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.
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.
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.
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.
Latest posts by Dana Davis (see all)
- Understanding How Innovation Creates Successful Businesses [Infographics] - August 19, 2020
- Simple Tips for Improving Your Content Marketing Strategy - August 17, 2020
- How To Protect Your Company from Employment Litigation - July 13, 2020