Various surveys have pointed out a steadily approaching recession in all major global markets. Small businesses need to plan well to survive the market downtrend. People may not be aggressively buying, which will compel businesses to revisit their marketing strategies.
Do you believe that another economic downturn has knocked at the door?
Many veteran economists worldwide have penciled in a recession in 2023, but their views slightly vary on the severity and timing.
Well, recessions are part of the economic cycle, and their adverse impacts on your business can be prevented if you make necessary changes in your marketing strategies on time. It is advised to hear the sound of knocking instead of waiting for a recession to arrive in full force.
Obviously, no business ever wants to be operating amid a recession. It ruins everything positive in an economy, particularly startups and small businesses. They aren’t financially equipped to survive the challenge.
But the recession is the talking point amongst business owners and experts. This is for two specific reasons. First, the global economy suffered heavily due to COVID-19, leading to a downturn in demand. Second, the Ukraine-Russia war has had an adverse impact lately on economic parameters. Both these and other reasons can manifest fully in the form of recession setting in finally in the coming months, say experts.
What is a recession?
In the U.S., people have been talking about the impending recession for around two years. The U.S.’s NBER (National Bureau of Economic Research) is the authority to declare a recession. So the bureau has been giving hints of recession. But it is yet to be officially announced.
So, what exactly is a recession?
The NBER defines a recession as a significant reduction in economic activity. According to the bureau, “it is a significant decline in economic activity spread across the economy, lasting more than a few months. The committee’s view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another.’’
Many surveys indicate that a recession is around the corner. But no one can predict for now when it will hit hard and how long its impact will last.
The Conference Board survey finds that 41% of respondents think they’re already in an economic downturn, and businesses have taken precautionary measures to combat the recession.
According to a Bank of America survey, recession in the US, Euro Area, and the UK is inevitable. The survey predicts a recession will hit the U.S. in the first half of 2023, while the European countries might experience it later in the year during winter.
JP Morgan sees recessionary trends in developing countries. As a result, developing economies will likely fall into a mild recession in 2023.
UBS Group AG, a multinational investment bank and financial services company, also conducted a survey and found that most investors are thinking about a recession. Of 2900 high-net-worth investors and 1200 business owners, 54% showed concern over a recession.
Are there recession-proof businesses?
While recession adversely affects most businesses, some thrive in these challenging conditions. A Harvard Business Review study has found that three-quarters of public companies in the U.S. having $50 million or more in annual sales have suffered due to the downturn. But many businesses have registered revenue growth and profits.
The survey revealed that the profit-making businesses during the recessionary trend are utilities, healthcare, food, automotive repairs, and education. This is because people continue to buy these products or services. These are recession-proof industries since they cater to basic needs.
01. Have A Cash Flow Plan
Cash flow is a small business’s first and foremost concern during recessionary trends. There are several expenses a business needs to meet to run it efficiently. Therefore, ensure you take care of your cash reserves for emergencies.
You should start by evaluating your current cash balances. Then, cut all those unnecessary expenses to save money. Finally, make sure you take a deeper look at your monthly sources of cash.
Additionally, have a forecast of cash flow for the next quarter. Then ask the management and service team to follow the guidelines.
Remember that some recessions, such as due to the COVID-19 pandemic, emerge without warning signs. So, your business should be prepared to meet such an emergency with sufficient cash flow and reserves.
02. Spend Within Your Budget
One of the strictest measures to take during the recession is to cut your spending. First, list the expenditures you do not have to keep anymore. Then, you can avoid spending at least a few more months on those aspects of your business. That will help save you a good amount of cash.
You should alert your business management to operate within your limited budget. That is the way to tackle unavoidable expenses.
03. Reduce Overhead Expenditure
Overhead expenses are the ones that cannot be linked to creating products or services. Such costs are of three types – fixed, variable, and Semi-variable. Fixed overheads remain the same every month, such as rent. Variable cost fluctuates, such as the wages of some employees. Finally, semi-variables are a business’s cost that increases or decreases depending on the current situation.
Examples of overhead expenses include spending on rent, utilities, insurance, salaries, office equipment, and office supplies.
Make efforts to cut overhead costs as much as possible and wherever possible. Think of eliminating or reducing travel and entertainment spending. Cut down overhead costs on outsourcing specific works.
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04. Track Marketing Key Performance Indicators
One of the fundamentals to take care of during the recession is to have a deeper look at your marketing indicators. In addition, you should regularly track the marketing results. That will help in making the right decisions on time.
Set practical marketing goals and then monitor the results. Then, eliminate those plans that do not work in the prevailing market conditions. Next, pay attention to the strategies that work well for your business.
05. Be Ahead of Your Competitors
Every niche market is overcrowded with competitors, and you’re compelled to compete with them. You must beat them to do a roaring business. Recession harms smaller companies more than the bigger ones due to the shrinking market.
So, your small business must know more about your competitor’s marketing strategy. Then, come out with a unique plan to sell your products or services aggressively in your niche. Also, evaluate your products’ weaknesses and strengths and compare them to your competitors’ offerings.
06. Build An Emergency Fund
Establishing an emergency fund is vital to doing business in crises such as recession times. When demand slows down and your cash flow is not up to the mark, the emergency reserves will rescue your business. Such funds also will help cover your personal expenses.
Some small companies are unable to tap debt markets. They should have a cash cushion to use later for emergencies. But make sure you have put emergency funds in place for at least six months of basic costs. With this fund, you can pay employees’ salaries and meet essential expenses.
07. Negotiate Flexible Client Agreements
One of the time-tested strategies wisest marketers adopt during a crisis is renegotiating their client agreements. Negotiate flexibility to ensure faster payments for your customized offerings.
For example, tell your clients you will reward them for ordering a contracted sales volume. With such flexibility, you can retain customers and maintain goodwill.
08. Cut Inventory Size
There is not much sense in keeping an extensive inventory when the demand during the recession period is decreasing. People’s buying capacity has declined, so they cannot buy your products as before. So, cutting your inventory size of products is a wise move.
Remember that you would be spending more on maintaining and monitoring inventory. Also, as inventory turnover slows down during a recession, it becomes costly. It also becomes vulnerable to theft and damage. That results in inventory costs and demand for storage space rising.
But while downsizing inventory, make sure that you are still able to fulfill orders. Refrain from downsizing in a way that leads to impairing customer relationships.
09. Find Out Multiple Revenue Streams
The recession is also a time to find a new source of income. You need to do some out-of-box thinking on how your small business can explore new revenue streams. But it would be good to find out the new income source within your current basic infrastructure of the company.
You can establish a revenue stream without making fresh investments during difficult times. For example, if you are a B2C, selling directly to consumers, you can add a new revenue source by including business clients in your list. Start selling some kits to celebrate birthday parties if you run a bakery. You can also manufacture new products in demand using your current production facility.
10. Build Client Relationships
When the crisis looms large during a recession, it is also the time to revisit your client relationships. You should understand your clients’ changing needs in the new economic scenario. So, while you make great marketing strategies, you should also pay attention to growing your client relationship.
Remember that you do business when clients are happy with your products or services. You can preserve revenue by knowing your clients more and building solid relationships. It will also help enhance your market reach.
11. Cater To A Specific Need
One of the best ways to tackle recession is to avoid making and providing a whole range of products or services. However, that may prove too costly for some businesses when saving money and keeping a good cash flow is the need of the hour.
So, think of the niche-down option. Niching down implies that instead of producing an entire range of products or services, limit them to just one or two. So, for example, a sports goods store can focus on selling soccer only. Similarly, you can switch from being a realtor to a homebuyer consultant.
If done strategically, niching down can win you customers in a recession and help you save cash.
12. Build Strategic Partnerships
During the hard times when the recession adversely harms your company financially, think of exploring new partnerships. That is a proven way to make your products or services attractive to your customers. Your target customers also are going through similar difficult times. So, if they have access to cheaper offerings from your organization, they will undoubtedly flock to your business to buy more.
When choosing your new business partners, pick those who can enhance the value of your offerings to customers. Customers want to maintain quality and durability when looking for products. So, find partners who help provide quality products at lower prices.
13. Adopt More Accessible Technology
Since you need more financial strength to hire expensive professionals and an army of employees during a recession, find out technology that works. To deal with the crisis, test those technologies in advance.
For example, your distribution network may need some amendments for lack of budget. You can then use technology to make your distribution more efficient. Find out ways to switch to virtual distribution techniques. So, you can still run a business when hiring a delivery person is not viable.
You can also use contactless payment technology that is less costly for online orders. Your customers can buy products online using the technology from retailers.
14. Build Up Employee Skills
Employees are your organization’s significant assets. You can build your employees’ skills to deal with the recession. With a new set of skills, they can help your business cope with new challenges and stay flexible. Such employees can think creatively to come up with ideas to tackle recessionary trends.
Also, as you invest in employees’ training, they feel more connected to your business during difficult times. They are then willing to do more to make your organization profitable.
15. Have Patience
All the measures you took to deal with the recession will not yield the results overnight. It will take time to realize the fruits fully. Moreover, instead of suddenly overhauling your business, you should take one step at a time. So, you need to have patience before seeing the results of your efforts to weather an economic downturn.
You must have a long-term perspective of your business. Levelheaded crisis management will help in tackling external pressure and lower debt levels.
What are the indicators of a recession?
You can find some hints of recessionary trends early based on research data. Take a good look at data from the labor market, industrial production, incomes, and consumer and business spending.
What works best in a recession?
When facing a recession trend, finding alternative options to invest your money safely is best. You can explore consumer staples, large-cap stocks, income investments, and healthcare. Look for companies that have good cash flow, strong balance sheets, and low debt. While making a safe investment during a recession takes work. Still, these are less risky options you can try out.
What are recession-proof industries?
Some industries are not under much recession pressure. These industries include healthcare, budget travel, premium luxuries, education, consumer staples, vices, utilities, and defense.
Who benefits in a recession?
There are some people and services that benefit even during the recession period. Government policy advisers, media personalities, and consultants generally have opportunities in a downtrend market.
What are the effects of a recession on marketing?
Some companies with a smaller budget are most under the pressure of recession as they have to cut their spending on marketing. Many others have the budget but prefer to refrain from aggressively implementing a marketing strategy. Instead, they adopt a wait-and-watch policy.
What skills can save you from the recession?
While nothing much can be done to completely secure a company or individual from recessionary trends, some skills can minimize the damage. Such skills include good time management, organizational and communication skills, and technological skills. Job-seeking people can also explore more opportunities with these skills.
How can companies earn profit during a recession?
A wise combination of strategic revenue saving and excellent planning helps businesses earn profits. With these measures, even those businesses having a tiny budget can achieve their profit goals. But they need to focus on customer service more than ever.
So, these are some marketing strategies you can apply to fend off the impact of the recession. Ensure you implement each tactic carefully after considering your specific business infrastructure and conditions.
Pay attention also to your business’s visuals to drive traffic during downtrends. Your logo design, in particular, must be unique and simple to catch viewers’ eyes. Ensure your logo has the right colors, fonts, and overall aesthetic look.
Do not worry about your low budget, as you can always use a logo maker to design your logo all by yourself. The tool from Designhill will give you dozens of logo ideas based on your brief. You can pick one idea and develop that into your brand identity.
Many experts think the recession is around the corner and can hit small businesses anytime this year. They should start taking the right measure to survive during difficult times. Businesses should cut their spending and maintain a steady cash flow. They should build client relationships, adopt less costly technology, find multiple revenue streams, and negotiate flexible client agreements.