Business Tips from SCORE: Recession-proofing your small business
If you can determine there is going to be a recession in our future, you have a better crystal ball than most. If you are concerned about how you will weather another “disaster” after the COVID pandemic, you are not alone. The majority of small business owners, according to a June 2022 Goldman Sachs survey, fear a looming recession.
As a small business owner annual, seasonal or strategic planning should be a part of an enterprise’s normal activity so you can pivot and readjust as the economic environment in which you operate changes. Having a recession plan will allow you to navigate the variety of challenges you will face in a down-turned market. There are some fundamentals you might address.
Focus on cash. The number one reason small businesses fail is they run out of cash. It is the lifeblood of every business. First, take a hard look at your expenses: Do your suppliers have pricing options that might conserve your cash? Are there other suppliers who might offer better buying terms? Are there services or products at a lower tier (price-wise) that will serve your needs just as well? Can you consolidate any outstanding debt?
You also might check in with your budget and adapt to meet the changes impacting your business. Give yourself some wiggle room by overestimating your expenses. And, on the other side of the equation, tighten up your receivables process. Send invoices in a timely manner. If offering credit, on the 29th day reach out if payment is not in hand. Offer discounts for early payment to keep cash flowing.
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Keep marketing. Most individuals who launch a small business think that marketing is only for building awareness in the beginning. The role of marketing is to direct customers with problems for which you have solutions to come to you, keep coming to you and will tell others about you to provide them with solutions. It is even more important when the business climate tightens to assure that current clients keep the connection and new customers find you.
Make sure your marketing investments are tied to your revenue, which means a flexible budget. Explore low-cost, high-impact tools such as improving the impact and retention of visitors to your website. And, have a system of measurement to determine what is working and what is not. For years we had a one-third-page ad in a trade show industry publication. We would always ask new callers how they found out about us. When the big market downturn happened in 2008 our trade show and event marketing business looked at how we were marketing ourselves. Not enough potential customers were reaching out to us from our industry magazine ads, which were very expensive. We chose to pivot by investing in an upgrade of our website since most of our new customers were coming from, first, referrals and, second, via a web search.
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Keep customer service a high priority. The relationship with customers is in the same column of importance to a small business as cash management. Blake Morgan's studies have shown that 94% of customers that have a very good experience will recommend and purchase more than those that don’t. Know what defines a very good experience then train the staff, measure their execution and repeat those engagements as the market gets tighter.
Consistency is the basis of a very good experience. If you look at comments about local restaurants and they say, “consistently good food and service,” you know these customers are performing the maximum compliment for that business by recommending it to others.
David Troutman, co-owner of Scargo Café in Dennis advises not to forget that connecting in the post-sale period is critical to remain top of mind (TOMA) with valued customers. TOMA is what brings a customer back to the restaurant that gives consistency in their food, service and overall experience. What is the first venue that comes to mind when thinking about dining out? The restaurant that was consistent. Loyalty programs that are proactive help create TOMA. Those that provide a dining discount on one’s birthday. The one that accumulates points for meals that leads to discounts or other benefits. Or just a “thank you” note for dining with us.
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Expand your revenue streams. When you can create additional streams of income or revenue you are less impacted by the downturn in the economy. Most small businesses, especially on the Cape and Islands sell their goods and services locally. Look beyond the boundaries of our locale by considering e-commerce. Go digital. Your Cape and Islands branded merchandise might have appeal to buyers who recently vacationed but didn’t take home a sweatshirt, T-shirt or hat. Many visitors missed purchasing their Cape Cloth Bodhi Hat while visiting the Cape, but they can go online to buy one for a holiday gift after returning home. This is a good example of multiple streams that protect Cape Cloth.
Your note cards that have images of the beaches are perfect for online holiday gifts to visitors to our shores. Hartford Insurance’s Small Biz Ahead newsletter advises even plumbers can go online by providing videos on do-it-yourself fixes that are common residential plumbing issues. Videos can drive traffic to your front door.
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Lastly, take advantage of tech to streamline your business operations. Making a small business more productive is easier today with available tech tools. These tools save money and create measurement tools so owners can see issues that need addressing before they become problems. Moving from manual to digital accounting software aids in cash management, expense identification and changes that affect the bottom line.
All of these actions can be taken pre-recession to be prepared for any downturn in the market. We don’t know what lies ahead but as Winston Churchill is famous for advising, “those that fail to plan, plan to fail.” As an Eagle Scout I have never forgotten, “Be Prepared."
Contributed by Marc L. Goldberg, Certified Mentor SCORE Cape Cod & the Islands. Source: Small Biz Ahead, Hartford Insurance Co. For FREE and Confidential Mentoring visit: www.capecod.score.org, call at 508-775-4884 or email us at capecodscore@verizon.net.
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