Small businesses are among the most vital institutions within the United States economy.
58% of small business owners say they love what they’re doing and won’t give it away for anything else. However, this sector also receives the biggest blowback during the reception.
As the world tries to recover from the pandemic, we will start experiencing economic downturns left and right. Owning a business will get worse before it gets better - but it doesn’t have to get worse for you.
Here’s how you can prepare and grow your small business during a recession.
We’ll also drop a few hints on how you can protect your business with a proper commercial insurance program during the pandemic.
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Small Business Owners Fear Recession
The coronavirus pandemic has been terrible for businesses. In many countries, governments and organizations have already implemented large-scale budget decreases.
These decreases will impact enterprises more than consumers, though. Many small businesses believe a recession is coming, and many aren’t confident in their business’s financial health.
Some of the worst predictions come from small business owners in North America and Europe. These regions are likely to see the most dramatic decreases in funding. The United Kingdom and Australia also expect large drops in investment, primarily due to global supply chain issues.
While many small business owners fear recession, some don’t plan to postpone their business goals. Small business owners agree that a recession presents an opportunity for their businesses.
How To Prepare Your Business For The Recession
Business owners are busy people. Everyone thinks they’re busy, and that’s generally true. However, small business owners are especially busy.
Many small business owners run their businesses and handle all startup work. They also juggle marketing, finance, and hiring operations. They have to ensure their business stays afloat while worrying about everything else.
Working with small business owners during the pandemic has revealed how hectic their lives can be. If you own a small business, you probably don’t have time for a little more work.
We'll review some of your most pressing concerns to help your small business survive a recession.
1) Manage Your Cash Flow And Build A Reserve
Every business owner has to understand their business’s cash flow. This isn’t too difficult when you’re getting paid regularly. However, when you start planning the budget for a downturn, you need a clear picture of your cash flow.
You can’t budget if you don’t know how much money is coming in. This is easier said than done, especially for small business owners.
If you’re a small business, you probably have a limited workforce. This makes your cash on hand extremely important.
You should keep six months’ worth of cash available at all times. Suppose you have a good month, save that money on the side. If you have an unexpected expense, use that money. This will allow you to prepare yourself for unexpected costs.
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2) Make A Contingency Plan
Building your savings and your emergency fund is helpful. However, you also need to have a plan for when things go wrong. The coronavirus pandemic has cost businesses billions of dollars in lost revenue. Additionally, the pandemic itself has cost businesses.
This is especially the case with companies that operate out of large homes and commercial spaces.
Small business owners need to prepare for some of these losses. Many people canceled their travel plans and social events. This will cut into small businesses’ profits. They can’t plan for this loss but can prepare for other losses.
What happens if you lose a big client?
Will you have enough income to cover it? These are crucial questions you must answer. Unfortunately, they’re not easy to answer. This is why you need a contingency plan.
Your contingency plan should cover extreme cases like losing a big client. It’s a good idea to include all of your financial concerns. Consider all possibilities, even ones that seem unlikely.
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3) Build A Strong Network
Managing a business during the COVID-19 pandemic has highlighted how vital networking is. While you’re worrying about getting your business running again, you should continue networking with other organizations. This remains one of the best ways to expand your business.
Small business owners aren’t just worried about how many customers they have. They’re also concerned about how they can keep their existing client base.
Networking allows you to build relationships. Relationships extend past the limits of your business, giving you access to new contacts and information.
You want to be in a network that provides value to your business. Stay away from networks that only request money for their services. Another way to find a good network is by looking for groups with similar members.
This usually means looking for groups with diverse membership in today's business world. While you’re networking, you should always look for business opportunities.
You should also build your network while meeting new people.
4) Protect Your Revenue With Business Insurance
Small business owners need business insurance; unfortunately, few of them have any sort of coverage.
Approximately 44% of small businesses don’t have business insurance.
Before you go into recession, you should have a Business Owner's Policy at a minimum.
Business insurance protects your business’s physical and financial assets. It also covers any employees you have. Business insurance protects your company from an unexpected lawsuit.
However, business insurance can also help your business survive a recession. You can protect your assets with insurance, so a downturn doesn’t wipe you out. In a recession, businesses are typically forced to close their doors. You can pay for lost revenue if you’re protected by business insurance.
Business insurance should cover lost income, lost business revenue, and employee protection. Many business owners offer protection for their workers.
However, some businesses don’t provide protections for lost business revenue.
5) Focus On Customer Retention
Some of your business’s most valuable resources are your current customer base. Hardly anyone knows your business better than your existing clientele, so it’s often easier to solve their problems.
This puts more pressure on existing employees and can provide more value than hiring new employees. It’s also cheaper to retain current customers than to find new ones. There are plenty of ways small businesses can retain their customers.
Money is a massive motivator for customers. To drive customers to your business, provide them with good deals.
Many companies use coupons and promos to attract customers. When the recession hits, many businesses will include discounts on their merchandise.
6) Ramp Up Your Marketing Efforts
Marketing is a crucial part of every business. Many small businesses haven’t yet adopted digital marketing strategies, but they should. Most customers use the internet to find their needed information in the digital age.
This includes finding businesses they want to patronize. However, digital marketing isn't as daunting as it seems. Many companies use platforms like Google and WordPress.
These platforms provide business owners with the resources they need to reach customers.
There are plenty of digital marketing resources for small businesses. Social media, in particular, has huge potential for small businesses. Platforms like Twitter, Instagram, and Facebook have huge potential.
Facebook Ads are one of the best ways to promote your business. As small businesses begin to recover, they can afford digital marketing efforts.
7) Make Data-Driven Decisions
Data-driven decision-making is becoming more and more critical. Businesses must make decisions based on hard data, not emotional feelings or word-of-mouth.
However, small businesses need to gather a lot of data to make data-driven decisions. Since most small businesses don’t have a dedicated marketing department, data gathering can be hard.
Fortunately, social media analytics help small businesses understand their business. Social media platforms like Twitter provide businesses with tons of data.
By evaluating this data, small businesses can predict customer behaviors. Small businesses should talk to social media experts to understand how to use this data.
The Bottom Line
Small business owners have a lot to think about. Running a business is difficult, and the recession will make it even more difficult.
However, you can survive a recession if you prepare. It’s never easy.
However, small businesses that plan usually fare much better than those that don’t. Make the most of the time you have.
Good prep work, including protecting yourself with business insurance, can help your small business thrive under a recession.
At Rogue Risk, we believe a solid commercial insurance program provides the sustainability needed for businesses to take the necessary risks for profitable growth.
If this is the relationship you want with your insurance broker, we would love to talk to you.
- You can call or text us at 518.960.6600
- Click here to contact us via email.
I look forward to introducing you to a new way of viewing your insurance program.
- Article by Sophia Young
- Photo by Blake Wisz