Crucial Strategies to Help Your Business Survive a Recession

A Bitter Dose of Small Business Reality

But vaccines and optimism are only 2 of the ingredients needed for financial recovery. And there’s a possibility that we could experience a double-dip recession, where the positive economic growth we’ve seen in Q4 is demolished by a second, perhaps even larger decline.

An economic report from CBS News explains that the many delays in additional relief from Congress are having a brutal effect on the US economy. “That is raising concerns about a potential contraction in economic growth early next year, which would mark the first ‘double-dip’ recession in the US since the early 1980s. JP Morgan Chase’s top economist, Michael Feroli, told clients last week the recent coronavirus surge and renewed restrictions to stop the spread would drive up layoffs and shrink economic activity in the first 3 months of 2021 by some $50 billion…It also would impede an ongoing recovery from pandemic lockdowns in the spring that rebounded rapidly between July and September with businesses reopening but which now appears to be slowing.”

The risk of a double dip is real—which is why we should joyfully ride the momentum of vaccines and other good news while also preparing for things to go south. It’s what the old-timers call “planning on the best and preparing for the worst.”

Helping Your Business Survive

Regardless of what lies in store for the first half of 2021, you’ll likely need to work hard to make up ground lost in 2020. Sure, there are some select businesses that have thrived during the pandemic. Prime examples include delivery and cleaning businesses, as their services took on a new level of significance during lockdown.

For the rest of us, we’ve lost a lot more professionally than just revenue. Supply chains have broken down, partnerships have been severed, employees have departed, and countless aspects of our businesses have been disrupted.

Despite these challenges, you can begin shoring up your business now to give it the best chance of surviving a potential return of recession conditions. By looking at case studies from the Great Recession, we’ve identified strategies that can pull you through this mess.

Research from the Harvard Business Review provides a few crucial lessons for any business hoping to endure 2021 and return to the path of success. The first lesson is to start preparing right now. There are a million reasons to wait, but they’re all outweighed by the fact that delaying your efforts only dilutes your prep’s ultimate effectiveness.

“Main Street has it right: Even as the debate about ‘when’ continues among economic forecasters, companies should begin to prepare themselves for the next recession,” explains the small business analysis from the Harvard Business Review. “As our research suggests, getting ahead relative to peers (even slightly) during recession gives companies an advantage that is tough to reverse when the economy is doing better.”

Now that you have your timeline for action, let’s look at the 2 most important strategies you can employ. You might already be taking some of the recommended actions, but these times call for a renewed effort.

Reduce Your Operating Costs

Perhaps this sounds like obvious advice. After all, who wouldn’t want to lower the amount of money they’re spending when they’re bringing in less of it each month? But the crucial point is to reduce your costs before the most serious troubles begin. Even if your business is currently on an upward trajectory, look for ways to streamline your expenses.

Back in 2008, the companies that began to trim their operating costs in January and February were able to create lasting efficiencies. They were proactive, rather than waiting for market conditions to force them to change. Here are some ways that various recession-proof businesses have lowered their costs:

1. Pay Less for Utilities

You might think that your utility rates are set in stone, but they may be negotiable. Talk to your water and power providers and let them know you need to lower your monthly bill. They’ll make recommendations for improving your efficiency, allowing you to save money. They also could agree to a discount—it certainly never hurts to ask.

Take a similar approach with your internet and phone services. Feel free to tell your providers that if they aren’t able to give you a better deal, you’re going to switch to their competition. Often, there are discounts that they can apply to your account in order to retain you—or you could ask them to match the introductory promo you’d be getting if you switched to a competitor.

2. Pay Less on Rent

Sounds nice, doesn’t it? And a conversation with your landlord can sometimes bring these monthly savings to life. For starters, landlords love to keep reliable tenants—so there’s a good chance that they’ll give you a discounted rate just to keep you in place and avoid the difficulties that come from finding a new tenant.

There are other rent-lowering strategies to consider, too. Ask if you can get a discount for paying early each month, or you could consider signing a longer lease in exchange for a better price.

3. Eliminate Unnecessary Expenses

Even if it was awesome having perks at your office, such as DIRECTV and Xbox Live, you should think about cutting the discretionary expenses that aren’t moving the needle for your business. It could be something as simple as switching to 1-ply toilet paper in your office bathrooms, or something more impactful, like sending out digital versions of your company’s benefit guides to employees instead of paying for printing and postage.

4. Automate Every Possible Process

Every minute that you spend working on a task that could be automated is wasted money—and whenever human error results in mistakes related to these tasks, the waste is only compounded. By automating your processes, you’ll save time, reduce errors, and save more money on an ongoing basis.

Whether you’re using MailChimp to send your emails and track results, Hubspot to manage your cross-channel marketing campaigns, or Hootsuite to post on multiple social channels in the blink of an eye, you’ll be leveraging the power of technology to take your business to the next level. What you do with all the resulting free time is up to you. Maybe you can dedicate more time to improving your website, networking with potential partners, or even just enjoying a cup of coffee on the patio—wellness has never been more important.

5. Purchase Used Equipment

Whether it’s a commercial refrigerator for a restaurant or a forklift for a warehouse, equipment can be a major expense for small businesses. You can reduce the burden by seeking out quality pre-owned equipment.

Among the best sources for used equipment are local auctions and online classifieds. You can broaden the scope of your search by using government auction websites—these services aggregate the available equipment from the vast expanse of the federal government’s operations, resulting in excellent deals on crucial equipment.

Most of these cost-saving efforts are focused on what’s going on within the literal (or metaphorical) walls of your business. But it’s also necessary to reach out and build connections with your customers—and that’s where this next strategy comes into play.

Embrace Your High-Value Customers 

The second distinct recession-enduring strategy noted by the experts from the Harvard Business Review report is focusing on customer loyalty. Resilient companies don’t spend all their precious time and dollars chasing down new customers—they double down on the high-value customers who made them successful in the first place.

During a recession, finances can become volatile for just about everyone. But your high-value customers might not be as impacted compared to the general population, as their financial stability prior to the economic downturn will often help them ride it out with fewer bumps. Additionally, these loyal customers already understand and trust your business. They’ll be more willing to shop with you when you’re at your best and more patient with you when you’re dealing with supply chain disruptions or other recession-related turmoil.

Focusing on loyal customers also reinforces the cost-saving principles outlined above. It’s always cheaper to motivate your current customers than to entice a new one, so you’ll be saving money by dedicating your resources where they’ll get the best results.

The goal: to reward your customers for their loyalty and help them feel how much they are appreciated. For example, you could send out a promotion for your high-value customers. Let them know right in the headline that they’re in an exclusive group. Or you could create a helpful white paper that’s relevant to your customer profile, then send it out with no strings attached.

By engaging with your loyal customers, you’ll often kick off a chain of reciprocity that will power your business through the toughest of times. This crucial engagement also helps to build a true community, which should be your ultimate goal. If your customers are seen merely as a “base,” then they’re just a support system that holds up your business. Transcending that level of thinking allows you to think of ways to share with your customers and treat them as unique individuals.

“When people feel like part of a community, amazing things can happen,” says Entrepreneur. “When people can gather—in person or virtually—they form relationships that keep them coming back for more. One example is the ever-growing—1.4 million members currently—Facebook group for the Instant Pot Community, where Instant Pot users share their favorite recipes and latest trials and errors. People visit that page, sometimes multiple times a day. It’s a community. And people love it. There are ways that you can create this type of following for your product or service too. Bond your customers together so they keep you and your business top-of-mind by reminding one another.”

Every effort you make to build such a community today will pay dividends tomorrow. If the economy continues to struggle, your business will be stronger because you’ve earned equity within your community of customers. And that kind of trust doesn’t just go away when things go south.

Strategies for Growing Your Business, Even Under Duress

Now it’s time to examine ways for you to branch out and take an additional share of the pie while still cutting costs and retaining your precious customers. This is where your preparation becomes so valuable—as other companies scramble to deal with the status quo, you’ll have efficiencies and advantages already implemented.

Start by surveying the market. There’s no way to rise above the competition effectively unless you know where they stand. During this analysis, look for both the good and the bad from your competitors. For example, if another company is using a particular social strategy that seems to be yielding strong results, find a way to incorporate the best elements of it into your own marketing.

On the flip side, take note of all the weaknesses you observe. This isn’t just to boost your ego but also to find deficiencies in the market that you can then fill. Your brand differentiators will always shine brightest when they meet a need that’s currently going unserved.

This is also a great time to review your pricing strategies. Are you underpricing some of your products or services? Or do you need to trim prices in some key areas? Your market research will help you to find the sweet spot of delivering value to your customers while also driving growth for your business.

Ideally, your cost-saving initiatives and growth strategies will converge to power your business through any economic challenges. But it can be a wise decision to also add financing into the equation. The influx of cash provided by a loan can give you a cushion that becomes essential when even your best plans hit inevitable snags.

It’s tempting to think that the best time to apply for loans is during the trough of a recession when rates might be at their lowest—but this isn’t necessarily the case. You could seek financing as the economy ramps up and rates increase (perhaps prior to a double dip) and enjoy distinct advantages.

“Another potential long-term benefit of rising interest rates? Improved margins,” explains Lendio CEO Brock Blake in a Forbes article. “The underlying driver of a rate increase like this is inflation. When there’s mild inflation, prices for goods and services tend to move higher, giving small businesses room to increase their prices over time. With better cash flow and higher rates, you can improve your margins, leading to additional flexibility and breathing room.”

Let’s say you sought financing at a time when the economy was improving and stability seemed to be returning to your industry. This decision would be no different from any of the other initiatives discussed in this guide, as it’d be a win-win regardless of what happened in the near future.

If the economy were to take another tumble, you’d be ahead of the competition. You’d have the cost savings, customer retention, and financing needed to weather the storm. And what if the good times keep rolling and this recession fades into your rearview mirror? You’ll be in the most enviable position because you’ll have the momentum necessary to capitalize on all the new opportunities.