8 Tips to Prepare your Business for a Recession
Don't lose your shirt during a recession -- read on for helpful tips and tricks to keep your business thriving!
Recessions can be challenging times for businesses of all sizes. Due to recent events, many businesses are fearful of what lies ahead economically. Thankfully, there is wisdom abound from the financial crisis of 2008, and a plethora of strategies to help you prepare your business for a recession so that you can maintain growth!
Diversify Your Offerings
During a recession, customers may be more cautious with their spending. As a result, businesses that rely on a single product or service may struggle to generate enough revenue.
That's why diversifying your offerings and opening new streams of revenue is a great way to get ahead. By expanding your product or service offerings, you can appeal to a wider range of customers and reduce your reliance on any single product or service.
To do this, consider areas of value your business has the capabilities of providing that you aren’t currently making any revenue off of, or additional products that you can invest in creating that may provide a great profit for you.
For example, a restaurant might consider offering catering services or selling branded merchandise. Alternatively, you could expand your menu to include more options, such as vegetarian or gluten-free dishes.
If, like us, you’re a tech company, this concept can still apply to you! Perhaps you have an abundance of expertise in your field that you can use to create and sell courses through sites like Udemy.
You might also consider challenging your expertise and adding more value to existing clients. For example, if you are a software provider with content writing talent, you can potentially use that to create a content writing service for existing clients.
Focus on Customer Service
During a recession, customers may be more selective about where they spend their money. That's why it's essential to focus on providing exceptional customer service. Providing consistent, quality customer service will help you build customer loyalty while also attracting new customers through word of mouth.
To do this, consider the areas that may affect the quality of service your staff provides. If there is opportunity to boost your teams’ internal engagement and morale, be sure to tune into that. Creating a healthy and engaged working environment sets the stage for your teams servicing to improve.
It’s also wise to consider investing in additional training for your staff. Ensure that your employees understand your business's values and are equipped to handle customer inquiries and complaints. You may also want to consider offering incentives to customers who refer new business to you.
Invest in Marketing
History has taught us that businesses who lean into advertising and marketing during recessions tend to perform better. It can be tempting to cut back on marketing expenses to save money. However, investing in marketing can actually help your business grow during tough economic times.
For one, increasing your marketing efforts in general allows you to reach new customers and increase brand awareness. However, and most importantly, marketing during a recession means there will be less competition.
Many businesses will try to get ahead by giving into cost-cutting temptation or will sadly not have the means to advertise, giving a small amount of other businesses more opportunity to shine. That being said, you want to be sure you budget your advertising and marketing efforts appropriately.
To make the most of your marketing budget, consider investing in online advertising, social media marketing, and email marketing campaigns. These forms of marketing can be highly effective and cost-efficient.
Leaning into free marketing tactics can also make a large impact on lead generation. For this we recommend rolling up your sleeves and putting in the effort to boost your SEO and social presence as much as possible.
Another great and cost-effective strategy is collaboration. Consider partnering with other businesses or organizations to co-promote each other's products or services.
Improve Operational Efficiency
This part probably goes without saying but it's essential to focus on improving operational efficiency to reduce costs and increase profitability. To better help you prepare your business for recession, look for ways to streamline processes and eliminate waste.
You may also consider outsourcing certain tasks to reduce overhead costs, but we’ll discuss that more later.
To improve operational efficiency, consider using technology to automate manual tasks. For example, you could use a customer relationship management (CRM) system to manage customer interactions, or a project management tool to streamline your team's workflow.
If this sounds a bit overwhelming, you can also look into freelancing or booking a consultant to help you identify inefficiencies and implement solutions.
Keep an Eye on Cash Flow
Cash flow is critical during a recession. Make sure that you are closely monitoring your cash flow and again, taking steps to reduce expenses where possible.
If possible, try negotiating with suppliers for discounts or better payment terms, and be on the lookout for opportunities to reduce inventory levels.
To manage your cash flow effectively, consider creating a cash flow forecast. This will help you anticipate your cash needs and plan accordingly.
You may also want to think about working with a financial advisor to help you develop a cash flow management strategy.
Partnerships and Collaborations
As the economy slows, it may prove challenging to fund new projects or initiatives. However, by forming partnerships and collaborations with other businesses, you can pool resources and achieve common goals.
To form partnerships and collaborate with other businesses, start by identifying businesses that share your values and target market. Reach out to these businesses and propose a mutually beneficial partnership or collaboration.
Using social media platforms or attending industry events are also great ways to network with other business owners and find potential partners.
Outsource Non-Core Functions
During a recession, it may be difficult to justify hiring new employees to handle non-core functions. That's where outsourcing can be a valuable tool. By outsourcing non-core functions, you can reduce overhead costs and free up resources to focus on your core business.
To determine which functions to outsource, start by identifying the tasks that are not critical to your business's success. This may include tasks such as accounting, human resources, or IT support. Then, research outsourcing providers and compare their costs and services to find the best provider that fits your budget.
Keep in mind that when outsourcing, it's critical to choose a provider that aligns with your business's values and goals. Look for a provider with a proven track record of success and good customer reviews.
It's also essential to establish clear expectations and communication channels to ensure that the outsourcing relationship is successful.
Outsourcing for Information Systems
Diving a little deeper here into our area of expertise, outsourcing some or all of your IT services can greatly benefit your business during a recession and in general.
Read our full article on that here. But to keep it short and sweet, outsourcing your information systems can help you reduce costs, improve efficiency, and access specialized expertise.
To outsource your information systems, start by identifying the specific functions of IT that you want to outsource. This may include software development, data management, cybersecurity, or Helpdesk support. Then research outsourcing providers that specialize in these areas.
Like all outsourcing goes, you want to be sure to choose a provider with experience in your industry and a proven track record of success. Look for a provider that offers a range of services and can provide customized solutions to meet your business's specific needs.
As unpleasant as economic crisis are, there are so many creative strategies and opportunities to help your business thrive. By expanding your offerings, boosting your marketing, collaborating with other businesses, outsourcing, or doing combination of these things – you can prepare your business for a recession and whatever else life throws at you!
If you’d like to learn more about IT outsourcing, let us help walk you through the process to give you a better idea of what it looks like and how much you can save!