Is the United States headed toward another great recession? Are we in an economic recession already? It depends on whom you ask. For now, there are signs that the economy is still in reasonable shape, even if it’s growing slower than it did in 2021. What the coming year holds is anyone’s guess.
Recessions bring challenges but can also bring opportunities for companies that know how to seize them. So while others debate whether or not we’re in a recession, here are some business growth strategies during an economic crisis that can help you attract new customers, maintain cash flow, and grow your market share.
1. Diversify into “recession-proof” products or services
Truly recession-proof industries may not exist, but some do better than others during an economic downturn. Consider whether you can expand your products, services, customer base, or investments into:
- Health care
- Maintenance and repair services
- Discount retail
- Law enforcement
- Grocery stores
2. Take advantage of less expensive digital advertising
When a recession hits, the first thing many business leaders slash is their marketing budget, as they view marketing efforts as discretionary costs. But this can be a mistake.
A study from McGraw-Hill Research looking at how companies fared during the 1981-1982 recession found businesses that advertise aggressively had sales 256% higher than those that cut their advertising budgets. And a 2010 study published in the Harvard Business Review found that companies that didn’t cut marketing budgets during the recessions of 1980, 1990, and 2000 outperformed the competition by at least 10% in sales and profits growththree years after the recession ended.
When competitors scale back on marketing strategy, the cost of advertising drops, particularly pay-per-click and social media advertising. Seize the opportunity to buy more ads with less money, and your business will be in front of your target audience when the economic slowdown ends.
3. Negotiate lower prices or discounts from suppliers
Another business strategy to consider is reviewing contracts and negotiating with vendors.
Best practices for vendor negotiations include building a healthy give-and-take relationship. Your vendors and suppliers have sales goals, too. So part of your negotiation should include demonstrating how you can help achieve them.
For example, if you spread your purchases across several vendors to reduce costs, can you approach one vendor with an offer to consolidate purchasing in exchange for a discount?
Make your contracts mutually agreeable rather than forcing vendors to accept significantly worse terms than they would usually agree to—otherwise, you’ll breed resentment.
4. Invest in automation
Many business leaders are hesitant to invest in automation because they believe the startup costs are too high and the return on investment will be low. But automation can increase efficiency and save your business a lot of money in the long term.
Inefficient companies often find it too challenging to stay afloat during an economic downturn. However, if you can streamline and automate essential business processes, you can significantly cut your overhead, saving on costs while providing the same level of customer service.
Look at your existing processes and workflows to identify new opportunities for automation. These are processes that:
- Involve structured tasks
- Move data across multiple systems or applications
- Are highly repetitive and mundane
- Require 24/7 operation
Talk to your existing solution providers to discuss the possibilities. They may already incorporate features that can help you benefit from automation faster than your competitors.
5. Convert your “Active” Income into “Passive” Investments
A recession brings opportunities with better buy-ins and pricing with certain types of stocks, investments funds and real estate strategies to help your portfolio. If history serves us, anytime the economy is down, investing in assets, allows you to enjoy the gains when things turn back around. Utilizing strategies such as dollar-cost averaging when investing in the equities market, or converting your commercial rental payments into a downpayment for a commercial space. There are no guarantees in life, but going with prior data, provides some validity to the claim “money is made at the buy-in.”.
6 (Bonus idea). Build trust with employees
Economic uncertainty doesn’t just impact your business—it also affects your employees, who may be worried about losing their jobs. So how can you keep employee morale high during tough times?
Communication is key, so make sure your management teams have a solid internal communication strategy. Share your strategic plan and let employees know what they can do to improve customer loyalty or bring in new opportunities. Share big and small successes so people know their hard work produces tangible results.
If you do need to cut pay or benefits, be transparent. Bad news is sometimes inevitable, but proactively addressing employee concerns can prevent rumors and misinformation from spreading.
Recessions are a natural part of the economy, so whether we face one next year or sometime in the next decade, it’s always a good idea to look for new ways to save money, improve the customer experience, and enter new markets.
The key to seizing these and other opportunities is to have accurate and up-to-date financial data on which to base your decisions. If you need help staying on top of your accounting, taxes, cash flow forecasting, or payroll, book a consultation today. We’d love to talk about your company’s financials, future growth prospects, and any other important matters.