Closing down a business due to harsh economic times is every business owner’s worst nightmare. This fear is especially true for small business owners that have inadequate reserves to keep the effects of an economic downturn at bay.
However, difficult economic times should not necessarily spell doom for owners. In this guide, you will learn how to make your business successful during harsh economic times.
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What is an Economic Downturn?
According to this article on Market Business News, the value of stocks plummets and businesses borrow less when an economic downturn occurs. During this time, the growth of an economy slows down and unemployment rates increase due to layoffs.
Other signs of an economic downturn include a decline in spending, the gross domestic product shrinks, property value decreases, and foreclosures increase.
An extended economic downturn results in a recession. Experts characterize a recession as a period when businesses announce more job cuts, stock markets suffer continuous losses, borrowers default loan repayments, inflation rises, and consumers lose confidence in the economy.
When a recession becomes more severe, then it is called a depression.
How to Make Your Business Successful
The effects of an economic downturn, recession or depression on your business are scary but avoidable. Below is a list of tips that could help businesses to thrive during tough economic times.
1. Reduce expenses
Businesses cut back on jobs when the economy slows down because they have to reduce their expenses as cash flow decreases. While this move is disadvantageous to employees, it helps businesses to thrive.
Besides layoffs, businesses can implement pay cuts, apply energy-saving tactics to slash electricity bills, and move to cheaper offices. If possible, businesses can create a remote work environment as a last resort.
The bigger part of this exercise involves creating a budget with realistic revenue projections. This will guide your company on the actions you will take to achieve your revenue goals.
2. Hold on to your clients
When times are tough, you have to work even harder to retain your clientele. This is because you need to protect the income flowing into the business.
You can do this by showing your clients why the product or service you are offering them is important. Since your customers are also feeling the effects of difficult times, show consideration with reduced prices and free packages.
This will portray that you not only care about them but also appreciate their contribution to your business.
3. Do not cut back on marketing
As you reduce business spending, you should not cut your marketing budget. No matter how tough times are, you have to keep looking for more customers. You might feel tempted to trim your marketing efforts since consumer spending has declined. But, as long as the demand for your product or service still exists, keep marketing to maintain or grow your market share.
The trick is to know that you have to change your marketing strategy to fit the situation at that time. This means targeting a more specific market, creating attractive offers, and exploring digital marketing.
4. Outdo the competition
As a business owner, ask yourself what you can do to stand out from the competition. You will need more customers to make your business successful and one way to achieve this is to redirect your competitors’ traffic to your door.
Sit down with your marketing team and develop a plan. You could decide to improve customer service, target a market that you and your competitors are overlooking, or advertise in a space that your competitors have not explored.
5. Create a strong relationship with your bank
The relationship you have with your bank will count the most when an economic crisis hits. If you have created a healthy relationship with your bank over the years, then your chances of obtaining a loan are high whether your business is small or large.
A loan is crucial if you want to invest in something that could potentially give you more customers and increase your cash flow.
6. Concentrate on your strong points
In the list of products or services that your business offers, there are probably a few things that perform better than others in terms of revenue generation and strength of delivery.
During harsh economic times, you should concentrate on your top services instead of adding more to your package. As a result, you will have more time and money to focus on these services enabling you to achieve your revenue goals.
7. Conduct employee surveys
You must know the behavior and attitude of your employees to achieve success. You can gain this knowledge through employee surveys.
Dr. Cynthia Reed, a psychologist from the US National Business Research Institute, explains how the behavior and attitude of customers and employees affect profits.
The behavior and attitude of your employees will affect your customers’ behavior and attitude to your product or service and in turn, affect your earnings. Therefore, discover the attitude and behavior of your employees and what drives it through surveys.
From the results you get, take the relevant action. This will improve customer service and increase earnings.
8. Research how you compare to other businesses
You can find out how you compare to other businesses through customer surveys. This will give you perspective on the ways you are falling short so that you can do better.
So, if you find out that customers receive free shopping bags from competing retailers while they have to pay for them at your establishment, you can start offering higher quality green shopping bags for the same price if your customers care about the environment.
9. Create a winning team
If you have all the right strategies and a poor team, you will not make your business successful. Therefore, create the kind of team that will deliver your strategies effectively.
Also, your team should share the same vision as you, they should feel motivated, and they should have the right attitude to get things done.
10. Offer strong leadership
You could have the perfect team at your disposal but it is useless if you cannot guide them in the right direction. Strong leadership is essential for any business to succeed.
You should, therefore, lead your team by inspiring them, listening to them, guiding them with confidence, communicating effectively, and showing good decision-making abilities.
It is not enough to simply apply the above tips without consistent reviews. By reviewing your strategies monthly or quarterly, you can find out if they are working or not. If some of your strategies are not working, adjust them accordingly. On the other hand, keep using the strategies that are giving you positive results.
Are you interested in more tips for businesses? Read on to find out how to avoid financial issues as a small business.