brand representatives, customers, and workers at the same time. They have deep knowledge about processes and can lead your company out of difficulties. During the recession, you should also treat them respectively.
Actions to take:
1. Ask employees about their vision of business development. Workers usually face the issues and have ideas you wouldn’t think about. This way you can get a new strategy on how to survive a crisis period and make employees feel their value to your business.
2. Maintain effective communication. Share honest and accurate information with your people confidently and on time. This will help to keep trustful relations with employees and ensure you value them. Consider scheduling team meetings using calendar SharePoint and ensure that your employees are on the same page.
3. Avoid massive dismissals since they’re only a short-term win strategy. Such action is a sign to customers and competitors about your weakness and negatively impacts your brand image. As a result, you may save some costs but lose more essential profit.
4. Be more strict while stuffing new people. For sure, the economic decline means a low possibility of team extension. However, for the rare cases when a new person is needed, take a serious look at whom you hire. You’re in a condition to choose an experienced employee with high potential.
5. Drive employees’ development. Opportunities to grow as a person and a worker give them the inspiration to contribute more. Job activities delegation can be one of the ways to motivate your employees and release some time for you to do more important things.
6. Offer any benefits you can. We know times are hard, but you must pay close attention to your employee’s health and wellness. When your staff is taken care of, your business will flourish. Offer them health benefits, insurance, and anything else you can afford. Use one of the many recommended employee benefits platforms to keep track of these expenses.
Recession brings difficulties for small businesses, but it shouldn’t give start to collapse. Of course, during economic decline, you will not get as high income as you want. You will have to work more, think more, and be ready for multiple obstacles.
However, once you’ve withstood, your business will be stronger, automated, and full of ideas you’ve decided to implement once the financial situation becomes better. So, be brave to drive your company through this challenge or a disaster, and remember that after the dark night, the sunset always comes.
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Andriy Zapisotskyi is a founder of GrowthMate – a relationship-based link-building agency that helps small and mid-size brands grow in SERP and generate more revenue. Andriy loves to mentor startups and network with people. Running is his hobby and he enjoys discovering new places. Connect with Andriy on Linkedin.
