Searching the internet over halfway through 2022, investigators will find a degree of varying results. Most of them baiting users with foreboding phrases like “danger ahead”, “banks predict”, or “Is the U.S. headed into a recession?” Let’s be realistic with preparation for the potential threat of a recession, the recession may already be here. Inflation has increased the prices of nearly everything from produce to haircuts, prodding the cost of living upward like hellacious demons from the 7th circle. Fuel and shipping prices have been throttled by an intense war instigated by Russia on Ukraine, resulting in sanctions that limit availability of natural resources and fertilizer from Eurasian countries.
Among other effects, these few consequences hurt small businesses by reducing sales and profits, which intimidate the existence of capital spending, marketing, research, and credit access. Businesses who specialize in these industries need to think quickly to tread water in the coming months.
The time conspiring against the inevitable has passed, now survival through a recession should be top of mind. Thankfully, there are ways for small to midsize businesses to safeguard themselves against the negative economic growth that lurks ahead. Specifically, industries that are said to harbor recession-proof businesses like consumer staples, basic transportation, cybersecurity, and healthcare. Before getting started, it helps to know what a recession is and how the United States pulled itself out of a similar situation in 2008.
H2: What is a recession?
A basic and easy-to-understand definition of recession is the result of a country’s economy persistently declining for two quarters in a row. The question of “When will it end?” is on everyone’s mind but to some comfort, the average recession length in the United States is about 17 months. With the onslaught of COVID-19 in 2020, a temporary recession that started in February ended in just two months. To initiate the downturn, the stock market crashed and recovery was thankfully initiated in April by “relief and stimulus measures”.
A more relatable situation to present day was posed by the 2008 recession, ominously dubbed the Great Recession. This marked the single most detrimental economic dip in an array of countries, since the Great Depression choked financial systems around the world during the ten year period between 1929 and 1939.
The 2008 financial crisis started in 2007, with the U.S. housing market bubble burst. Since 2001, the reduction of prime rates (excellent rates offered by banks to “low-risk” customers for housing) allowed banks to provide irresistible mortgage rates to customers who couldn’t have previously secured a loan. This skyrocketed the demand, raising housing prices to a new level.
When those rates began to hike in 2005, demand for housing thus fell and the remaining supply became less valuable. Due to higher interest rates, subprime buyers who had adjustable-rate mortgages, a.k.a. ARMs, couldn’t manage their payments. This resulted in a society underwater, regardless of whether they were considered “prime” or “subprime”. Soaked in the tides beyond their control, homeowners were forced to foreclose, and banks continued to tighten their lending accessibility.
To shorten a longer story, the banks had their tangible assets replaced with those subprime loans which hindered their ability to keep up with the consequential defaults, which affected the lending and borrowing powers of major companies, and of course, the average Joe. This resulted in frequent bankruptcy, bailouts, and layoffs that affected an enormous number of industries. Consumers began to prepare for the worst by reducing their frivolous and essential spending, further reducing demand for travel, housing, and sustenance. These factors contributed to a lingering downfall that has already begun to rear its ugly head again.
H2: How to Make a Small to Mid-Sized Business Recession-Proof
The best way to protect businesses against a recession is to maintain a strong position prior to entering one. If the opportunity for planning has passed, there are ways to survive, and sometimes thrive within a recession. Spend some time evaluating current practices and apply frugal business practices that keep quarterly numbers in the black throughout the lifetime of the business.
- Reduce overhead costs.
- By limiting wasteful spending on things that don’t generate a positive cash flow, businesses can save on things they probably forgot they were paying for. Some examples of easy ways to save are renting an office space instead of buying, considering a WFH environment to reduce travel costs and prevent employees from getting sick, canceling software subscriptions that are no longer used, and streamline tasks by switching manual processes to digital forms.
- Raising customer service quality can make companies stand out among the competition. While this doesn’t necessarily mean hiring more experienced individuals for the job, the focus is training employees that know the process. YouTube can provide free education on a wide variety of occupations and software, so much so that these modern educational practices have been dubbed as attending “YouTube University”. Consider a chatbox functionality to your website to leverage AI to reduce customer services staffing.
- Also consider limiting the things the business can’t live without, providing a more realistic layer of coverage. For instance, companies with an in-house IT support team can save an insane amount of money by outsourcing IT services. Consider opting for co-managed IT support which allows admins to opt into specific services they require and opt out of those they don’t need as much.
- Outsource to cut costs.
- There are various areas of business that don’t need an in-house representative to maintain things all day, every day. Among those careers frequently found on Fiverr, web designers, WordPress specialists, sound engineers, and graphic artists can be implemented as pay-per-project positions moving forward.
- As mentioned above, outsourcing IT services (such as IT Help Desk Technicians and Computer Support Specialists) can save money because, typically, website maintenance can be conducted on a weekly or bi-weekly basis. In 2020, managed IT services in the U.S. paid out aroud that’s a fraction of what salaried IT jobs pay per month, according to $100 to $150 per person per month.
- Not to mention, in terms of IT, there are regulatory requirements that businesses must meet. Hiring a freelance cybersecurity expert can make sure your systems are up to snuff, and protect from security breaches that potentially cost millions. SMBs are a hot target for hackers and should take protecting themselves seriously.
- Don’t cut marketing (in fact you might want to double down on it).
- The more visibility you have during the tough times, when the timid cut their marketing budget and disappear, the more likely you are to be the source that people remember or go to when they get better. Research ways to enhance your organic SEO, which is a skill that can be learned over time, with no college education required. Again, remember YouTube University. Create video content that resonates with potential and existing clients and keep people engaged in the niche.
- Heard the saying “content is king”? There’s a reason for that. Providing useful content to readers will keep you in their minds as a reputable source. So instead of Google searching a relevant topic to your business, they’ll come straight to you to hear the word from the prize-winning horse’s mouth.
- Diversify or consolidate your offerings.
- If you are a one trick pony business but fall more into the nice-to-have category then it would be wise to diversify your offerings to fill a potential market gap or cater to a more recession-proof customer or business like healthcare, co-managed IT services, education, essential retail etc.
- For small businesses that get hit hard during recessions, like restaurants, limiting menus to customer favorites and profitable edibles will help the shop stay afloat. An odd industry suggestion, but potentially expansive one, is to partner with a YouTuber or influencer. Create a food challenge and try to spread the word via social media, they’ll often be happy with the gesture and only expect the dish free if they finish.
- Streamline your internal processes.
- This is a simple concept that can be determined by conducting an audit of your current processes. Using affordable software to track business time can help get the ball rolling. This benefits small to mid-sized businesses by using their time more effectively, and understanding which employees might be able to handle a reduced schedule. Search for products that are industry specific to learn what’s available when it comes to managing internal processes.
- No matter the industry, finding a system to automate email sends and learning all of its capabilities can be essential to saving time on manual responses and reporting. Reaching out to customers via email has become customary over the past 20 years, and it doesn’t show signs of stopping. Most companies generate up to 35% of their overall revenue from email marketing, and that’s a combo of manual and automated campaigns. Most CRMs (Customer Relationship Management software) contain an expansive offering of tools to keep customers engaged while tracking them effectively. Programs like Salesforce and HubSpot can provide insight that was never before attainable with unparalleled efficiency when compared to processing emails individually.
- Constant competitor analysis.
- Take time to learn what’s working well for businesses in the industry. Reading reviews is a great way to see what other companies in similar fields are doing well. Ask current customers if what is being reported in competitor reviews is something they’d like to see within their current subscription or plan.
- Evaluate current processes to determine if there are easy ways to provide more to current customers, even if it’s a small feature or a bug fix that prevents them from using the service more frequently.
- By taking steps to secure reviews, businesses tend to see an increase in both website traffic and visits to physical business locations, if there are any. By beating out the competition on Google, and to a lesser degree sites like Yelp and TrustPilot, companies are rewarded for top spots in search results. Coupling that with evergreen content that resonates, managing a recession becomes much easier.
- Be creative.
- What separates successful companies that have a lot of competition? Creativity. Potential and returning customers are much more attentive to interesting concepts they’ve never seen before, or words that stand out among the crowd. Try testing new social content that’s based on customer experience. Grab some insight from reviews, polls, and comments from happy customers and create content around those central ideas.
- Seeing email open and click rates drop? Try some edgy subject lines, and content that makes people care inside the inbox. It’s not always a discount that connects with people. Sure, it may bait them in but if the messaging is off, the discount doesn’t matter. Reach your target market by making them the focus of the product, and touch on how it impacts their lives, whether that’s making it easier, or taking away an insecurity. When you can make them feel something special, they’ll return to feel again.
- Don’t silo these efforts and think of new concepts alone. Teams harness the power to bounce ideas off of each other, weigh the positives and negatives, and use past experiences as frame of reference for future endeavors. Again, investigate the industry leaders who are doing it well, and who inspire thought-provoking concepts that will draw people in and keep them comfortable.
- Take a break from being an adult and try to see the world through the eyes of a child. Overthinking and focusing on being professional can limit our abilities to be colorful with messaging, in the figurative sense. Talk about the failures, laugh about things in the industry that frustrate people, send updates in a playful way, and poke fun at the establishment tastefully when possible.
Preparing for a recession can keep the lights on and a candle of hope burning through stressful situations and tight budgets. With a firmer grasp of recession survival, creating a fool-proof prevention plan in an economically apocalyptic situation will make life ultimately easier. By trying to create interesting/useful materials, strive to be unique, try new things when possible, and treat customers respectfully, one might find that the road less traveled is the key to a successful destination once the recession inevitably concludes.