In today’s trying economic times, recession is continuously looming over the country. But what to do in a recession? Basically, a recession is a significant decline in economic activity. This slump is seen across different sectors, whether manufacturing or healthcare. Although it lasts only a few months, its impact can be lasting and make a business go bankrupt. When determining the risk of recession factors such as employment, inflation-adjusted spending is taken into consideration. Elements such as depth, diffusion and duration are considered when assessing if the economy is undergoing a recession.
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How Can Businesses Combat Recession?
When considering diversification of offerings, don’t go crazy adding products to your portfolio without proper assessment. A simple rule of thumb is to add those products to your lineup that add value at a minimal cost. For example, consider adding pocket squares and ties to the product mix if you are manufacturing shirts and suits on a large scale.
Such products are usually small and won’t take up a major part of your business expenses. You should only diversify your offerings by analyzing the market and interpreting which products are trending. This is a secure way to expand your business without having to incur much risk. Diversification doesn’t only relate to products but also where you are selling them.
Platforms like Amazon and Etsy are at your disposal when expanding your sales domain. Consider the diversification of prices. You can add updated prices of different products and allow consumers to select how they want to buy them. Either through a card or a Buy Now Pay Later option.
Once you do this, there is an increased chance that consumers would buy from you instead of going to your competitors. Be smart about the strategy that you propose to prospective customers. Let’s revisit the example of shirts and suits. If you are offering them in premium and high-end quality. Consider mixing the material with polyester to reduce its final cost. This would allow you to acquire clients looking to shop on a tighter budget.
Become Well-Versed With Your Cash Flow
Another way that you can combat inflation is through the power of cash flow. Firstly, if you don’t already hire an accountant. The professional’s expertise would allow you to carefully assess your statements and make sure that they are in order. You should know your cash flow so that changes can be made to the company’s operations to help bring down the costs.
Take a look at the statements month-wise to help you understand the details and see the bigger picture. This strategy would also come in handy when forecasting the upcoming months. Assessing the statements enables you to determine your monthly spending and ensure that you don’t exceed the budget this year.
With the help of your accountant, you can determine a spending plan, which should factor in the worst-case scenario, which can either be recession or inflation. When reviewing your budget, consider your purchases over the next 18 months. So that you can review how the recession impacted your business spending.
Once assessed, you can delay acquiring high-value items such as new office space or furniture. Make sure that you don’t go overboard with cutting costs. Include room for advertising expenses in your budget.
Keep those providing you with significant returns and drop the ones deemed as ‘sunk cost’. This measure will help you save hundreds of dollars which can help reduce the final price of given products.
Customer Is King
The customer is king in any economic condition, whether recession or inflation. They can either make or break your business operations. The idea is to convert one-time customers into repeat clients. Here are some things that you may want to consider:
Who doesn’t like being rewarded? The satisfaction that a reward provides is unmatched. It is still one of the greatest tricks businesses can follow if they want to skyrocket their conversion rate. If a customer spends a certain dollar amount at your store, they should be rewarded with either free shipping or gift cards.
Spend the money and earn rewards that can be redeemed either through an online store or at its physical location. It’s a good way to keep the customers hooked and allows them to come back for more. This measure allows them to feel special and a part of something that’s bigger than themselves. It would eventually increase the number of items customers add to their shopping carts.
If someone buys an item from your store, allow them to subscribe to your services. Through such a model, customers wouldn’t need to visit your store whenever they want to buy something. They can simply have it delivered to their home.
Determine consumers’ buying habits and offer them products they are interested in. Such as, the item would reach them on the first of every month if they opted for the subscription-based model. Offer discounts to help customers opt for this model.
Who doesn’t like free samples? This mentality can be incorporated into a company’s marketing strategy. When a customer buys a product from your store, provide them with a sample of your upcoming product. This measure would help improve the frequency of sales. For example, if a client orders dog food from your website, throw in a toy as a freebie. It would increase the likelihood of customers returning to your store for more purchases.
Focus on Core Competencies
The power of diversification is important but let’s not stray from the company’s value proposition. It’s important to remember why you established your company in the first place. If you manufacture clothes, it would not be ideal to introduce a line of furniture. Be confident in your high revenue-generating products and market them.
At the day’s end, this is what’s going to bring you out from the depths of recession into an era of growth. Stick to what you know rather than experimenting in industries that you have no prior knowledge about. Use your budget wisely to promote high-performing products rather than keeping weaker ones afloat. If you have a creative gene that won’t let you rest, segment your products according to demographics.
Get Your Team Ready
Make sure that you are aware about which person is suitable for what kind of task. Delegate tasks effectively and ensure that experts in each department are being used to their full potential. If needed, don’t be afraid to downsize your operations.
You can’t keep everyone happy and manage a business simultaneously. Consider cross-training employees so that they have a diverse skill set and can handle the work of different departments. Your team should be prepared to handle the recession.
Conclusion: What To Do In a Recession
A recession is like a looming cloud over an economy. Sometimes it might rain and destroy everything in its vicinity. Economists predict that in 2023 recession would be mild to moderate when compared with data from 2022. In 2023 there would be an increase in the unemployment rate. Unemployment rate may rise from 4% to 6.5%. But in 2023, some help from the government is also expected. Businesses need to prepare themselves for a bumpy road.
Featured Image: Forbes