Learn strategies to prepare for and survive economic turbulence.
With growing unrest and political instability, trends and projections indicate a global economic downturn. Experts believe the US will likely see a recession in early 2024. The World Bank’s latest Global Economic Prospects report suggests that even developing countries will likely experience a sharp slowdown.
An economic crisis can be highly damaging, especially to a newer small business. Customers and clients slash spending even as business costs rise during such times — besides, higher interest rates and reduced commercial lending during a recession limit capital access.
However, small business leaders can take proactive steps to prepare themselves. Planning makes it possible to safeguard small businesses from a crisis while continuing to operate and even thrive in tough times.
Here are six tips to navigate a global recession.
1. Keep a large cash buffer
Thriving in challenging market conditions hinges on maintaining substantial cash reserves. A robust balance sheet is a buffer covering higher costs amid rising inflation. At the same time, it can help you invest in unique growth opportunities that come up during economically-stressed periods.
2. Find new business efficiencies
While cutting costs is crucial, implementing time-saving technology and better operations mechanisms that make your small business efficient is equally essential. Doing so eliminates unnecessary expenses and positions your company for resilience and growth in the post-crisis landscape.
3. Focus on customer
Successful businesses understand and satisfy their customers’ needs during difficult economic times. It is not simply about lowering your prices but enhancing customer service and providing more value for money.
Provide prompt and efficient service to your existing customers. Personalize the experience as it fosters loyalty and attracts new customers.
4. Keep investing in marketing
While you may be inclined to pull back on your marketing when a recession hits, doing so can jeopardize your long-term growth plans and credibility. Instead, keep up or even increase your marketing efforts. This will help you capture new customers, especially from competitors who have scaled back their efforts.
5. Prioritize online outreach
Remember, e-commerce and online shopping are here to stay. Establish a robust online presence and utilize digital marketing strategies to attract new customers. Additionally, revamp your company website to make it more responsive and mobile-friendly.
Further, actively engage the community on social media platforms and implement online advertising or strategic email campaigns to expand your reach.
6. Diversify your revenue stream
Depending on one source of revenue can make your small business vulnerable to sudden market shifts and economic downturns. Diversification — whether by expanding offerings, targeting new markets, or adding distribution channels can help you mitigate that risk. Having multiple revenue streams makes your organization more dynamic.
Bonus tip: Get expert support
Leverage free business coaching and training programs from Community Development Financial Institutions and government-affiliated resource centers. These resources can guide you on financial management, budgeting, securing capital, and business strategy and help you navigate the downturn more confidently.
The final word
We know from history that the next crisis will differ from the last one. If the Great Recession of 2008 taught us anything, we must be vigilant when times are still good. By following the guidelines outlined above, you can weather the financial storm and emerge more robust than ever.
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This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.