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Small Businesses Surviving Another Disaster: The Recession

Written by on May 02, 2022

Your salary hasn’t changed but do you find it hard to make ends meet? You feel like everything is getting more expensive and you wonder how you haven’t noticed before.

If you’re a small business owner, the struggle might be even harder.

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You might be wondering how you’ll pay your employees, will you experience late payments and would you be able to pay the vendors on time. You’re in a recession, along with your business.

Since the beginning of 2020, we’re experiencing financial hardships. First, it was the consequence of COVID-19, and now the Russian invasion of Ukraine deepens the financial hardship even further.

That said, we will talk about the recession, explain what it is, where we are now, and how to survive as a small business.

What Is The Recession?

We usually define a recession as a period of economic downturn. A recession happens when there are two consecutive quarters of negative economic growth, compared to a country’s real GDP. The longevity of recession varies and some of them last only for a few months, while others last a few years. A recession usually causes job losses, decreased manufacturing and consumer spending as well as a decline in purchasing power.

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What Usually Happens With Small Businesses During a Recession?

Small businesses are usually hit the hardest during a recession due to budget constraints, reduced spending power, and lack of readiness to face the hardship. However, some small businesses find ways to thrive even in the hardest economic times but those are few and far between. Some of the things that happen during a recession include:

  • Decreased Cash Flow. Monetary circulation is one of the most important things for business success. Many small businesses do not operate on a large scale and they’re dependent on smaller customers. That said, if a few customers delay payments, the survival of a small business is put at risk because they cannot pay the vendor which, further, slows down all aspects of a business.
  • Lack of Demand. Small businesses often depend on a few bigger customers, and if one (or all of them) stops requesting their services they could face closure.
  • Staffing Cuts. During a recession, small businesses often have to cut costs and staffing is one of the first things that come. Since it’s easier to lay off workers compared to escaping the rental contract, many small businesses lay off either the newest people or those who are redundant. This creates a new set of problems since employees who stay quickly become overworked, and lose the morale they had.

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How did we get here?

Now we’re in something we call the COVID-19 recession. The COVID-19 recession started, for most countries, in February 2020 when the Coronavirus spread outside of the Chinese borders.

In a desire to stop the spread of COVID-19, many countries put in place lockdowns and straightened rules and regulations which led to the recession. We entered deeper into the recession with the Russian invasion of Ukraine, and its consequences are yet to be seen.

How To Survive A Recession As a Small Business?

After we explained what recession is, and how we entered the last recession, let’s see what small businesses can do to survive the recession.

Work on Improving Inventory Management

One strategy to fight the recession is to work on your inventory management and try to improve it. Take a good look and decide whether you can reduce the inventory without decreasing the quality of your product. Maybe there’s something you’re ordering in excess, or you can source it cheaper somewhere.

It’s important to mention that during the recession you should cut all your unnecessary spending. Think about the resources you currently have and decide which your business can live without for a while or entirely and make sure to cut back on these costs. You can use the saved money for better purposes, such as marketing, or stocking up the necessary items.

Improve Relationship With The Existing Customers

Studies show that, on average, businesses spend up to five times more money on customer acquisition compared to customer retention. During a recession, people tend to decrease their spending, which makes it even harder to persuade new customers to try out your product and service. That said, investing in customers that already know you might be a good financial idea that will help you go through the recession easier.

Reach out to your customers and work on showing them you have their back. Make sure to show them respect, and how much you value them through various incentives and actions that will make them stay with you for longer.

Invest In Your Marketing

Many businesses see marketing as an expense only. However, marketing is probably one of the rarest expenses you shouldn’t cut back on during a recession. In fact, businesses need to keep up with the marketing trends (if not boost them) during a recession to stay on top of the minds of their customers.

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Luckily, marketing doesn’t have to be expensive if the marketing strategy is planned well. In the age of recession, businesses should focus their effort on building meaningful campaigns that relate to their customers. That said, businesses can send custom-made newsletters, discount codes, offer loyalty programs, and so on to draw prospects back in.

Focus On Your Strong Points

While many highlight the importance of diversification when it comes to growing a small business, doing plenty of things at once might be damaging to your small business. In fact, it can be a waste of time and money. In times of recession, small businesses should focus on things they do the best and the things that set them apart from the competition. Sometimes, less is more, and focusing on providing the best service in one specific area can do more than doing plenty of semi-good things. That said, find your strong points and make them your bulletproof vest against the recession.

Automate As Many Things As You Can

Time is money. Automation of business processes results in saved time, decreased liability, and more money for the company. That said, companies should look to streamline and automate all eligible processes either by outsourcing labor or subscribing to online software.

As an online-invoicing software, InvoiceBerry helps both small business owners and freelancers, streamline their invoicing process, ensure timely payments, and ease the payment tracking process.

Since getting paid in time is important for small business survival, especially in the times of recession, InvoiceBerry can help small businesses ensure the uninterrupted cash flow by allowing its customers to send incentives for early pay through their invoices or catch the lead while it’s hot, by turning quotes into leads effortlessly.

What’s best, businesses don’t even have to spend a dime to try out InvoiceBerry’s software. It takes just seconds to subscribe to free trial period!

How To Thrive In a Recession As a Small Business?


As we’ve already said, a small percentage of small businesses thrive during a recession. Here are a few tips on how you can set your business up for success even in the most difficult times.

Improve Decision Making Process

During a recession, the success of a company will develop both on the decisions the company makes and the person who makes them. Studies show that decentralized companies have better performance during tough economic times since they delegated decision-making further down the hierarchy and they were better able to adapt to changing conditions. Decentralization matches decisions with expertise, unlike centralized companies that hoard decision-making to one, narrow, group of people.

That said, think about your organizational structure, as it might help you deal with uncertainty.

Firing Employees Isn’t The (Only) Solution

Even though layoffs are a natural part of the recession, companies who thrive during the economic downturn know that employees are their biggest asset they shouldn’t save their money on. The truth is: that layoffs are harmful to companies as they can cause productivity and morale issues. Instead of firing employees, companies who thrive during the recession reduce hours for their employees or implement furloughs and performance pay.

Deleverage Before a Downturn

Thriving in a recession depends on how well you prepared for it. Before the recession begins, make sure your small business has financial reserves and can continue operating when the recession takes place. If Amazon didn’t save the money before the dot com bust, it would have more limited business options. However, since they saved and had money to cover the losses and launch Amazon Marketplace.

Final Words

Surviving the recession is hard, especially for small businesses that struggle with budget management even during the “normal times”. Yet, there are cases where businesses thrived during the economic downturn. We hope that our article gives you better insights on what to do during a recession and how to bulletproof your business during harsh economic times.

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