What you’ll learn:
- How to grow your business during economic volatility
- Why marketing is more important than ever during an economic downturn
If you’re a small business owner, you’ve probably been keeping a close eye on the economy lately. An analysis by Investopedia shows that 1.8 million small businesses failed during 2008—2010, the two years that marked the start of the last major recession. Job losses were even more extreme.
However, a recession doesn’t have to mean the end of your business. There are several things you can do to continue growing your business during a recession.
What to expect when a recession hits
A recession is defined as a significant decline in economic activity that lasts for at least six months. During this time, businesses across the country will experience slower growth or even need to scale back operationally, and consumers will restrict their spending habits. This can have a ripple effect on your company, causing you to see declines in revenue, profit, and customer acquisition.
In other words, a recession is generally not a good time to start or grow a business. But if you’re already up and running, there are things you can do to survive and thrive during the storm.
How to grow your business in an unpredictable economy
There’s no denying that recessions are tough on businesses. But if you adjust how your business behaves, you can use a recession to your advantage and come out on the other side even stronger than before. Start with these 6 strategies:
The best way to weather a recession is to prepare for an economic downturn in advance of the dip. This means creating (or updating) your business plan, forecasting your finances, and building up a cash reserve that you can tap into when times get tough.
You should also take a close look at your customer base and think about which segments are most likely to be affected by a recession. For example, businesses that cater to luxury consumers will usually see a decrease in demand during an economic downturn. On the other hand, companies that provide essential goods or services will often see an increase in demand.
Find more insights on preparing for a recession here.
Increase marketing spend
One of the first things businesses tend to do when a recession hits is cut back on marketing. However, this can be a mistake. A study published in the Harvard Business Review found businesses that thrive in a recession tend to pump money into their marketing efforts while trimming other costs.
Why? Because during a recession, consumers are bombarded with news about the state of the economy. This can make them more cautious about spending money, which means they’re less likely to take chances on new products or services. So if you want to win customers in a recession, you need to increase your marketing spend and ensure your target audience is aware of your brand.
Be selective with spending
Increasing your marketing budget doesn’t mean that you should start throwing money at every opportunity that comes your way. Operating a business in a recession means you need to be selective with your spending and focus on investments that will have the biggest impact.
For example, instead of marketing to your entire audience, focus your efforts on the segment that’s most likely to convert.
Build strategic partnerships
In difficult times, businesses can find shared value if they stick together. Forming strategic, mutually-beneficial partnerships with other companies in your industry might be a successful way to do this. Partnerships can take many different forms but they all have a common end goal: to help both parties gain something valuable for their business.
You can also look outside your industry for help. There are countless products available that are designed to ease your workflow.
Spending too much time onboarding employees? HR software can help. Struggling to get paid on time? Try Hopscotch Flow. This easy-to-use tool gives businesses instant access to funds from outstanding invoices, even if a client hasn’t paid yet. Control your cash flow, unlock revenue on-demand, and keep your business going strong in times of uncertainty.
Grow your online presence
Want to save your startup during an economic downturn? A recession is a perfect time to focus on growing your online presence. 2.05 billion people shopped online in 2020, and that number will likely continue to grow.
There are many different ways to grow your online presence, but some of the most effective include starting a blog, investing in search engine optimization (SEO), and using social media to reach new customers. You can run a targeted successful campaign with little to no funding and introduce your product to high-intent buyers.
Make changes when necessary
Finally, remember that you should always be prepared to make changes when necessary. If you’re not willing to adapt, then your business will likely struggle during a recession.
For example, you might need to adjust your pricing, modify your product offering, or downsize your operation. Whatever changes you make, the important thing is that you’re prepared to do what it takes to keep your business profitable during tough times.
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