You want your small business to survive in a recession. But you are not quite sure how to do this. In this article you will get some business strategies to get through a recession.
I have been studying businesses for decades. Including in-depth analysis into the great depression that I wrote for an encyclopedia. In addition to running my own during the 2008 downturn. The tips that I provide below are based on that knowledge and experience.
Let’s get started with the first piece of advice.
You have a strategic plan for where you want to go. A recession should not take you too drastically off course. Remember the strategic plan is to guide you to where you want your business to go. By making decisions that take you in a different direction, you will not achieve your long-term goals.
Instead look for alternatives that keep you heading to the same goal, even if it is a different path.
For example, if you wanted to long term have a retreat center and were in the process of doing short retreats at other facilities. You might adjust by doing virtual retreats until the economy changes. Still heading to the same goal, just a different path.
When do you need to forget about the long-term strategy? When there is a structural change to your industry.
Such as when digital cameras were invented and when Prohibition was enacted. If companies in those industries did not change when the industry changed they did not make it.
When your market has completely changed, then you need to redo your strategy. And then head in your new direction.
Check out our small business strategy consulting for help with updating your strategy.
Your employees are critical to delivering the best service to your clients. Try everything that you can to maintain what you can for them. Keeping morale high will improve the businesses chances of survival. When your quality declines because your staff are not happy the clients leave.
If you do need to reduce costs related to your employees, try and include them in the decisions. They may have ideas that you have not thought of to control the costs.
For example, maybe they are willing to give up a benefit you thought they all wanted. Maybe instead of layoffs, they are all willing to take a small cut to keep everyone on board.
Most importantly stay open and honest with them. A solid line of communication paired with teamwork will help. Once they think they can't trust you, the morale is already gone.
It is cheaper to keep your current customers than to find new ones. So make sure your marketing includes ways to keep your current customers happy.
Ideas might include a reward program, referral bonus, reduced rates on repeat services or introducing new ways for them to buy. Sometimes even just an extra thank you will keep them around. Never underestimate the impact of a phone call or a handwritten thank you note.
Mindset is everything. If you believe you are going to fail, then you will fail. If you believe you will have to lay off employees, you will.
How you think about a downturn will impact you more than the actual downturn.
So how do you get the right mindset?
This is more than just positive thinking. It is also about getting into your limiting beliefs and re-setting them. When we have a belief, our subconscious will try everything in its power to prove ourselves right. This is how our minds were designed to keep us alive!
This is whereas a business owner, you need to work on yourself to ensure the survival of your business. No one is immune to this. Your past that created your beliefs will impact you and your business.
So how do you go about changing these beliefs? Well that really is another article, actually a book, but here are some tips to get you started.
This seems simple, but it can be hard because our beliefs are not always laying on the surface. It can take time to find them. The best way to start this process is to journal about what is blocking you. Then start to work through those issues with tools such as tapping and meditation.
For more on emotional healing tools check out this article: Emotional Healing Tools
Another aspect of mindset is getting the right balance of being cautious and aggressive.
A recession can be a great time to get ahead of your competition. This will require some aggressive moves when others are pulling back.
By making calculated decisions, with good financial management, aggressive moves can payoff in the long run. Don't view being aggressive during a downturn as a negative. Many businesses thrive during a recession because they are aggressive.
Things move fast on a regular basis. Add in economic instability and you have an extra level of movement. You need to be ready to make decisions and changes quickly.
Stay abreast of what is going on not only in your industry but complementary industries and the economy. The faster you learn about something, the faster you can act on it.
Stay up to date on your business. If you typically look at the financials monthly, look at them weekly. The more you know when you need to make quick decisions the better.
If you are typically a slow decision maker then get extra decision-making input from your top employees, your spouse, a mentor, or your board. Really anyone who can give you extra insight and help you narrow down to the right decision.
Need extra help going through a decision? Check out our decision-making coaching session.
I saved financial management for last, because it is the make or break factor in how to thrive in a recession.
Everything I talked about above is dependent on you having good cash flow. Notice I did not say revenues or profits. It is all about the cash flow.
Many businesses have closed, not because they did not have revenues. But because the timing on the revenues coming in and payments going out were off. If you don’t have the cash in the bank to pay your bills, it does not matter how much revenue you are bringing in.
And debt can only carry you so far. Plus, one of the first things to break down in a recession is the credit markets. Available cash to borrow dries up.
You have to master cash flow to survive.
And I am not talking about a cash flow statement report. But a projected balance in your bank account.
How to do this? It will depend on the size of your business and your financial software. But one great way that is simple and cost effective is an excel spreadsheet of payments due and expected income.
Not a numbers person? This is not the time to just pass it off as something you can worry about later. Have your CPA help, or your bookkeeper. Make sure you are working on understanding your cash flow.
Remember that every recession is slightly different in causes, length and what industries are impacted the most. But by following these tips you will help your small business thrive in a downturn.
Need more tips on your business and recessions? Check out this article on How to Prepare for a Recession.
Andrea Travillian is the founder of Aspirify, Inc. Andrea has her BBA in finance from the University of Iowa, her MBA from Creighton University and her coaching certificate from the International Coaching Academy. She is an author, speaker, and most importantly mom.