How to Profit During a Recession & How to Prepare Your Business for a Recession: 7 Recession Profit Secrets

If you’re a small business owner facing an oncoming economic downturn, it’s fair to wonder how can a business prepare for a recession while still accomplishing everything that needs to be done just to keep the lights on. The fact is, nearly 170,000 small businesses shut down during the last major economic recession (between 2008 and 2010).

Yikes.

It’s a tough statistic to hear, but the truth is, economic downturns happen. So what can you do to prevent your business from going under during hard times? After all, you want to protect your livelihood and everything you’ve worked hard to build.

Here’s what one study from the Harvard Business Review says. The key to keeping your business alive during an economic downturn is to try a healthy balance of offensive and defensive strategies. Here’s what I mean:

• Offensive strategies: Investing in research and development, new products, and marketing—basically anything that helps your business grow.
• Defensive strategies: Cutting costs and improving operational efficiency. This involves scaling back in case you have fewer customers.

But remember, you need to strike a balance. Here are some tangible ideas to help.

5 Offensive Strategies to Grow Your Business in a Recession

1. Differentiate your business.

If the economy is dipping, it’s game time. Don’t be afraid to let your competitive side show. Ask yourself how you can stand out from your competitors and then execute.

Ideas on how to differentiate your business:

• Collect customer feedback and make a few changes that your customers recommend.
• Improve customer service.
• Offer higher quality products and services.
• Think about what makes your business different and then market it.

But be careful here too. Don’t try to do too much at once either. You don’t want to jack up your expenses or overextend yourself. The key here is finding realistic ways to out-perform your competition.

2. Learn how to do effective recession marketing.

Spending on marketing in a recession might seem counterintuitive. After all, shouldn’t you be cutting back?

Not here. Trust me.

Keep up with your marketing, whether it’s blogging, Google Adwords, or direct mail. Marketing can be a real game-changer during an economic downturn. It can convince current customers to keep buying from you and reel in new business.

Instead of cutting out marketing altogether, try lower-cost approaches. For example, digital marketing is a great way to reach people and stay within your budget. It costs a lot less than printed mailers and can have a wider reach. A few ideas:

• Improve your website, whether it’s search engine optimization (SEO) or tweaking your site’s usability.
• Increase your business’s presence on social media channels.
• Push out relevant, informative content via blogs and content downloads.

Best of all, many of these digital marketing tactics don’t cost anything—just a bit of time and effort.

3. Get business insurance.

Did you know that up to 40% of small businesses will file an insurance claim over the next 10 years? Even if the most careful small business owners can face costly circumstances.

If you already have a business insurance plan you’re happy with, great. If not, it’s time to get a quote now. You’ll need protection in case anything happens that could set your company back financially.

4. Learn how to set monthly and quarterly sales goals.

During an economic recession, it’s critical that you achieve sales goals. After all, sales generate revenue and keep your business alive. Take time each month to set specific and measurable goals. You can even set a few goals, including ones you know you can achieve and “stretch” goals, which are bigger and bolder targets.

To figure out how to set the right business goals, take a look at what worked in the past—and what didn’t. Ask yourself:

• When did my business do particularly well last year?
• What is the slow season for my business?
• Why did customers choose my business over competitors?
• Why do customers choose competitors?
• What keeps customers coming back?
• What’s my churn rate?

Understanding what works and what doesn’t can help you make changes and set realistic sales goals. It’ll also help you achieve them.

5. Learn how to innovate your small business.

Now’s the time to stand out. Innovation can bring new customers to your door, even when times are tough. But, it’s not the time to try out that crazy idea your cousin had at Thanksgiving. Test new ideas that solve real customer problems. If you stay focused on helping your customers, you’ll be more likely to win in the marketplace.

To figure out how to best innovate your small business, consider asking your customers through a survey or in-person:

• What service do you wish we offered?
• What would you like to see more of? Less of?
• How can we better serve you?
• How do you rate us against competitors?

Then take their ideas and innovate. Act fast too! Chances are, your competitors are right behind you with similar ideas.

3 Defensive Strategies to Recession-Proof a Small Business

1. Watch your cash flow—and protect it.

At first, this seems easy. The cash coming into your business should be greater than the cash you spend. But the truth is, it’s difficult for a lot of businesses. In fact, 82% of businesses fail because of cash flow management issues.

Keep a close eye on what you spend each day, week, and month. Stay organized, and keep your invoices and receipts. Then over time, track trends in your spending. Here are a few software solutions that can make it easy:

• Pulse boasts an easy-to-use web-based experience.
• Float pulls information directly from your bank accounts.
• Freshbooks is another simple tool that connects to your bank accounts and gives you reports on spending.
• Quickbooks is a widely-used business software and a great tool for cash flow management.

But as you may know, getting paid on time is a common challenge for small business owners. To help protect your cash flow from dipping:

• Put due dates on invoices and follow up with customers that are lagging.
• Review customers that run up a credit and politely decline your service.

And make sure you pay your bills on time too (personal and business.) This keeps your credit up and helps you avoid an unexpected pile-up of bills.

2. Learn how to cut business expenses.

A recession is time to figure out which choices will help you cut back on expenses. To profit during a recession you may need to trim the fat and run lean. Ask yourself, what are your business’s excess expenses?

First, check out your inventory. Do you have surplus goods? If so, put a hold on materials that are piling up. If you’ve been ordering the same brand through the same vendor for years, compare options and prices for the same supplies. Maybe you can get a better deal elsewhere.

If you run a business that offers services, rather than goods, find out where you’re spending too much time. How can you become more efficient at what you do? Then think about other parts of your business. Can you save on office space? Employee benefits? What about business insurance? Try shopping around to see if you can get a better quote on a plan that’ll protect your company.

If you keep cutting a little here and there, it can really add up.

3. Be great at customer service.

High-quality customer service is your biggest defense during a recession. When times are tough, people choose to buy from someone they know offers excellent service. Not only is it the right thing to do, but it keeps customers coming back for more.

• Always be kind when you hear complaints.
• Go above and beyond to solve a customer’s problem.
• Ask customers for feedback and then take steps to improve.
• Send thank you emails or small tokens of appreciation during holidays.

Remember, a happy customer will tell their friends about your business too. Customer service is one of the best marketing tools you have at your disposal.

Here’s the bottom line.

When a recession hits, it’s time to act fast and try all of these approaches. You need to do everything possible to stay afloat. It is possible, but it’ll take time and hard work. It’ll help if you’re already putting these recommendations into place when the economy is up. This way, you’ll already be ahead of the game.