Running a company during a recession can pose major challenges to their owners. But it also offers them an opportunity to revamp their businesses and find new avenues for success.
Here are six strategies for small-business owners who are struggling to survive in a weak economy:
Exercise your bargaining power: Recessions can take a toll on a company's cash flow. If you're having difficulty paying your suppliers, work with your vendors to create a payment plan that's more manageable. You might be able to use the economic crisis as a bargaining chip to renegotiate your contracts and get better terms.
You should also look for ways to reduce inventory to keep overhead costs down. And be sure to bill customers right away, which can help speed payments and keep cash flowing.
Focus on the profit-makers: When the economy is flying, it's easy to get sidetracked by adding ancillary products or services that might broaden your company's appeal but water down profits. Take a critical look at everything your business offers and concentrate on the efforts that will bring in the most cash. Weed out time- and labor-intensive services that are less profitable.
Explore the art of the deal: Customers still spend during recessions, but they're more cautious and sensitive to bargains. If you provide services, consider bundling some together under a lower price. Try offering reduced prices for groups. Look for underserved customers and lure them with discounts. Special prices might hurt in the short term, but attracting new clients will help you generate revenue after the economy rebounds.
Improve customer service: It's important to retain the customers you have. Show them your appreciation through discounts, special events and gifts. Take the time to talk to them. Provide them inside information about your products and services. If you do it right, they'll remember you after the economy improves.
Evaluate your rivals: A recession can become an opportunity to attract clients from your competitors. Try offering services that help you stand out in the field, such as free delivery or package deals.
Adapt and get creative: Revisit your original business plan and ask yourself if your vision is still viable in this economy. If it's not, look for ways to adapt by tapping into new markets or targeting other groups of customers. Consider taking a new marketing approach or changing the packaging of your products. Minor tweaks can create major improvements.
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