3 Effective Tips To Help Businesses Survive A Recession
With US and UK inflation at a 40-year high and the war in Ukraine ongoing, there is significant speculation about the possibility of a recession.
Experts such as Dutch bank economist James Smith and the International Monetary Fund (IMF) have warned the public and businesses alike of the possibility of an economic downturn. Furthermore, fintech giant Klarna recently announced that it would be firing 10% of its staff in preparation for this outcome. With this not-so-promising outlook, what can businesses do to survive an economic crisis?
1. Consider Going Remote
In 2020, the world witnessed a historic shift in the job market as the covid-19 pandemic forced many businesses to close their doors and their employees to begin working from home. This initial forced trial has since convinced many businesses to go remote for good, abandoning their offices altogether, and thus saving significant sums of money in the process.
Data from Global Workplace Analytics suggests that companies can save an average of $11,000 (approximately £6,800) per year for every employee who spends half of their time working from home. The key factors behind this figure are increased productivity, lower real estate costs, reduced absenteeism, and reduced staff turnover.
2. Keep Up The Marketing
While your business might be looking for areas to reduce spending, marketing shouldn’t be one of them — or at least not too drastically. Amid a recession, businesses should do whatever they can to stay front-of-mind for customers. At a time when consumers will be cutting back on spending, you need to remind them that your product or service is important to them — it’s something that they need. As well as maintaining marketing strategies that are already working for you, businesses should also consider:
- Sending out regular, high-quality emails to current customers on your mailing list
- Placing targeted adverts online
- Posting regular content to your social media channels
- Holding contests, sales, or events
However, it’s important that businesses keep their message and approach considerate during difficult times. Being pushy may secure sales in the short term, but coming off as insensitive will likely tarnish your reputation in the long run.
3. Protect Cash Flow
A recession will see your profit margins slim, making it increasingly difficult to maintain a healthy cash flow. Some effective options for cushioning your cash flow include:
- Stop focusing 100% on profits: Unfortunately, having a profitable business doesn’t automatically equate to having a healthy cash flow. Speaking to Finance Monthly, Corporate Lawyer Bobby Gill explains that if a business's product goes through a long sales chain, but customers fail to pay their invoices for 3 months, a business may technically be profitable, but will have no cash to hand. On the flip side, a business may have a healthy cash flow, but limited profits. Gill points out that both profit and cash flow are necessary for success and each requires the same amount of attention.
- Cut back on non-essential spending: Businesses should regularly audit their spending, but especially so amid or in the run-up to a recession. Consider whether there are any services, resources, or subscriptions that you can cut back on or eliminate. Are there any products that you can purchase for less? Can you switch suppliers to get a better deal?
- Invest in your existing customers: The cost of recruiting new customers is much higher than the cost of maintaining existing ones, especially during a recession when people are trying to keep their spending minimal and are less likely to spend on goods or services that are new to them. Your current customers already know how great your product or service is. But, to secure their loyalty through tough times, you need to maintain standards, or push them higher, to keep your client base satisfied and keen to spend money with you.
Recessions pose a major threat for businesses, especially those that are small and/or still new to the scene. However, an economic downturn doesn’t necessarily spell the end. With a careful plan of action, businesses can come out stronger on the other side.
Disclaimer: The information contained within this article is for educational and entertainment purposes only and should not be considered as personalised advice or recommendation.