While experts still couldn’t decide whether we’re in a recession or not, one thing’s for certain: the economy isn’t doing so well and a full-on recession may still very well be just around the corner.
Of course, this could spell disaster for business owners like you. No matter the size of your operation, your customers deciding to hold onto more of their money can seriously affect your bottom line.
Now, while there are things you can do today to recession-proof your business, it’s also important to know what to do if and when a recession happens—which is what we’ll talk about today.
1. Cut your spending
While it may sound simple at first glance, it’s actually quite tricky to execute properly. You need to know exactly what to skimp on. Otherwise, you may end up also compromising your business’ ability to make money.
Marketing, for example, is one area of your business that you should not pull funds out of. Your customers are already hesitant to spend their money, which means you need to work extra hard to get them to pull their wallets out. Backing off on your marketing efforts is the exact opposite of that.
So, how do you cut your spending the right way?
Depending on your business, you can:
- Temporarily switch to an online-only operation so you don’t have to pay rent to run a physical store
- Temporarily (or maybe even permanently) switch to a fully remote working setup so you don’t have to rent an office
- Renegotiate deals with your vendors (who are more likely to agree because they can’t really afford to lose any clients during a recession)
- Temporarily reduce your operating hours
- Switch to cheaper supplies
- Streamline your operation (i.e., only keep the necessary people and equipment)
- Focus on the products and services that bring in the most money and put all others on hold
- Identify and cut unnecessary expenses such as underutilized subscriptions
2. Make it easier for your customers to buy
During a recession, people are looking to make whatever money they have last for as long as possible. If you can help them do that, they’re more likely to buy from you.
But how exactly can you do this?
First, you can offer discounts and special deals to your customers. While this may eat into your revenue in the short term, it’s still better than not selling anything at all while waiting for the economy to bounce back.
Second, you can offer more flexible payment plans so your customers can spread the cost of their purchases over a longer period instead of spending a lot up front.
Third, depending on your business, you could explore implementing a subscription-based model instead of charging full price up front.
Finally, you can offer your products in smaller, more affordable sizes. If you sell services or digital products, then you can offer lower-priced packages with fewer bells and whistles.
3. Get financial assistance
Finally, you can also get extra funding from the bank in the form of a business loan. Not only will it give you the much-needed cash buffer you need to keep your business afloat until the economy bounces back, it will also give you access to much lower interest rates because banks are eager to get the economy moving again.
The only problem: it’s much harder to get your loan application approved during a recession. With people getting laid off and businesses declaring bankruptcy left and right, it’s only natural for banks to be pickier when it comes to choosing who to lend money to.
The good news is there are other options available to you.
Before you go out and apply for a business loan, though, you need to understand that it’s not something you should do just to keep your doors open a bit longer. Instead, you need to know exactly how you’ll convert the debt into something that helps your business make more money. Otherwise, it’s just another company expense for you to worry about.
The bottom line
Without a doubt, recessions are terrible for businesses. What it’s not, however, is an insurmountable problem. With enough planning and the right strategies in place, you should be able to keep your business afloat until the economy bounces back.
If you need extra funding to increase your cash buffer or keep your business profitable once the recession hits, apply for an Asenso small business loan today.