According to the National Bureau of Economic Research (NBER), there have been 14 economic downturns in the United States since the Great Depression, which started in 1929 and was unabated till the end of the 1930s. On average, an economic downturn comes after every 6-7 years. However, the important thing to note is that not all economic downturns are the same.
Most of the economic downturns in U.S. history have been short-lived and the Covid downturn was the shortest one since it lasted for just two months. However, it was by far the deepest wherein the real GDP tanked by 31.2% and unemployment peaked at 14.7% in the second quarter of 2020. At times, the economic downturn lasts longer than usual, like the Great Recession of 2008, which occurred from late 2007 to mid-2009, making it the longest one since World War II. During this period, the S&P 500 Index crashed massively by 57% from October 2007 to June 2009 and unemployment reached 10% in October 2009.
The Great Recession of 2008 (housing market bubble) which triggered a worldwide financial crisis left many business owners feeling infuriated, defeated, and overwhelmed. Now once again the economy is showing signs of another downturn with the escalating tensions between Russia and Ukraine, the Fed’s aggressive interest rate hikes in the last few months to fight back against the 40-year high US inflation, and other broader economic uncertainties. This slightest hint of another economic downturn is enough to give jitters to business owners. In fact, 93% of small business owners are worried about the US economy witnessing an economic downturn in the next 12 months. Although nobody can exactly predict when the economic downturn will strike however, being prepared in advance can actually soften the blow. Listed below are some strategies to insulate your business and make it more resilient to economic shocks. Let’s dig deeper into it.
4 Foolproof Ways to Future-Proof Your Business When the Economy Goes South
1. Create a Healthy Cash Flow Plan
Did you know? 82% of businesses end up failing due to cash flow mismanagement. Therefore, it becomes critical for business owners to manage their cash flow, particularly during a period of crisis. One of the easiest ways to protect a business’ cash flow is tightening the trade receivables process. Start by sending invoices to clients at the completion of each milestone of the project rather than sending out all invoices in one single day. Also, regularly monitor pending payments of clients to send them reminders sooner than later. Businesses may also consider offering early payment discounts to reward quick payments from their clients.
2. Upskill Employees
Layoffs are common in economic downturns, particularly in the cyclical sectors. It is essential to recognize the value of exemplary employees and not to overlook them at any cost. During recessionary times, businesses need a reliable team of experts that can help them think creatively, pivot quickly, and stay flexible. To achieve the same, enterprises need to invest in their workforce by building up their skills and cross-training staff to meet unexpected needs. Onboarding and training new employees can cost dearly to enterprises. On the other hand, upskilling the existing workforce can help businesses go a long way when the economy goes south.
3. Invest in Marketing
Marketing is crucial for the growth and success of a business. When the economy takes a downturn, the first thing that many business owners do is that they cut their marketing budgets. Having said that, investing in strategic promotions can help businesses acquire new customers and weather the storm during times of uncertainty. Listed below are some ways to make the most of the marketing efforts without spending a fortune:
- Explore Cost-Effective Marketing AvenuesBusinesses can grow their customer base by leveraging social media networks, partnering with niche influencers, creating high-quality press releases, repurposing and amplifying existing content, motivating user engagement, hosting webinars, building a brand community, and much more.
- Monitor and Analyze TrafficAnother powerful way to make the most of your marketing efforts is keeping a close eye on both Analytics and Search Console. Using these free tools, businesses can monitor and analyze their current marketing strategy and make necessary changes if required. At times, making minor changes to the website content or tweaking social media strategy can drive an influx of customers.
- Track Marketing ROITracking the returns on every dollar businesses spend in marketing allows them to stay focussed on marketing efforts and get more bang for their buck.
4. Capitalize on the Existing Customer Base
During an economic downturn, businesses often look for opportunities to attract new customers by offering discounts and special offers. Instead of spending an enormous sum of money in attracting new customers, businesses can capitalize on their existing customers and improve their relationships with them. The reason behind this is that existing customers are already familiar with the businesses they partnered with and trust them for a reason. Also, it’s much easier and considerably cheaper to upsell and cross-sell products or services to existing customers than to new customers. Listed below are some proven ways to nurture the relationship with existing customers:
- Create a Loyalty ProgramOne of the easiest ways to reward existing customers and encourage them to come back again is to create a loyalty program for them. A point-based reward program could be helpful in driving sales through your repeat customers.
- Focus on Improving Customer ServiceWord-of-mouth marketing is accountable for $6 trillion of annual consumer spending, amounting to 13% of consumer sales. In other words, 90% of people are likely to trust a brand recommended to them, even if it comes from a stranger. This simply means that offering exceptional services can not only help businesses get repeat clients, but happy customers often act as brand advocates since they share their personal experience with other prospective customers, resulting in increased sales at a much lower cost.
The fear of an economic downturn is looming globally. By the time business leaders or decision-makers come to know that the economy is cooling, they are left with no other options than reducing costs. Therefore, it is high time to set up your business for success with the future-proof strategies aforementioned in this ultimate guide. Consider these foolproof tips to weather any storm and stay resilient during an economic slowdown.