The world economies are in a mess and heading for a recession. But this shouldn’t be much of a surprise if you’ve been paying any attention to the news over the past year.
The war in Ukraine, inflation, ongoing supply chain disruptions, interest rate increases, energy supplies and pricing are making it tough for consumers and small businesses alike.
So what is a small business owner to do? Well, you have two choices, play defense, and batten down the hatches or go on the offense and grab market share. So let’s explore both options.
The most natural thing to do in recessionary times is to get ready to ride out the storm. In episode #55 of the Small Business Minute titled Are you Ready? I review some things you can do to ready yourself for an economic downturn.
But when a recession does hit, playing defense means making draconian cuts in expenses because there’s a good chance your revenues will take a hit.
It means being ruthless. You need to adopt the attitude that nothing is sacred, and everything is on the block. But being internal optimists, that’s not easy for a lot of entrepreneurs. Always remember the goal during recessionary times is to survive and live to fight another day.
One big problem with any pending economic retraction is knowing how bad things may get. There have been many contractions that weren’t anywhere near the predictions and ended up being nothing more than speeds bumps.
However, there have also been many times that the reality was far worse than the forecasts. In addition, some industries were more impacted than others. The point is no one knows with any certainty which way the winds are going to blow. So, it’s better to prepare for the worst and hope for the best.
This recession is different
Unfortunately, there is one major problem facing business owners this time around – Covid! Let’s be honest, from a business owners’ perspective, Covid was not just a health issue, it was business destroyer. Its impact was far worse than any recession.
Small businesses faced unprecedented disruption, through forced shutdowns, and health and safety protocols that were extensive and expensive. This left small businesses uncertain of their future.
Because of this, entrepreneurs were forced to make decisions to cut staff and expenses in order to survive. Any owner that had a financial cushion saw most of that safety net disappear.
So, once the economies of the world started to open up, entrepreneurs have been struggling to return to profitability and normalcy. Unfortunately, because of Covid, most small businesses have nothing left to cut.
Sadly, if a recession is in the cards, thousands of small businesses will disappear as they are tapped out. One thing that you can count on is that there won`t be a government bailout.
But there is an alternative.
If you take a pause and step back for a moment, you’ll might realize that there is another approach to consider, and that is to go on the offense.
When you consider that when most small business owners hear the word recession, their knee jerk reaction is pull back on everything. As I mentioned early, it’s a legitimate strategy. Batten down the hatches and survive.
However, instead of a wholesale slash and burn across all areas of their company, taking a surgical approach might prove to be the way forward.
First off, making cuts is prudent. But instead of sweeping cuts, why not look at all non-profitable areas of your company. Got dead inventory that you’ve been hanging onto, dump it and free up your cash. Even at $.25 on the dollar, it’s better than staring at it and it puts some cash in the bank.
Next, focus only on those products and services that are profitable, period! This is not the time to launch any new initiatives. They usually require some form of investment, whether that’s human or financial to support it until such time they contribute in a meaningful way to the bottom line.
By focusing on those products or services that are already profitable frees up financial and human resources to go on the offense and start grabbing market share.
When you consider that just about everyone of your competitors will be cutting their marketing spend, this will create a vacuum in the marketplace. With them cutting back on their promotional campaigns, this forces the advertising industry to offer discounts or bonuses to make up for their shortfalls. So, this is the time to take advantage of the situation and amp up your awareness.
By increasing your marketing and sales initiatives during this period, it can drive awareness of your products and services within your target market. The key here is “your target market”.
“Going on the offense in a recession,
is like driving down a two lane highway
and getting the chance to pass
10 slower cars in one shot.”
It’s absolutely necessary to have laser like focus on your target because you’ll need to be shrewd on how you spend your money. Because your profitability will probably take hit during a recession, this may not be the best time to open new markets, but every case is different and need to be measured on its own merits. However, going deeper into those channels that you already know and understand is the smart play.
It’s also important to be aware that recessions aren’t biased. They impact most industries the same. So, you’ll need to be prepared to sharpen your pencil as you hunt for new customers, because everyone will be looking for value.
Once the economy recovers, you should be able to recover most of the margin you gave up, because you’ll have fewer competitors.
Going on the offense in a recession, is like driving down a two lane highway and getting the chance to pass 10 slower cars in one shot.
Bear in mind, this strategy take guts, but as the saying goes “To the brave goes the spoils!” But when you think about it, how risky is it? It might be less than you think. When you consider your that many of your competitors will be sitting in a corner sucking their thumbs hoping that things get better.
Fortunately, recessions don’t come around that often but when they do, you must react decisively regardless of whether you choose to play offense or defense.
A word of caution if you’re planning to play defense, be ready to protect current customers or market share. Chances are one of your competitor may be playing offense and you are on their hit list.
Get More LIFE Out of Your Business
You shouldn’t be the hardest working person in your company.
Many small business owners find that even after the struggling start-up years, they’re working too many hours and still managing every aspect of their businesses.
Greg Weatherdon has been there, done that. As an entrepreneur, he learned not only how to get a business to the point of running smoothly, but also how to reduce the number of hours he worked, delegate more responsibility to his employees, and take longer vacations while his business chugged along like a well-oiled machine. And now he is providing the secret to success.
Do you suffer from any of the following?
1. Business ownership isn’t living up to the dream.
2. Endless workdays.
3. You can’t find good people.
4. Profits are less than expected.
5. You can never take a vacation.
You’re not alone. But there is a solution. As Greg demonstrates, with some time and effort, you really can Get More Life Out Of Your Business.