During the 2008 recession, thousands of businesses were forced to close their doors for good. That number actually grows if you consider the employees, entrepreneurs, and other individuals who had to either find another job or file for unemployment.
With another recession possibly on the horizon, it's a safe bet to say that this can, and most likely will happen again. Doors will shut, business owners may struggle to retain their assets, and some businesses may never rebound. So how can you, as a small business owner, make sure that you don't find yourself in this predicament?
Choose the correct legal framework.
While many people want to be a startup founder or a small business owner, that doesn't mean every one of them knows how to protect a business and its assets. Becoming an LLC or S-Corp doesn't automatically remove your risk. Keeping insufficient insurance for your business can be a disaster, opening you up to issues if the legal framework of your business isn't optimal.
Before you do anything else to recession-proof your business, focus on making sure your business is built on the best legal foundation possible. Consulting with a lawyer, accountant, adviser, and trusted bank are essential in keeping your business assets secure and airtight.
Pay off debts (both personal and business).
Paying off debts isn't just for those looking to improve their personal finances. It's equally important for small business owners who want to see more profit than loss. Debt hanging over your head is never a good idea, even if you think your business can handle it. While debt doesn't necessarily predict a business's failure, carrying debt longer than you have to isn't a good business practice.
As an entrepreneur, stressing about personal debt can cause you to make rash business decisions, or at the worst, "borrow" from your business. You're supposed to invest in your business, not take from it. And during economic troubles, businesses with less debt are more likely to thrive than those struggling with it.
Securing collaborations are essential to small business owners. While many large corporations may not even feel the sting of a recession, a small business can quickly go underwater if it's competing against the business in its niche. To protect your company, secure partnerships with other companies that relate to your business but aren't in the exact same niche as you.
For example, a wedding planning company with connections in the floral, hospitality, and event planning industries that don't take on wedding clients is more likely to thrive versus the wedding planning company that doesn't have those connections.
Capitalize on current customers.
While it's important to continue to grow your customer base, keeping current customers satisfied can keep your business in the black. The major issue with trying to attract new customers is that you have to spend time, money, and effort marketing to them, building their trust and pitching to them. All of that attention may not even pay off if new customers are looking to save money during a recession, so focusing on existing, loyal customers is the smartest move. It helps you save money, continue to provide value, and increase profits.
Be both broad and niche.
While you should have a specialty to market to your ideal customer, being too specialized can hinder your business when the next recession hits. Instead, focus on offering value to your customers, being a bit different in your industry (but not too left field), and being broad enough that you can make changes and tweaks as needed to expand your customer base.
Be budget conscious.
Even without debt, a business can struggle during a recession if it isn't budget conscious. Keep a close eye on inventory, staff, finances and spending. Be ready to change course or make necessary cuts.
Along with watching what you spend, invest wisely. Avoid too many spontaneous purchases. Do your research, survey your market, and consider alternative options before investing in something. While you will need to invest continuously in order to keep growing, investing in the wrong items is a waste of money for a startup. That money could be better spent elsewhere.
Don't stop marketing.
Satisfying current customers is highly important for keeping your business alive, but that doesn't mean you should stop marketing altogether. It doesn't have to break your budget. Social media and websites provide an effective platform for small business owners to market without spending too much.
Social media is free. Options like Facebook ads and email marketing are low cost compared to a TV commercial. Staying in the public eye is essential to enduring a recession. If potential customers don't know you exist, they can't use your products or services. So, utilize inexpensive options if you have to, but don't stop marketing.