8 Ways Small & Local Businesses Can Prepare for a Recession

It’s no secret that the economic situation has been less than ideal lately—the US annual inflation rate reached a 40-year high last June. This has triggered a lot of fear-mongering, causing consumers to tighten their purse strings and businesses to start cutting costs. That being said, going into panic mode won’t help you. 

It does feel like a make-or-break moment for local and small businesses, but not all is lost because there are measures you can take to prepare your business to thrive in a volatile economic situation. 

So what can you do to ride the wave of an economic downturn and make it to the other side?

8 Ways Local Businesses Can Prepare

The first step to surviving a recession is to accept there’s an economic downturn happening and that you need to do something about it. No burying your head in the sand. The second step is to create a plan of action so you can make well-thought-out adjustments instead of quickly pushing through detrimental changes out of fear. For example, panic-firing a load of employees you still need will only ensure that you don’t have the capacity to properly serve your customers anymore. 

So, what should your plan of action include? Here are some tips. 

1. Examine Your Expenses

Cost-effectiveness is important throughout the life of a business, but even more so when operating in an economic crisis. While cutting costs to the point that you can’t run your business in a way that meets your customer’s needs isn’t advised, it is a good idea to look over your expenses. 

Is there a subscription fee you’re still paying even though you no longer use the service? Over 50% of Americans don’t know how much they’re spending on recurring payments—don’t let your business fall into this trap. Ask yourself: Is every expense justified? Are there costs that are likely to increase meaning you’ll need to rethink your budget? This is the time to know your finances inside and out. 

2. Diversify Your Customer Base

A turbulent economic situation is a great opportunity to diversify. It means you’re not putting all your eggs in one basket, creating more security for your business. Yes, continue to serve your current customer base. Just consider who else you could add to it.

Plenty of people could benefit from what you do, so think out of the box. You might consider expanding to a different industry or sector, from B2C to B2B or vice versa, from those who are able to make a big financial contribution to those who want support in a more accessible way like a subscription model and more. Create opportunities to attract more consumers to you. 

3. Re-evaluate Your Business Model

Speaking of adding a subscription option, this is a good time to review your business model. Is it working? Will it continue to work with the behavioral changes brought on by the economic situation?

For example, if you are a service provider with a high ticket offer working with clients one on one, you could increase the accessibility of what you do by adding a one-to-many on-demand product that costs less because it’s not live or personalized. There are plenty of options to consider. Affiliate marketing is rising in popularity (with a market value of $17 billion as of 2023) and bundling products together creates a good deal for penny-pinching customers. Adapt your business model to the environment we’re operating in now. 

4. Look Over Your Marketing Plan

Another core element of a successful business in tumultuous times is to optimize your marketing. After all, people can’t buy what they don’t know exists. Working on getting your business in front of the people who need it is more important now than ever.

Marketing is all about refinement. Make sure you’re tracking your metrics so you can find patterns and understand what your customers want to see from you. Experiment and interpret the results. The more you refine your marketing and your messaging, the more effective it will be. 

5. Keep Staffing in Mind

Employee salaries are some of the biggest expenses businesses have to pay. Redundancies are unfortunately a consequence of economic difficulties. But it’s a big decision that needs to be weighed up so necessary talent and capacity aren’t lost (which would hold the business back during this crucial period). 

Consider staffing with the lens of cost-effectiveness. If a staff member were to leave, how will the gap be filled? Digital tools and automation have grown in functionality massively so digital transformation can reduce workforce costs while still allowing you to meet the needs of customers. We’re a poster child of this as we streamline customer communication through our text marketing tool. It’s thought that around 60% of occupations have at least 30% of tasks that can be technically automated. Have a plan for how to reduce employee costs without losing out on capabilities. 

6. Offer Clear Payment Terms

How can you make fulfilling payments easier for your customers? The disposable income your customers have to spend will be reduced, meaning they’re going to be more aware of what and where they spend. So they will potentially have to make some difficult decisions. 

By having clear payment terms, your customers know where they stand and what they need to do to keep enjoying the benefits of your business. If you’re worried about customers defaulting, payment plans are ideal. Transparency is key in anything to do with money.

7. Keep the Customer in Mind, Always

While a recession is a scary time for everyone, especially business owners, if you keep your focus on your customers and what they need from you, you can’t go far wrong. Meet them where they’re at. Market to their problems and priorities at the moment. Give stellar customer service that makes them want to keep coming back. 

Make it as easy as possible to say yes to you. After all, creating a great customer experience can help companies grow their revenue by 10-15%. If you’re unsure of what your customers need from you right now, get a customer feedback process in place. This means you’ll be constantly checking in with your customers as we weather the economic situation. 

8. Prioritize Relationships (with Customers and Employees)

While we’re all feeling the stress of the recession, strong relationships are so important. So both your customers and employees should feel safe with you if they’re going to be loyal. Attentive customer service, “you’re speaking to me” marketing, rewards programs, and other ways to show your appreciation really matter to your customers. In fact, 69% of customers say that rewards programs are a deciding factor in trying out a new business. 

Consider ways to build a strong workforce like establishing your company culture, adding employee benefits, supporting employee wellbeing, particularly financial wellbeing, and giving them opportunities to voice their needs and concerns. Did you know that 80% of workers would choose to stay in a job with benefits over moving to a job that pays more but has no benefits? When you have a strong team of employees and a strong customer base, you will thrive. 

Expect the Unexpected: Final Thoughts

No matter how much you prepare for a recession, your plan won’t be perfect because unfortunately, there isn’t a magic crystal ball that can tell us with certainty what the economy has in store. To save the business, the best thing you can do is be prepared for any outcome. Be flexible and responsive by regularly reviewing and updating your business strategy so it’s relevant to the current environment you are operating in. 

An open mind, attentive tracking, meaningful action-taking, and focus on the people you want to serve and uplift will put you in good stead and prevent you from becoming a casualty of the recession.