Right now, small business owners all over the world are operating in one of the most difficult economic climates in a generation. The one-two punch of an already slowing global economy combined with the worldwide disruption wrought by the coronavirus (COVID-19) is leaving many of them in a precarious situation.
Some won’t survive, and others will have to make some difficult decisions in the months ahead.
That’s because those that make it are going to have to act fast to regain their footing in their market while looking for ways to cut ongoing operating costs. It’s often a difficult and painful process with no guarantee of success, where a single wrong move could spell disaster. Worse still, there’s no one-size-fits-all approach for small business owners to follow.
There are, however, some best practices that can form the basis of a smart recession response plan for a typical small business. Here are the three most important among them.
Avoid Cuts to Marketing
In most cases, business owners react to recessions by trying to decrease costs in any way possible short of layoffs. While that’s a logical way to proceed, there is one type of spending that shouldn’t be on the chopping block if at all possible – marketing spending.
There’s over a century of data that proves that the businesses who resist cuts to their marketing in times of recession or even add to their budgets tend to survive and emerge into better times in a stronger position than they started. And as much as the idea may be unpalatable for some, this means protecting marketing spending has to be a priority, even if it means payroll cuts.
After all, seeing to the survival of the business is paramount, and is the surest way to keep as many valuable employees around as possible over the long term.
Deleverage as Soon as Possible
Although the current economic crisis came swiftly, depriving most small business owners of the chance to prepare for the worst, there’s still some room to make changes that can increase a business’s survival rate. The most important among them is to take steps to deleverage the business as fast and as effectively as possible.
If this means holding asset sales or cutting prices to encourage customers to buy warehoused products, now’s the time to do it. Afterward, every spare penny of profit should go straight toward paying down debt.
Also, businesses should make every effort to refinance existing debt to take advantage of plunging interest rates. In the last recession, it was debt – not slumping sales – that caused businesses to fail. And that’s a lesson every small business owner should take to heart today.
Invest in Sales Training
When economic trouble is on the horizon, businesses tend to focus on their capital outflows as a measure of how prepared they are. That makes sense, but it ignores the fact that capital inflows are just as critical, if not more so. Much as is the case with marketing spending, this is another area where businesses should look to make targeted investments, rather than cuts.
One of the most cost-effective steps to take is to invest in additional training for sales staff. Doing so will increase sales performance, and maximize the bottom-line impacts of the business’s ongoing marketing spending. The name of the game here is efficiency. Giving salespeople the skills and tools they need to convert more leads into sales is both an offensive as well as a defensive measure.
More sales equal fewer cutbacks in other areas of the business, and investing in training will put the business in a position to come roaring out of the recession at the earliest opportunity.
Positioned to Succeed
It’s important to note that the steps outlined here aren’t an exhaustive list. Each individual business will have its own circumstances to worry about, and that means some situation-specific planning. These three areas of focus, though, are about as universal as it gets. They’re things that apply to every business in every industry, and the data and historical precedent that back them up make their utility plain to see.
So, for small business owners scrambling to help their companies survive, this is where to start. And when the storm passes, there’s a good chance that these steps will put you in a strong position going forward. All you have to do is hang in there, and better days will come.