The COVID-19 recession has arrived. These steps will show small businesses how to outlast the economic downturn and become strong examples of a recession-proof business model.
If the Great Recession is anything to go by, this global pandemic spells real trouble for small businesses in America. Early reports indicate that COVID-19 stands to have an even greater disproportionate effect on the small business sector.
These smaller companies are vulnerable because they are young, they have fewer team members, and they don’t have the resources to weather tough times. But this is only half of the story! In fact, these characteristics are exactly what will help a small business survive the pandemic recession.
Here’s why many entrepreneurs will survive this slowdown, along with a step-by-step breakdown of how to recession-proof a company like a crisis management pro.
Converting Weaknesses into Strengths
The global economy has suffered since COVID-19 prompted lockdowns to flatten the curve. Almost overnight, the world and business as we know it dramatically changed. Micro and small businesses everywhere immediately experienced a decrease in sales.
But this doesn’t mean that smaller businesses are destined to close—far from it.
The fact is those small companies have a unique advantage over larger companies in times of unprecedented crisis. Business owners can use these advantages to survive—and even thrive—through these moments of economic recession.
- Young companies are innovative, adaptable, and primed for change. It’s easier to add products, adjust services, and completely pivot to new markets as needed.
- Small businesses have fewer team members and can react to change faster and with less upheaval than established, bigger companies
It’s up to small business leaders to make the necessary changes to adapt and survive. The ability to quickly and effectively respond to change will keep business flowing. Here are some of the changes teams can make in light of the COVID-19 recession.
Step 1: Run a Super Lean Business
The first step to being more proactive during a global pandemic is to make the business leaner. Owners should sit down and consider their business models and how to make them more efficient, streamlined, and effective by cutting expenses.
- Create a list of necessities and extras (cut all extras)
- Eliminate nonessential expenses
- Look at costs and ask the hard questions
A large office, for example, is nice to have but can quickly become a huge drain when sales are slow during a recession. Decide to work from home or secure a smaller location to minimize losses.
Check out these cost-cutting ideas.
Step 2: Evaluate and Enhance Your Inventory
The second step is to evaluate your business inventory for improvements and changes. Inventory management includes reducing costs, seeking alternatives, and securing more affordable inventory partners. It’s also a good idea to add high-demand inventory, such as personal protective equipment (PPE).
- Find out what is most profitable and focus on selling it
- Add inventory that sells well during an economic downturn
- Reduce and refine your inventory
- Any existing stock that is slow to sell must be discounted
- Carefully review sales metrics for opportunities
The recession will offer business owners many opportunities for increased sales of specific items. Use these to enhance existing sales and better organize the ordering, storing, selling, and tracking of your current inventory levels.
Step 3: Watch the Cash Flow
Business owners should closely monitor cash flows. Those who were not that attentive to things like weekly cash flow reports in the past must seize this time to change. In order to understand how to continue creating profit, entrepreneurs must know where their money goes.
- Do not rely on past financial data for future decisions during COVID-19
- Manage inventory cash flows with care
- Build up capital reserves as much as possible
- Create meticulous weekly and monthly cash flow reports
- Monitor late-paying customers or clients
With an eye on cash flow, business owners can quickly respond to negative streams. Remember that profit does not always mean positive cash flow so measure everything and often.
Step 4: Aggressively Market Your Business
Business owners should dig their heels in and continue aggressively marketing their products or services. Expansion is key to continued growth, so don’t make the mistake of cutting the advertising and marketing budget.
- Find new ways to market to existing customers
- Try new markets and focus on real-time analytics for guidance
- Be where the competitors are (and be different or better)
- Create new COVID-19-related promotions
- Know what competitors are doing to market during COVID-19
A real recession-proof business understands that when a crisis looms, the best thing to do is increase—not decrease—marketing efforts.
Step 5: Run a 5-Star Customer Service Operation
The final step to take during this economic downturn is to channel serious effort into customer retention and service. Many companies are experiencing a decrease in sales, but this is no reason to allow customer service to fall short. The opposite is actually true!
- Give customers such excellent service they won’t go anywhere else
- Institute an outstanding loyalty program to retain existing customers
- Consistently collect feedback to understand customer sentiment
Play to the local nature of small business to keep customers happy and coming back. An entrepreneur who values their customers can only continue selling during a downturn.
It’s been a tough few months, but there is still time for small businesses to embrace change and use these five steps to adapt to a COVID-19 world.
To recap, entrepreneurs must make their businesses super lean, evaluate and enhance their inventory, and carefully monitor their business cash flows. This, combined with continuous, vigorous marketing, and superb service will help their company survive the COVID-19 recession.
Take these steps today to ensure that your small business makes it through the economic downturn this year!