The U.S. economy is impacted by global events and consumer demand. This means that inevitably your business will at some point face a recession. Though this might seem a bit daunting, there are many ways that you can prepare your business to survive an economic downturn.
The key to getting your business through tough financial times is planning ahead and making strategic decisions now in order to set your business up for future success. Though an economic downturn can certainly take a toll on your business, there are some strategies that you can use to keep growing your business during a recession.
1. Understand and clearly communicate your value
During an economic downturn, many consumers tend to think twice about purchasing “nice to have” products and services. Instead, they may reserve their limited disposable income for the things that they deem more necessary. The companies that provide products and services that are not essential are more vulnerable during a recession. The key to staying strong during an economic downturn is a compelling value proposition.
The first step to creating an effective value proposition is understanding the value of your products or services. Consider what ways your company provides something that is important to your customers. Then find a way to clearly communicate this to your audience. Rather than focusing on features, think about the benefits that you can provide to your customers and how your product or service makes their lives easier.
2. Turn to your current sales channel for new opportunities
Though it is important to continue looking for new leads and sales opportunities, your sales channel and existing customers are one of your most important assets, especially during an economic downturn. When customers have less disposable income, they are less likely to try new products or purchase from brands they are not familiar with. This makes it important for you to continue to nurture relationships with your current customers and offer them additional products or services that meet their needs.
There are a few ways that you can leverage your existing customer base to expand sales of new products and services. One strategy is to provide products or services that are adjacent to your current offering. This may be expedited shipping options or offering warranties on your products. Another way to find new opportunities in your current sales channel is by extending your product or service line beyond these adjacent products. This might include offering similar products/services or those that pair well with existing products/services. Yet another tactic is to enter new markets through strategic business partnerships or alliances, thus expanding your income opportunities.
3. Outsource work that is not your core business
When a recession hits, it is important that business owners and key employees focus on their core responsibilities to ensure that everything continues to run smoothly. This may mean outsourcing any work that is not strategic. Forbes suggests outsourcing functions like human resources, accounting, manufacturing, and transportation. This allows you to continue to focus on the more vital aspects of your business to help you ensure that your business stays ahead of the game.
An economic downturn is a great time to hire new talent to handle these tasks, especially freelance professionals. When companies have to begin layoffs or cut hours due to lack of income, the market is flooded with talented people who are looking for work. There are many ways that your organization can build a freelance-friendly culture that is enticing to professionals who are looking for a new job or extra work.
4. Consider increasing your line of credit or establishing a new line
Many small businesses already have a line of credit that they use to take out funds on demand. This gives companies an ongoing source of capital that they can access to pay bills, maintain operations, and cover expansion costs. A business line of credit is a great option for organizations that have short-term funding needs or are experiencing temporary cash flow problems. They can also be a vital tool in preparing for potential financing issues during a recession.
A business line of credit is a very valuable funding option during an economic downturn as it provides a financial safety net when businesses are not doing as well as they would like to. Even if you do not need a credit line at the moment, consider increasing your credit line or opening a new line of credit when times are good just in case you need access to funds later on. This extra source of funding may be just what you need to keep your business afloat during hard financial times.
Though an economic downturn can certainly have serious consequences for your business, the good news is that a recession does not mean that your business can’t grow. Using the strategies above, you can work to prepare your business for a recession and find ways to thrive, even in an unstable economy.