5 Ways to Recession Proof your Small Business

Everyone today is concerned about the economy and the impact that it can have on their personal finances. Home business and small business owners are particularly concerned about ways in which they can protect their business from the ravages of the recession. While you may not be able to control the economy, there are definitely steps that you can take to protect your business.

1. Analyze Expenses

As everyone knows, if a business is to succeed expenses must not exceed income. Therefore, during a recession, when income is likely to be reduced, it is more important than ever to look at ways in which you can reduce your costs. If you have not already done so, it is critical to analyze your budget and determine places where money can be saved on expenses. What expenses can you really do without right now?

It is also a good idea to analyze your inventory as well, if you carry one. Inventory is an expense and during a down economy you may not be able to carry as extensive of an inventory as you once did. The last thing that you want to have happen is to get stuck with shelves full of products that you cannot sell. The next time you place an order, keep that in mind and consider whether reducing inventory orders might help you in the future.

Along the same lines, it is important to look at ways in which cash flow can be freed up as well. Now is definitely the time to call in any favors that you might be owed. Get in contact with suppliers and try to negotiate arrangements that will allow you to extend payments. It is also a good time to begin calling in any old debts that you might have as well. Given the recent credit crunch, it can definitely be to your advantage to have as much cash on hand as possible. Doing so can help to tide you over to make payroll as well as make payments to vendors and even spend money on marketing efforts to help grow your business.

2. Provide Quality Service

Now is the time to focus on providing the very best quality customer service possible. The key here is to focus on keeping your existing customers and ensure that they remain loyal to your business. This is actually one of the best things that you can do to protect your business without spending a lot of money. When it comes right down to it, many customers will stick with a business they feel understands them and provides them with a higher level of personalized service.

3. Renegotiate Contracts

If you have a lease or contract that can soon be renewed, it could be the right time to renegotiate it in order to lower prices. You should also consider whether you need to make any cuts at this time as well based on need. For example, if you really do not need the deluxe office machine, you might consider renegotiating for a less expensive model, if it means that you can lower cost and improve your cash flow.

4. Focus your Marketing Efforts

During good times, you may have enough disposable income that you can afford to spend funds on a variety of marketing efforts, but that is not the case during a recession. Focusing your marketing efforts is particularly important for a home based business. You need to make sure that all of your marketing efforts count. If you do not already have a website, you must make sure that you get one. It is extremely difficult for any business to succeed today without a website. If you do already have a website, make sure that it is top notch. Yes, this will involve an investment, but it is one that can be well worth it because it can help your home based business to stand out in the crowd.

The key with marketing during a recession is to ensure that you get the most for the money that you do spend. A top quality website can help you to reach not only a larger audience, but a global audience. During a recession this is critical. People naturally tend to search for the best deal possible for both products and services and that means going online. To get your fair share of business, you must be visible online. In addition, if you do not already have it set up so that customers can purchase items online, now is the time to invest in an e-commerce tool so that customers can do so. This is an investment that is well worth the price and can actually pay for itself many times over in the long run.

5. Keep Pricing Steady

During a recession there is often a big temptation to immediately begin cutting prices. The thought process is that if prices are cut, it will bring in more customers and you will be able to sell more products. This is true to a degree, but it should also be kept in mind that profit margins will be slashed in the process. In addition, the brand that you have worked so hard to build will likely be diluted as well. It should also be kept in mind that once you discount your prices, customers will likely expect that same pattern to continue, even after the economy turns around.

Ultimately, you need to be careful to make sure that you do not become lured into a discounting war with competitors. If you are going to offer discounts, make sure that you only offer them to customers that are current and those that are repeat customers. This can help to generate loyalty among customers without diluting the quality of your brand.

Surviving in a recession can be a challenge for any business, but with careful thought you can recession proof your home based or small business against the difficulties of even the current economy.