Every business, big or small dreads closing down due to harsh economic times. However, the fear is stronger for small business owners with insufficient reserves to help them survive during such times.
The world has experienced a harsh time economically for the past several months due to the COVID-19 pandemic. According to the World Economic Forum, COVID-19 has caused an economic shock three times worse than the 2008 worldwide financial crisis.
As the pandemic continues to exist among us and with cases continuing to rise worldwide, more people are trying to get their lives back on track. That includes many small and medium-sized business owners around the world whose businesses are hanging by a thread.
Nariman Behravesh a Chief Economist says that the world economy has experienced a short recession and everybody has been hurt. As many people blame this short recession on lockdowns, Behravesh says it’s as a result of fear and uncertainty amid the people. Consumer’s fear of catching the virus has stopped most of them from going to places they would normally go and this has affected the economy.
During a recession, there are more job cuts and unemployment rates go high. Stock markets experience losses, inflation goes high and above it all, consumers lose confidence in the economy.
This is where your business is affected the most – consumers losing confidence in the economy. Susan Ward on The Balance Small Business points out that declines in consumer confidence lead to decreased sales and this threatens all businesses.
As an entrepreneur, it’s hard to run and maintain a business during harsh economic times such as this. The effects of such a recession on your business are frightening and unavoidable.
How then does your business thrive during a harsh economic time?
Despite all the effects of difficult economic times, these times do not essentially spell bad news for businesses.
In good economic times, your business’ cash flow is solid and your profits are on the right track. For most entrepreneurs, when they are in a good place, they tend to loosen the wheels a little bit. That does not mean you run your business with a blind eye during good times. There are definitely several strategies you put in place to keep your business going on track.
During the harsh times, you need to tighten the ropes a little bit more when it comes to these strategies. Your goal should be to get going and keep selling during harsh economic times despite the hurdles. From ensuring solid cash flow to strengthening your customer base, there are a few practices you can implement to make your business thrive during harsh economic times.
1.Protect Your Cashflow.
Every entrepreneur knows that cash flow is what keeps a business alive. That means that money must flow in and out of your business.
Keeping your cash flow on track during harsh economic times might seem a little difficult. That means you have to put as much effort as possible to protect your cash flow.
This calls for revenue increase and reducing your business expenses. You need to come up with ways to increase your revenue and profits and to always make sure your business makes more than it spends.
Increase your sales through any way possible and cut out your expenses.
Reducing your expenses may call out for some hard decisions such as laying off some of your employees. On the other hand, you might have to consider pay cuts. Think of options such as moving to cheaper offices or having your employees work from home.
It’s also time to run your business on a strict budget with realistic revenue projections.
2.Concentrate on Your Competencies.
What part of your business influences more sales? Is it your excellent customer service or is it a specific product or a specific service? Whatever it is, concentrate on it.
If two of your services or products perform better than the rest, concentrate on them.
Bank on the business aspects that generate more revenue and what you do best. Concentrating on them will give you more time and more money to focus on the products or services and this eventually leads to more revenue.
Many businesses might be tempted to diversify the products or services but now is not the time. You already have limited money and this will only draw your focus from what you do best.
Just focus on the most profitable.
3.Make the most of your current customers.
Your current customers are gold and your leverage.
You already have their loyalty that you can bank on. Established customers give you more sales opportunities. All you need to do is to make sure you retain them during the harsh economic times and your key here is customer service.
Your current customers are key to keeping your income flowing without incurring extra costs that come with finding new customers.
Remind them why your product or service is important. Show them you understand that times are difficult for them too by reducing your prices or offer some of your packages for free. Show them they matter. Meeting their needs and making them happy is what will keep them coming back to your business.
4.Don’t Cut Down Your Marketing.
Most entrepreneurs might consider cutting down their marketing budget to reduce their expenses but that’s a mistake.
No matter how tough it is, cutting down your marketing will cost you more than what you are saving. They say in the business world you have to spend money to make money. You have to spend money if you want to get more customers.
Marketing is the only solid way to bring more business to your doorstep. As long as you are still in business and there is a demand for your products or services, keep marketing. Marketing will help you maintain and grow your business’ share in the market.
Being in a different economic time than usual, you need to change your marketing approach to align with the market changes.
Consider focusing on a more specific market – niche market -, giving striking offers, and investing more in digital marketing.
5.Outdo your Competitors and win their customers.
Even as you bank on your current customers, you should come up with strategies to win new customers. This is where outdoing your competitors come in.
You need more customers to make your business thrive in harsh economic times. One of the best strategies to win you more customers is drawing your competitor’s customers to your business.
Outdoing your competitors comes through your business standing out from them and you need to be strategic about this. You need to research your competition to know what they are doing and what you can use to your advantage and attract their customers to your side.
Visit their websites, their social media platforms, and their physical locations. See how they advertise their business and find out what consumers love and don’t love about their businesses.
Think of how you can tweak your own business practices to shift customers to your business.
Maybe it’s improving your customer service, or targeting a market segment your competitors have ignored. It might also be advertising in spaces your competition has not explored.
6.Build a Strong Relationship with Your Bank.
With your income having gone down, your business might need a financial hand to survive rough economic times.
Experts say hard times make it harder to borrow and this is when your credit score speaks for you. Businesses are always advised to keep their credit ratings on good for times like this.
There are many financial institutions that cushion small businesses during harsh economic times but they have to access your creditworthiness. If your business’ credit and personal credit is good, you stand a good chance to get a loan to keep your business afloat.
So, as you borrow money for your business, keep tabs on your credit score and make sure you are on the good side of the score. You never know when you will desperately need a loan to keep your business afloat.
7.Create a Winning Team and Be a Strong Leader.
Behind every successful business is a winning team with a strong leader.
Create a team whose attitude and behavior will help you implement your strategies. Their attitude has a great impact on your customers’ attitude towards your business, your products, or your services. Look for ways to improve their attitude and to feel motivated.
Build your team towards being on the same page with you and with the same vision for your business.
You cannot create a winning team if you are not a strong leader. You need to guide your team through and in the right direction. Inspire your team, support your team, and listen to your team.
As a leader, analyze your strategies and your plans to survive during a difficult time seeing what and what is not working. Ensure effective communication, and guide your team with confidence.
Tough economic times should not mean the end. As a small business owner, even with inadequate reserves, you can still survive during harsh economic times.
Implementing the above does not mean your business will not be affected by the recession at great extents. It only helps you ensure your business survives the harsh economic times and perhaps even profit from them.
Once you understand how you are doing things now, you will be able to figure out ways to make improvements.