With the impact of Brexit, the pandemic, and now the recession, small businesses – which make up 99% of the UK’s business population – have had to switch into survival mode more times in recent years than they may care to remember.
Economic uncertainty can impact even the most robust of businesses, but the downturn in the nation’s finances doesn’t necessarily mean it’s all doom and gloom for the foreseeable future. Joe Calnan, contributor at SMEWeb, writes: “… the recession may yet be our saving grace.” The measures put in place by the Bank of England mean “businesses can’t risk any complacency”, says Calnan. He suggests the economy will be given the re-boot that it needs.
In this article, we look at what you can do to recession-proof your business so that you can come out of it potentially more robust and more sustainable than before.
What is a recession?
Recessions follow a peak phase when a declining economic climate results in decreases in demand for products and services. Gross domestic product (GDP) is a measure of economic health in the UK, and when there’s a fall in GDP in two successive quarters, it’s a key identifier that the economy is in a recession. Unemployment rates and prices of goods increase, incomes don’t rise in line with inflation, and people have less expendable income.
Combine this with a huge hike in energy prices, as we have now, and it makes for a bleak outlook. However, it’s important to remember that recessions are a natural part of the economic cycle. There are expansions and contractions, or peaks and troughs in other words. While the headlines may be anxiety-inducing, it’s best to diligently focus on what you can control within your business to help weather the storm.
How to recession-proof your business
Have a solid grasp of your numbers
Consistently monitoring the numbers behind your business’ performance is essential. Understanding the percentages rather than the pounds, gives you a clearer picture of the direction you’re heading in. Running figures on a spreadsheet or using an accountancy app gives you insight into the future – it’s the closest thing you’ll get to a crystal ball. You can see where you might hit seasonal hurdles, which products and services offer a good margin (and those that don’t) and where you might be able to reduce costs.
Check and double-check all your costs
Carefully examine all your overhead and direct costs (including cost of sale, delivery, staff costs, and packaging). Are there any savings you could make without compromising quality or service? Can you negotiate with your supplier? Business owners are often reluctant to negotiate with suppliers on cost, but it’s a worthwhile exercise. If you have good relationships with your suppliers, there may be room for manoeuvre in areas you hadn’t even thought of. With a little determination, this strategy can be far easier than simply putting prices up.
Can you diversify or re-structure?
Diversification comes in many forms – you might consider going after a new target market, or offering alternative or complimentary products or services to those you currently provide. People’s needs and priorities shift during a recession – can you address those needs somehow? If you can move with your customer, chances are they’ll keep coming back to you. Another way to diversify is to add a new distribution channel, such as online or wholesale, which can bring a whole new dynamic to your business. Rather than sticking to a one-track path, think about how you could establish multiple revenue streams.
Stay connected to your existing customers
Attracting new customers is five times more costly than retaining existing ones. Existing customers are crucial to your business at any time, but they can be a lifeline during economic instability. Deal with customer complaints quickly and effectively. Stay in regular contact without inundating them – this will turn them off. Email, social media, mobile apps, relevant web content, and website retargeting are all valuable tools in keeping your existing customers close. You might ask them how they’re enjoying your product or service, or delight them with something of value to make them feel appreciated. This could be a discount on a product, a refer-a-friend incentive, or a white paper or how-to guide giving valuable insights. If you can demonstrate that you value them and give them something they feel they won’t get somewhere else, they are far more likely to stick with you.
Keep up your marketing activity
It may feel counter-intuitive to keep spending money on marketing when you’re tightening the purse strings everywhere else. Marketing is often the first thing to stop for companies when troubled economic times strike. However, turning your marketing activity off altogether can be significantly detrimental. A recession is precisely the time to be promoting your business for several reasons:
- You can be fairly confident that your competitors will be cutting back on their marketing, which means your voice will be the louder and clearer one in the market. You can actually gain market share.
- When it comes to ad spend during a recession, it’s a buyers’ market. If you’re paying for advertising, it will be cheaper than in stable economic times, giving you more bang for your buck.
- Cutting back on your marketing means you will lose share of mind among your customers. If you’re no longer front of mind for them, they’ll no longer automatically think of you when they next want to buy your product or service. That can have long-term effects on your business.
- And finally, maintaining a marketing presence gives a sense of stability. If you’re behaving confidently, you will inspire confidence, and this will ultimately have an impact on your bottom line.
These times will pass
While a recession can be a worrying time for your business, it doesn’t have to be a hopeless situation. Putting the measures we’ve outlined into place can help steady the ship and put you on a better course for the brighter times that inevitably lie ahead.
Need more support?
Having someone experienced to guide you through challenging times can make a world of difference, and that's where we come in. Our local advisers are uniquely equipped to support you and help take your business to the next level.
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