Thanks to the coronavirus pandemic and recent political upheaval, the United States has found itself in an economic downturn once again. Its sudden impact has left business owners reeling as they scramble to figure out how to survive a recession as large and strange as this one.
Which businesses struggle first during a recession is determined in part by the recession's cause. This time around, many restaurants and small brick-and-mortar businesses felt the sting most as COVID-19 responses begged people to isolate themselves. But even if your business is in a different sector, you've likely suffered as well.
As troubling as times are, don't let your company throw in the towel yet. Read on for seven methods of surviving the economic collapse that can help see your business through to the other side.
1. Cut Nonessential Costs
When you're trying to figure out how to survive a recession, cost-cutting is often the first thing that comes to mind. It's crucial to be methodical in your approach, though. Resist the urge to dive in headfirst and cancel everything except the rent and utility bills.
Instead, start the process by taking a close look at your business's budget. Identify every recurring cost and group them into three categories: essential, nice to have, and unnecessary.
Feel free to cut unnecessary costs right away—you can always start paying for them again if they become relevant when business picks up. As far as the nice to have costs, like coffee for employees or a daily cleaning service, see if there's a way to keep the benefits while lowering expenses. You might switch to a different brand of coffee or drop the cleaning down to once every two weeks.
2. Negotiate Lower Essential Costs
Now that you've whittled your budget down to only the most necessary items, it's time to see if you can cut costs even further. Talk to your landlord, utility companies, and other service providers to negotiate a discount or extended payment schedule. Many of the costs you assume are fixed can be lowered if you take the time to ask.
Remember: the bills you're paying are headed to businesses, too. Most of the time, they'd rather get paid later or less than not get paid at all.
3. Manage Your Inventory and Maximize Cash Flow
Surviving a recession involves planning for the long haul. In many cases, that means keeping a decreased stock of items on hand. While demand could return overnight, it's more likely to come back gradually with ups and downs along the way.
If you can sell off your backstock and turn it into cash, do it. Cash flow is far more important than inventory, so take advantage of any way to maximize cash flow in and minimize cash flow out of your business.
4. Prioritize Customer Relations
Loyal customers may be the #1 thing that keeps small businesses going through hard times. These are people who you've already invested time and resources in, building a relationship that goes beyond "occasional shopper". Letting these relationships go to waste as you downsize is a mistake you might not recover from.
Instead of falling into radio silence, keep your customers updated on how your business is changing. Let them know that even though times are hard, you're still there to meet their needs any way you can. Stay front-of-mind by sending out newsletters, posting on social media, and updating your website often.
5. Focus on Organic Marketing
Marketing is more important during a recession than any other time, but if you're like most businesses, your budget for PPC ads and advertising campaigns has dried up. That doesn't mean your marketing needs to stop, though. It just needs to change forms.
Now is your chance to start focusing on long-term strategies like content marketing and SEO. Even if you're working with a marketing or content agency, the cost for these organic approaches is much lower than vying for paid traffic.
This is your opportunity to refine your website, start a blog, and get involved on social media. If you meet your customers where they're at and continue to be a helpful resource through troubled times, they'll turn to you when they have money to spend.
6. Adapt Your Offers
Survive, adapt, overcome.
That's the mantra of businesses that survive economic collapse and come out stronger on the other side. The most essential part of the phrase is the middle word: adapt. If you aren't willing to adapt your offers to the changing economic landscape, you risk becoming irrelevant.
Take time to think about whether there's any way to change the way you provide goods or services to meet customers where they're at.
Could you re-package your services in lower-priced bundles? Open up an online store to drive sales even if your shop is closed? Start making deliveries and offering takeout from your sit-down restaurant?
If your offers don't make sense for your clients anymore, find a way to use your existing infrastructure to offer something new.
7. Take Legal Action
Declaring bankruptcy is an absolute last resort, one that many business owners wouldn't dream of taking. Under the old regulations, the process of bankruptcy can be costly, time-consuming, and still result in you having to close your doors. What's worse, small business owners can end up being held personally responsible for SBA loan business debt.
Under new amendments to Chapter 11 Subchapter V Bankruptcy laws, though, small business owners have more options for restructuring their finances. If the majority of your debt comes from SBA loans, you may be able to restructure the debt and lower monthly payments, allowing you to keep your business open. For more information on small business reorganization, talk to your local SBA attorneys.
How to Survive a Recession and Emerge With a Stronger Business
The current recession, like those that have happened and those that are yet to come, is a massive challenge for small business owners to face. Figuring out how to prevent economic threats in business isn't the right approach—even if you're able to weather this recession, another one will someday take its place. The better option is to learn how to survive a recession by being flexible and adapting to the changing landscape.
Looking for more ways to level up your business, even in tough times like these? Make sure to read through the other articles on our site to survive and thrive during an economic recession or depression.
