Although the UK is currently in recession, it is not too late to take the necessary steps to recession-proof your business. You know how the recession can impact your business, but what are the best ways to ensure survival during a recession?
In this article we are going to take a look at how SME’s can be prepared for recession with our best tips on how to recession-proof your business.
38% of all the startups that failed, did so because they ran out of cash according to CBInsights. According to the same figures, 35% failed due to no market need and 19% due to a flawed business model. All of these reasons for failure are completely avoidable is you are prepared.
During a recession the need to be prepared is even greater. Many business owners have not fully grasped their own cash flow which is essential to surviving the upcoming economic situation. Getting to grips with your numbers and creating a cash flow forecasts is absolutely essential to navigate through recession.
Creating a thorough risk management plan will also be key during this time to ensure you are aware of any further risks your business may face, and how to mitigate or avoid these risks. The benefits of creating a great risk management plan will not only help you to survive and thrive, but to reach your business objectives and succeed in the long run.
Completing competitor analysis will also be of great benefit when preparing for recession as customer spending will dwindle during this time and therefore the competition will be fierce. Now might be the right time to invest in partnerships or new marketing strategies, but ensure any decisions you make as a result are well thought out in the long term and not just for the next quarter.
A simple way to ensure survival during recession is to have multiple revenue streams, this way to maintain your income is brilliant during all times and not just during recession. Digital and physical products, recurring memberships, ad revenue and sponsored content are just some examples on how to diversify your offerings to ensure you have multiple income streams.
It could be an ‘obvious’ move such as a physical store also selling items online to increase your geographic footprint and customer base. Or perhaps you can introduce B2B selling if you usually sell directly to consumers. Some other ways to diversify incomes might require some more imaginative thinking, for example a personal trainer who usually trains a client in person may introduce the option of online-coaching or pre-made programmes and recipes available for download.
Another thought to consider during recession is to modify the products and services you already offer, in order to remain attractive to customers who may need to cut back on their spending, especially if your offerings are seen as ‘non-essentials’. For example, an upmarket clothing brand may introduce a more affordable range of clothing, or a professional dog walker who usually only offers 1:1 walks may look to start group walks at a lower price per hour.
Focus on employee retention
Job loss is a huge feat faced by employees during a recession. Make cutbacks elsewhere while you can to retain your staff where possible and focus on employee retention. Out of fear for their job, or their own financial situation, employees may be looking for work elsewhere. In order to run a successful business you will need a team of dedicated and motivated employees. If possible, consider incentives such as flexible hours or rewards to keep employee morale up during this time.
You can look to cross-train or up-skill your employees to help your business to be flexible and adapt during recession, and will also ensure your staff feel valued and secure in their job. The more you invest in your employees, the. More they will feel invested and motivated for the success of a business.
A recession is often a time for increased unemployment rates, but it can be the chance your business needs to find new talent and form a productive and well-oiled workforce. This will not only help you to navigate your way through the economic crisis, but will ensure success in the long-run.
Incentivise customer loyalty
During a recession don’t make the mistake of trying to do too much and attract new customers. It is easy to focus on growing your customer base and income, but by paying attention to your current customers and their requirements can help you create a loyal customer base who will support you during difficult economic times and ensure success for the future.
Repeat customers will be a key source of income, and word-of-mouth will play a huge role in drawing in new customers during a recession. This method of continuing to make sales will be far more rewarding and cost-effective than advertising or other means of attracting new customers.
Falling into the trap of offering new customers a discount or special offers might not be the best way to survive through the recession as loyal repeat customers will feel under-valued. By creating a positive experience for your existing customer base, you are helping to ensure the repeat customers and word-of-mouth recommendations we discussed above.
Some fantastic ways to incentivise customer loyalty include running a referral scheme, such as a mobile hairdresser offering 10% off for an existing customer and their neighbour when referred. Another great and easy way would be to offer discounts to existing customers, promotions for previous customers on their birthday or to create a loyalty programme to encourage repeat business.
Think outside the box
Finally, don’t be afraid to innovate during an economic crisis. Customers will be making tougher decisions on how to spend their money during this time and you will need to innovate in order to stay relevant. To survive a recession you need to be flexible and willing to undertake new opportunities for growth.
Although it might seem like the time to cut-back on spending, if there is a new product or service you can bring to the market, then now might actually be the right time to do this. If you have a handle on your cash-flow and the market research from your loyal customer base, you are in the best position possible to take the leap.
Now is the time to position your business for success, and to create a recession-proof business. Thorough preparation and flexible plans for the future are the best way to thrive during this time of economic uncertainty.
If the prospect of tackling the recession alone is too much then consider additional support. The Finance People have flexible and affordable finance experts on hand ready to assist. Book your no-obligation consultation with our team to discuss how we can help.