Nearly 170,000 small businesses shut down during the last major economic recession (between 2008 and 2010).
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:
But remember, you need to strike a balance. Here are some tangible ideas to help.
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.
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.
Keep up with marketing.
Spending marketing dollars seems counterintuitive during a recession. 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:
Best of all, many of these digital marketing tactics don’t cost anything—just a bit of time and effort.
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.
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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 help set your goals, take a look at what worked in the past—and what didn’t. Ask yourself:
Understanding what works and what doesn’t can help you make changes and set realistic sales goals. It’ll also help you achieve them.
Innovate, innovate, innovate.
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.
Through a survey or in-person, ask your customers:
Then take their ideas and innovate. Act fast too! Chances are, your competitors are right behind you with similar ideas.
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:
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:
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.
Cut expenses where possible.
A recession is time 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.
Be great at customer service.
This 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.
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.
I earned a B.A. in Journalism from the University of Wisconsin at Madison (go Bucky). After realizing my first job might involve carrying a police scanner at 2 am in pursuit of “newsworthy” crimes, I decided I was better suited for freelance blogging and marketing writing. Since 2010, I’ve owned my freelance writing business, EST Creative. When I’m not penning, doodling ideas, or chatting with clients, you’ll find me hiking with my husband, baby boy, and 2 mischievous mutts.
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated reinsurance carrier by A.M. Best. Harborway Insurance is a trade name of Simply Business, Inc., which is a licensed insurance producer in all 50 states and the District of Columbia.