6 top recession prep tips
Strong businesses survive recessions more frequently than their weaker counterparts. Before the going gets tough, prepare your company by:
- Making customers your priority. Consumer-focused brands outperform equivalent businesses in recessions because their customers stay loyal.
- Adopting a broad marketing strategy. Using free and paid marketing methods, you can build an expansive consumer base in advance of a recession.
- Creating a cash flow strategy. Brainstorming recession scenarios before they happen can help you figure out how to handle cash assets in an economic downturn.
- Nurturing a positive workplace. Happy staff members stay focused and maintain morale for longer when the chips are down.
- Networking with other businesses. Community businesses usually come together to help each other during hard times.
- Fostering innovation. Innovative business practices can help you overcome adversity and stay ahead of the competition.
You can strengthen your company by putting these safeguards in place well before a recession—so, start making changes now.
7 ways to thrive in an economic downturn
You’ve implemented all the protective tips above and it’s time to face the music. But why just survive when you can thrive? Here are seven ways you can boost your business during an economic slump.
1. Protect your cash
Bills, taxes and wages still have to be paid during a recession. To balance the books, you need to trim unnecessary expenses and make sure money keeps coming in. You can do this by increasing your billable hours and promoting key products to drive sales. If you find yourself in a pinch, consider looking for a low-APR business loan to support cashflow.
2. Seek assistance
Perhaps unsurprisingly, financial advisors usually grow their businesses during economic downturns. A competent financial advisor can explain available solutions to keep your company afloat until the economy starts humming again. Government programs, bailout grants and other initiatives might help you pay essential bills until your profits increase.
3. Revisit inventory management
You may be able to reduce production or acquisition costs without sacrificing product quality. Now’s the time to seek quotes from alternative production facilities and suppliers. Think about how many items you order at once. Are your shipments too large? Could you use a dropshipping service instead? Can you trim warehousing costs? Thinking outside the box could save you money.
4. Drop the extras
A recession isn’t always the time to add products to your core portfolio. Doing so is a risk: If it doesn’t pay off, you lose a lot of money at an already volatile time. Instead, consider taking the most successful products from your key niche and spending any extra cash on consumer targeting.
5. Woo existing customers
Existing customers are already familiar with your brand. They trust you and feel comfortable shopping in your ecommerce store, so they’re more likely to feel receptive to advertising campaigns. This is the time to capitalize on those existing relationships. Take a look at your customers’ purchase histories and create marketing emails that match their interests. Then, track results and hone your tactics accordingly.
6. Win new customers
Some companies handle economic trouble better than others. It sounds somewhat Machiavellian, but you can use a recession to draw customers away from the competition. Pinpoint trouble spots in your closest competitors’ marketing schemes, sales funnels and products; then, craft better alternatives.
7. Keep marketing
Whatever you do, don’t be tempted to slash your marketing budget. Instead, use hypertargeting and niche marketing methods to show your ads to a carefully selected group of people. A hundred great leads are better than 100,000 crummy leads, so go after the consumers who are most likely to buy your products or services.
8 reasons to launch your startup in a recession
Perhaps surprisingly, brand new businesses often thrive in economic downturns. Here are eight good reasons to get your venture off the ground during a recession.
1. Fewer competitors
Some businesses fail at the first sign of economic trouble; others lose substantial clout in the market. You’re the new kid on the block, and this is your chance to shine. Analyze your competitors’ vulnerabilities—they might include problematic supply chains, personnel trouble or faulty products—and craft better strategies to get ahead.
2. Consumers want innovation
Recessions are frustrating. Fewer companies invest in innovation, and new product development slows down. Meanwhile, consumers still need to solve problems—and that’s where startups with big ideas come in.
3. Startups create jobs
Economic downturns lead to layoffs. Not even highly skilled STEM workers are immune from redundancy during a recession. Your new startup won’t just create jobs in the middle of a downturn—you’ll also gain access to a pool of really talented jobseekers.
4. Supplies cost less
Ailing businesses sell assets when times get tough. Landlords charge less commercial rent, and raw materials tend to get cheaper. You might save money on everything from office space to prefab stock if you launch your startup during a recession.
5. Lower interest rates
Central banks usually slash interest rates to encourage consumer spending when economies tank. Interest rates on loans and credit cards go down at the same time, making it potentially cheaper to borrow during a recession.
6. You’ll gain negotiating power
Vendors find it hard to shift stock when economic conditions deteriorate. If you’re a reseller, try renegotiating an existing deal with a supplier—or negotiate a better deal with a new supplier. You hold more power in the midst of an economic slump.
7. Great habits start early
Generally speaking, startups founded in tough economic times are efficient, nimble and artfully strategic. Profit margins might be tight now, but you can increase them when the economy recovers—and at that point, your business can continue to grow.
8. Savvy investors will invest
If you need funding, keep your eye out for angel investors looking to move money away from volatile stocks. If your startup looks promising, they might decide to invest in you instead. Clever backers know that successful startups founded during recessions generate solid returns when conditions improve.
If you plan ahead and adopt the right strategies during a recession, your company stands a much better chance of surviving an economic downturn. Startups actually do pretty well during recessions, so if you’ve considered starting your own company, now might be the ideal time to do so.
