People panic as soon as the word “recession” hits the airwaves— business owners, in particular. Startups tend to be tumultuous and vulnerable even during periods of stability. News of an impending recession often leads investors to batten down the hatches or withdraw from passion projects entirely.
Surviving a recession requires proactivity and planning. Here are five proactive tips for recession-proofing your startup so you can make it out the other side.
Audit Your Expenses
One of the top priorities when facing a recession is auditing your expenses to see where money is going. Now is the time to cut back and minimize costs as much as possible. Many business owners mistakenly wait until margins get too tight before making strategic cuts. Being proactive with your efforts allows you to redirect funds to an emergency savings account.
Start by evaluating your existing tools and programs and whether any alternatives are available. Take a closer look at subscriptions to determine which are necessary and which could be scaled back. Many SaaS platforms are billed based on user counts or subscribers. Now is the time to remove unengaged email subscribers and determine how many team members really need access to your tools.
As you audit your expenses, consider creating a longer-term prioritized plan. Hopefully, the initial sweep will help protect your business. However, it’s beneficial to outline what gets cut next, just in case.
Improve Your Credit Score
After auditing your expenses, it’s time to revisit your business’s credit score and debt ratio. Managing this will help protect your business if you need additional financial support to get through tough times. While you can secure bad credit loans in a pinch, improving your credit score will help you get better terms and interest rates.
Take a look at your debts and craft a proactive plan to pay them down. Consider redirecting funds from your expense audit toward your debt. If possible, explore debt consolidation and talk to different banks to determine if a better payment option is available.
Revisit Your Audience
Acquiring new customers is more expensive than retaining existing customers. Consider redirecting your acquisition efforts to customer retention and nourishing existing relationships. Your customers will also be facing challenges during the recession. Creating loyalty and understanding is more important than ever.
When in doubt, ask your customers what they need. Conduct some primary research to see what value you can bring your customers during this challenging time. Audit your marketing materials to see what content resonates and focus on what you do well.
Refine Your Product Offerings
Revisit your product offerings and determine which ones are the most indispensable to your customers. Then, consider how you can refocus your efforts to refine your product offering and highlight top sellers. It’s better to do a few things well than many things with half effort during a recession.
An alternative strategy is to re-evaluate your business and pricing model. Consider how you can make your product offering more accessible to your customers. For example, adding different monthly payment plans or financing options could make all the difference as customers mind their spending.
Invest in Your Employees
Your employees are your greatest asset during a recession. Many companies look at layoffs as a cost-saving option. Instead, start with a hiring freeze and consider how you can support your employees through coaching and skills development.
Creating a company culture focusing on employee wellness and education will help your business perform better with limited resources. Skilled employees who feel empowered to communicate feedback are more likely to share their experiences and improvement suggestions.
The looming recession is intimidating for startups and small business owners. However, with proactivity and strategic planning, you can prepare your business to survive— and even thrive— during this demanding time.
