Firstly let me tell you what is a small business. A small business is also known as a micro business. Basically, It is a private company or a partnership with fewer employees and less annual revenue than any other corporation or large business. For example, medical stores, grocery stores, bakeries, or any small manufacturing mills. You know not all small businesses grow to the size of large-scale businesses. They are well suited to operation on a small scale for many years, because when a recession comes they may face quite a loss if they are not well prepared.
What Is A Recession?
A recession is a remarkable decline in economic activity spread across the economy which lasts more than a month or even a year and is normally visible in real GDP, real income, employment, wholesaler- retailer, etc. mostly it is caused due to business and consumer confidence which means recession occurs mostly when a buyer’s spending is low compared to their standard of living. The one who only benefits during a recession is landlords, rent owner, property agent, etc because during a recession renting becomes the more appealing option.
How Does The Recession Affect A Small Business?
Sometimes we come to hear that recession is ongoing, and sometimes it is going to arrive.in any of these cases, you need to be ready in advance, you have to develop a strategy to tackle your recession period. because As the recession comes closer it will be much harder for you to survive in that period. Recession is a very scary word for every small business because they don’t have enough financial stability as large-sized businesses.
How Can Your Small Business Survive The Recession?
Well, you don’t need to panic, here are some points you need to take care of to survive in a recession, so let’s take a look.
Focus on your competitors– your competitor’s business is something you need to be afraid of because that is something they are better than you. It could be their service or even their product. You need to take a different path assuming that could help you in making your product better than your competitor, which could lead you to great risk but if it works then you get a great reward. You cannot spend your money on weaker products, so you need to look for great ideas for a better product.
More marketing – during the recession it is important for a business to do as much marketing to be on the top and in the mind of their customers. A recession is a very difficult situation for all buyers to spend and even sellers to sell so it is very easy to lose your business during these times. During this time you can go for online business i.e you can promote your goods and services through advertisement so everyone could be aware of it, you can send emails and notification messages to your customers about your products, you can check in with the customers whom you lost in the past and win them back with some offers, make better use of social media to reach your customers.
Maintain your cash flow – recession always affects your profit margin. So maintaining your financial flow becomes tricky. So you need to take care of your cash flow because once it gets affected it could be the end of the business.
Invest in your customer – it takes a lot of effort to gain the trust of new customers, so better take care of the existing ones, because the recession makes it harder for every customer to spend on their liking. So it’s not possible for new customers to give it a try during a recession. So you need to let your existing customer know that you care and have their back, and treat them with respect. During this difficult time if you make your relationship even better with your existing customer then it gives you lifetime loyalty.
Cash savings – half of the small businesses have issues related to cash saved for further use. We need to at least keep cash reserves up to 30% for the next six months, so when we have to face a recession we should have enough to make tough decisions. And according to a 2016 JPMorgan Chase survey of about 600,000 small businesses. “That’s definitely not enough cash to be able to survive in a big downturn,” says Jody Grunden, a certified public accountant at Summit CPA Group in Fort Wayne, Indiana.
To strengthen your business, here are Some points to remember before a recession enters your business.
- Always keep emergency funds ready.
- Finance for new equipment which could help you further
- Maintain proper cash flow and look for a proper source of income.
- Keep a strong cash reserve.
- Review your products and services on a daily basis.
- Compare yourself with your competitor.
- Monitor your new customers and even existing customers.
- Keep looking for opportunities in the market.