Small businesses are hit harder by tough economic times, and they have less flexibility to adapt and weather long downturns in the economy. Being proactive now, when times are good, will help your business be better prepared in the event of any unforeseen economic event, and can help turn those kinds of issues into opportunities. Here are four tips on how you can help recession-proof your business:
- Always be selling
There is never time in running a small business to rest on your laurels. You’ve got to always be selling and trying to generate new clients. If losing one or two clients would put your business in a dire position, this advice especially applies to you! Regularly selling your business may mean that you have to focus on how to win clients from your competitors. List your top three competitors and put together a grid that compares your offering to theirs and identify where there are opportunities for success. Leverage your successes when trying to win clients who currently are with a competitor, know exactly the best pitch to give your potentials that focuses on what your business can do for them. If you look evenly matched on almost everything consider ways to provide better service, customer service can be the distinguishing factor for your business. This article from Entrepreneur helps explain how your business can increase customer loyalty.
- Don’t give up on marketing
If times get rough it may be tempting to think of cutting marketing as a way to cut expenses, but this could actually harm your business. David Royce, founder and chairman of Aptive Environmental, and was an entrepreneur during the Great Recession, explained in a Business Insider article how if you cut marketing you’re really just banking on not losing any of your current clients because it is hard to grow your business if you’re not putting your business out there. His recommendation is to maintain your marketing budget but continue to analyze if it is providing you with a return on your investment.
- Analyze your inventory
Keeping your business inventory lean helps reduce costs, look at both what you have on hand and what you routinely order. Do you have items on hand that you don’t need to? It is better to sell items that have been sitting there for years at a price that will break even or even be a loss compared to having to continue to pay and store them. The TV show “The Profit” actually dealt with this issue within a small business and was able to identify that the issue they had was that their inventory was disorganized, they weren’t able to track what was or wasn’t selling and they weren’t able to do any forecasting to build inventory in a smart way. He also brought up that even though you may think of what is littering your stockroom as still “good” that all products expire and have a shelf life, even if it could just be that the item is “expired” because it is no longer in fashion. If you have extra old inventory sitting around sell it for what you can get for it but get rid of it and build an inventory management system to be able to track what you have and what is profitable. Also take a look at the products that you frequently order and see if there is an opportunity to negotiate a lower cost with your current supplier or if there is another supplier available for a lower cost of goods.
- Know your options
During times of recession the environment around your business will change. Stress-test your business and analyze difference scenarios and put in plans to deal with those kinds of scenarios. Examples of things that you might want to look at apply would be how your business would handle a sharp decrease in sales, price increases or difficulty finding goods your business depends on and suppliers going out of business. Another thing to think about is your current sources of funding and capital, during hard economic times it may be difficult to secure funding from smaller financial institutions. Look at your supply chain and proactively research options to diversify suppliers or other businesses that you rely on to keep your doors open. While you shouldn’t ignore your core competencies, do your due diligence at looking at diversifying your revenue sources. This may mean looking at clients from different industries or examples for upselling existing clients with complementary services.