By Margie Zable Fisher
What do Trader Joe’s, Hewlett-Packard, Hyatt Hotels, Microsoft and General Motors have in common?
They all started as new, small businesses, during a recession. Today, they are household names. All of them have survived multiple recessions and continue to flourish.
That’s nice to know, but let’s face it: It’s not typical. Many businesses will decline and even go out of business during a recession. But your business doesn’t have to be one of them.
Several proven strategies will help your business survive, and thrive, during a recession. Oftentimes you will need to zig when others zag — or make moves that seem counterintuitive.
And the best time to start putting these strategies into place is before we are in a full-blown recession.
But wait — are we heading towards a recession or not? We can’t be 100% certain, but it seems that way.
According to the latest Nationwide Agency Forward survey, 70% of small business owners surveyed think a recession is likely within the next six months.
The same survey showed that business owners have been affected by the uncertain economy in the following ways:
- 60% of small business owners say rising costs and inflation have had a negative impact on their businesses
- 35% say their businesses have been hurt by increasing interest rates
- 39% responded that their business revenue has declined over the last six months, with some decreases as high as 30%
If these numbers are motivating you to take action, here are five ways to take action in the possible upcoming recession.
We asked eight experts in small business, trends forecasting, financing and more to provide insights and tips that will help your business survive and thrive in the near-term and in the future.
Beef Up Your Cash Flow and Cash Reserves
In our personal lives, we’ve been told to “save for a rainy day.”
Recessions are the “rainy days” of business, which is why it’s smart to cut unnecessary expenses, create additional cash flow, and get access to credit as soon as possible.
Why? Because small businesses often have a harder time managing during recessions because they don’t have the financial resources of larger businesses to handle a decrease in sales.
How much do you need? “Building up a strong cash buffer of at least six months worth of expenses is key to weathering a recession,” says Kelsey Sheehy, small business specialist at NerdWallet.
1. Tackle unpaid invoices
According to a Quickbooks study, the average U.S. small business has over $53,000 in unpaid invoices.
To get those unpaid invoices taken care of now, start using your Customer Relationship Management system (CRM) to create automated reminders that payments are due.
If those invoices still aren’t getting paid, you may need to resort to other actions, including sending a demand letter, using a debt collection service, and getting an attorney involved.
To prevent outstanding receivables from disrupting your cash flow in the future, consider using technology to elevate your invoicing and payment process:
- First, shorten the time it takes to create estimates and invoices by using a CRM system.
- Next, set expectations clearly by outlining key payment terms on your invoice, which may include paying for all or part of the service in advance, or by a certain date.
- Then, provide a variety of payment options through a payment processing system.
- Finally, use that CRM to send reminders and messages regarding upcoming payments.
2. Reduce expenses
“We cut back on unnecessary expenses like office supplies and furniture so we could afford to pay ourselves less while saving up for future investments in technology and training,” says Israel Gaudette, Affiliate Marketer at IG Marketing.
3. Negotiate supplier payments
“Small businesses can leverage relationships with suppliers to get favorable deals and terms through these difficult times,” says Marc Werner, CEO & Founder, GhostBed.
Your suppliers may be willing to accept smaller or no advance payments, increase payment periods, and offer discounts, so you can keep more of your cash. Now could be a great time to renegotiate a lease for your building or other facilities. Due to lower demand, you may get better rates and terms.
Finally, take steps now to ensure you have access to additional financing as needed. Consider getting a business line of credit, as well as corporate credit cards.
“Business credit cards with a 0% APR period are an important tool for business owners as interest rates continue to rise,” says Sheehy. “If you need to finance a large purchase, look for a business credit card with at least 12 month no interest.
“Already carrying a balance on a high-interest credit card debt? Transfer that debt to a balance transfer business card and pay it down over 15 to 18 months with no interest.”
Spend on Discounted Business Growth Opportunities
Yes, you read that right.
This is one of those times when you need to zig when everyone else is zagging.
For example, when other businesses are pulling back, commercial property owners and equipment suppliers may see lower sales. They may be willing to offer you better deals now, says futurist Scott Steinberg.
When you have cash, you might actually be able to grow your business significantly – by buying your competitors’ businesses, said entrepreneur and Profit First author Mike Michalowicz, on a recent Thryv webinar, on how to rally during a recession.
“An action you can take right now is to list all of your competition. Then set up Google Alerts to get notified about those companies,” he said. “What you’re looking for are any ripples happening in those businesses.
“Some percentage of them will go out of business and some will just try to exit out while they still can and let someone else buy the business.”
Continue and Even Increase Your Marketing Investment
“Many companies, especially smaller businesses, decide to cut their marketing and advertising spending during economic downturns,” says Tobias Roediger, Fractional CMO at The Chief CMO in Columbus, OH.
“However, a recession is one of the worst times to cut off the fuel that delivers new customers and business. As the old adage goes: Marketing during normal times is good; marketing during recessions is a must.”
Some business owners, like Derek Jacques, of The Mitten Law Firm, in Southgate, MI, even increase their marketing spend during recessions.
“It might sound counterintuitive, but I’ve been doubling down on my marketing budget.”
“With my Google Ads, I am seeing more ROI now than I have in past months, mainly because I have been focusing on bankruptcy cases and divorce,” Jacques says. “Both of these types of cases are more common in recessions, and it has led to increased revenue despite the negative news about the economy.”
Jacques shared the impressive results of his Google Ads: bankruptcy cases were up 76%, and divorce cases went up by 121%, with a 64% increase in revenue on divorce due to more of them being contested.
Identify and Protect Your Best Clients
Have you heard of the Pareto principle? In marketing, it states that 80% of your sales come from 20% of your customers.
When you consider that statement, it makes sense to spend extra time catering to the top 20% of your customers.
Before you can do that, however, you’ll need to identify your best clients. This is where a CRM is really helpful. It will help you determine your most frequent buyers, their sales, and characteristics such as geographic location.
Text Templates to Ask for Referrals
How to ask existing customers for referrals.
Once you’ve determined who your best clients are, “start immediately calling upon these clients, and thank them for their historical patronage, and let them know that you appreciate them,” said MIchalowicz.
“Then ask them ‘how can we serve you better? I don’t know how the current times are affecting you. I’d love to learn from you because we want to make sure that we’re caring for you.’”
This is a great way to learn about pain points and ways to improve your processes, that lead to more sales, referrals, and satisfaction.
When you speak to your top customers, you’ll likely hear that they are looking for ways to conserve cash, just like you are. Be ready for that, by letting them know that you are now offering more flexible payment options, such as buy now, pay later.
They’ll appreciate these choices, especially if your competitors aren’t willing to provide them. Even better? Flexible payment options can increase sales by 20%, according to Wisetack’s Josh Brill, on a recent Thryv webinar.
Finally, make a special effort to communicate frequently with these top customers and show your appreciation. You can use your marketing automation system to save time, and send special offers, thank you messages, birthday greetings, and more.
Use Technology to Save Money and Make Money, Too
Technology offers many ways to save money, by providing functionality that eliminates the necessity for manual, repetitive tasks.
Case in point: automating your billing process can help save your business $13 per invoice processed, according to Levvel Research. If your company processes even just 200 invoices per month, your annual savings would be $31,000.
It also helps companies bring in more revenue, especially when utilizing marketing automation tools to personalize email and text communications, which drive sales, customer retention, and customer engagement.
In fact, according to Nucleus Research, for every $1 spent on a CRM, a company receives $8.61 in revenue.
What technology should you invest in? Zapier recently asked business leaders for their picks on the types of technology that businesses need during uncertain economic times.
Video conferencing software, CRMs, chatbots, antivirus software, password managers, and more, made the list.
Oh, and before you invest in new technology, make sure you’re getting the most out of what you already have. It’s likely that you and your team aren’t using the full functionality of tech tools.
Now is the time to use 24/7/365 one-on-one support options to get new and existing team members up to speed, and maximize the benefits of that technology.
Thrive Now and in the Future
Our goal in this piece was to share strategic actions that can help you not only survive, but thrive during a recession. Do you feel more confident weathering the rocky economy ahead?
Whether you’re hoping your company will become a household name, or just want to have a great business and life in your corner of the world, we’re here to help, every step of the way.