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5 Keys to Building A Recession-Proof Business

February 21, 2016 By Dana Davis 9 Comments

The rules of business have changed in the 21st century, and although characteristics of good leaders never go out of style, the days of 20 years of service, a gold watch and a pension are gone for the most part.

5 Keys to Building A Recession-Proof Business

Lack of secure positions and a dearth of openings in high-paying careers – especially for displaced workers over 50 – have driven many to turn to entrepreneurship as a means of fulfilling their American dream.

However, the effects of the Great Recession and the long, slow recovery period has created an uncertainty about the future that has many entrepreneurs hesitant about the viability of their startups and their ability to sustain risk.

The current state of the economy has also made consumers more wary about where they put their money and to whom they give their hard-earned dollars. However, there is good news for would-be small business startups: with a little planning and foresight, you can recession-proof your business to withstand almost any bump in the financial road.

Table of Contents

  • Recession Proof Businesses
    • Shift Your Sales and Marketing Focus
      • 1. Work on doing what your competition does, but do it better.
      • 2. Change your marketing strategy to focus on your established customers.
    • Allocate Your Money Wisely
    • Plan Ahead
    • Re-Evaluate Your Inventory and Inventory Management Practices
    • Shore Up Your Liquidity
  • Is Yours a Recession-Proof Business?
      • Dana Davis
      • Latest posts by Dana Davis (see all)

Recession Proof Businesses

Small business survivors, like small business owner Eugene Chrinian, owner of multiple Ashley Furniture homestores, use a combination of foresight, leadership skills and an entrepreneurial spirit to gain and maintain successful enterprises that can weather economic downturns.

Chrinian emphasizes the importance of your team. In tough economies, companies cannot afford to carry poorly performing employees or lose their top people. Onboarding and training staff is costly, so heed his tips to ensure any additions will fit your company culture:

Shift Your Sales and Marketing Focus

Even in a solid economy, there’s still competition to contend with; in times of recession, businesses have to work harder to capture or retain customers who have less resources to spend. Shifting your sales and marketing focus uses two strategies:

1. Work on doing what your competition does, but do it better.

This requires some analysis of the competition, which should be standard practice anyway. Ask yourself “What do I offer?” “What does my competition offer?” and “How can I add services or change the way I provide my services to make them more attractive to consumers?”

2. Change your marketing strategy to focus on your established customers.

This is your built-in base, and if you foster customer loyalty and redirect your marketing efforts to keep your customers motivated to continue to do business with you, you’ll save time, money and effort on growing your customer base in hard times, and you’ll prevent your competitors from taking business from you.

Adding value to your service or offering discounts and rewards for patronage are also ways to instill loyalty and thank your customers for their business.

That doesn’t mean that you shouldn’t continue try and attract new business; it simply means to redirect the bulk of your energies toward serving your base. Flexibility is important in any business cycle.

Allocate Your Money Wisely

There’s a time to invest and a time to conserve. Look at the cost-effectiveness of options like outsourcing non-core functions versus retaining full-time staff for such things as IT and payroll processing.

You can also look at the wisdom of leasing equipment instead of purchasing. Explore ways of generating free publicity in lieu of paying for advertising. Learn to deal with growth without hiring employees.

Plan Ahead

If the last recession taught us anything, it’s that nothing can be taken for granted when it comes to the economy. Whether you’re a startup or an established business, alongside your basic business plan and growth estimates, you should also have a plan of action for hard times.

Sit down and look at challenges, and then brainstorm ways that you can overcome them. It’s also a good idea to pad your budget in certain areas to leave a little bit of wiggle-room in the event of a financial crunch.

Re-Evaluate Your Inventory and Inventory Management Practices

Managing your inventory is tricky in the best of times; in a bad economy, goods on hand that you can’t move can increase. Implement inventory management software and take a look at options like reducing the number of products in your line to focus on the most essential or popular.

You can also consider services like drop-shipping as a cost-cutting alternative to warehousing and shipping items yourself. Use technology like Automated Inventory Control and POS systems to keep tabs on your stock.

Explore alternative service providers, suppliers and other vendors to get a better price or more value for your money, without sacrificing the quality of your merchandise.

Shore Up Your Liquidity

Cash is king in any economy, but when times get tough, you need to keep your cash flow going. Some business owners might be tempted to use credit to preserve cash on hand, but accruing new debt is a short-term solution.

Pay down any debt when business is good, re-evaluate your budget to allocate funds more intelligently, and keep a financial buffer of cash reserves that you add to regularly in order to get you through the slow times with little stress or risk of business disruption.

Is Yours a Recession-Proof Business?

Businesses that thrive in any economy share certain characteristics:

  • They provide an essential service
  • They fill a niche or they solve a problem in a unique way
  • Their engaged employees retain customers and increase repeat sales

If you serve your market, and serve it well, build customer loyalty and choose a startup that can remain competitive no matter where the economy goes, you have a better chance of sustaining steady growth and avoiding stagnation in any economic climate.

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Dana Davis

Dana Davis focuses on small business and the use of gifts to show appreciation in relationships. She researches gifts of all kinds and especially personalized and engraved executive gifts for ExecGiftsBlog.com.
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Filed Under: Small Business Advice Tagged With: customer retention, customer service, Inventory Management

Comments

  1. Bella D. says

    January 29, 2020 at 1:03 am

    I enjoyed reading this article. You have cited anti-recession strategies that are practical and very useful for business of any kind. By knowing all of these things and applying them when managing a business then having a healthy company/business is never impossible.
    Bella D. would love you to read ..11 Top Reasons You Should Be Self Publishing On Kindle To Make Money OnlineMy Profile

    Reply
  2. Mark says

    August 12, 2016 at 9:05 pm

    Thanks for sharing some solid and extremely practical suggestions Dana!

    And I really personally resonate with your proven advice, where you advice
    cash strapped small business owners to , (both) to change their marketing focus, and
    focus more on their existing customers, during a recession.

    And to plan ahead! Far too many cash strapped small business owners,entrepreneurial start ups
    and or service providers, try and do things on the fly, instead of carefully planning!

    Doing so, would definitely go along way in alleviating a ton of their current,
    and future cash flow issues!

    Thank for sharing some incredibly practical advice!
    Mark would love you to read ..So What’s This Potentially Profitable Marketing Lesson A Static Website Can Teach You?Part TwoMy Profile

    Reply
  3. Wealth Artisan says

    July 21, 2016 at 1:03 am

    Hey Dana,

    I think the most important thing you highlight in this article is the liquidity. So many good businesses have gone down simply because their cash flow was mismanaged. Liquidity is of the utmost importance during lean times.

    Inventory is a huge problem for retailers right now. Inventories are at their highest on record. The warehouses are full, the stores are full and there’s no customers to be found. Having all of that capital tied up in staggering inventories is dangerous for a business.

    I especially liked your point about focusing in on existing customers. I don’t remember what the statistics are, but it’s remarkably more easy to get a sale from a customer who has already done business with you in the past versus trying to acquire new business.

    Thanks for sharing, you did a lovely job.

    Reply
    • Gail Gardner says

      July 21, 2016 at 11:18 pm

      Hi Wealth,

      I hope small business owners understand that there is no recovery going on. Unemployment and underemployment are at staggering numbers. Careers that paid a living wage have been replaced with service sector jobs that don’t.

      It was obvious retail was struggling when brands were offering deep discounts (30-60%) last year before Black Friday and Cyber Monday even happened. Businesses with excess inventory may have to be creative and make less per item to free up some cash.

      I have advised a lot of small businesses and they consistently fail to build relationships with their buyers. Even those who have email istws are not effectively using them. If they want to survive, they need to get proactive.
      Gail Gardner would love you to read ..GetResponse Reveals Powerful New Online Marketing Tool Any SMB Can AffordMy Profile

      Reply
  4. Leroy says

    June 23, 2016 at 8:05 am

    My strategy advice, focus on selling necessity-based products or services, use guerrilla marketing techniques to get the word out, sign a few big customers at a discount, minimize your full-time staff, run a tight ship budget-wise, buy a business instead of starting one.
    Leroy would love you to read ..Top 3 Medical Apps as Listed in App AnnieMy Profile

    Reply
  5. Seun says

    March 3, 2016 at 8:55 pm

    This is really inspiring.

    Finding a niche and filling is the best way to keep your business recession proof. Retaining existing customers is also a good strategy.

    Thanks for sharing.
    Seun would love you to read ..What Does A Marketing Coordinator Do?My Profile

    Reply
  6. George says

    February 27, 2016 at 2:10 am

    Planning ahead is very important in making your business recession-proof. By planning ahead you are able to build a business that easily adapts to different business environment.
    George would love you to read ..ILLITERACY ISSUEMy Profile

    Reply
  7. John Carroll says

    February 26, 2016 at 4:13 pm

    Hey,

    Thank you for this blog! Seriously useful info.

    I have bookmarked this and i also am looking forward to reading new articles.

    Great I like it!!!

    Thanks!
    John

    Reply
  8. sam says

    February 24, 2016 at 7:06 am

    Well said I think It is helpful to grow business in recession. nice part is Allocate Your Money Wisely and plan ahead
    sam would love you to read ..Coolpad Note 3 Vs Lenovo K3 NoteMy Profile

    Reply

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