Grim economic forecasts can trouble new small-business owners. But veteran entrepreneurs will tell you this is not the time to give up hope. Instead, it’s time to strategize so that your business will weather the recession. During a recession it is possible for your business to survive and thrive, when you make smart decisions.
Strategy #1: Tap into recessionary trends
Used vs. New
In a recession, people often seek out used goods instead of new ones. That’s why pawnshops and consignment stores thrive during a recession, and why consumers check out the used car lot instead of the dealership in town.
Traditional storefront owners can tap into this trend in several ways. Offering second-hand goods alongside your new items may drive in new, otherwise thrifty customers. For higher-priced items, such as yard equipment and electronics, consider offering rentals along with your sales.
Repair vs. Replace
Similarly, people are looking to repair and refresh their broken or outdated items instead of merely replacing them.
Tim Kinley, an auto mechanic near High Point, North Carolina, used the recession as a springboard to success. Tim lost his job in the automotive manufacturing industry a little over a year ago. Instead of looking for new work, Kinley decided to strike out on his own, running a car repair business from his backyard garage.
“I’m slammed here. I’ve gotten more work than I could ever imagine.” Kinley said. His customers are loyal, too. “They bring their cars back for oil changes, brake repairs, just about everything. I’m booked solid for at least two weeks at a time, but people would rather wait on me and pay less, than pay more money at the car dealership.”
Kinley has no full-time employees. Two of his mechanic friends from his former job come to help him in the afternoons when they leave work for a little extra cash. His wife handles the bookkeeping, marketing, and other business details.
Traditional homebuilders have noticed this trend also. Many contractors have found success in the recession by shifting their marketing efforts to remodeling projects in absence of the new construction projects. Promoting smaller projects, such as adding on porches and remodeling bathrooms has proven successful. Many builders are also offering their expertise by the hour, completing “handyman” projects for homeowners.
Travel vs. Staying Home
Instead of spending money on travel, vacation, and personal development, people are choosing to stay put at home…or at least closer to home. For many, webinars have replaced the more traditional business conventions and seminars. They are very popular right now in almost every industry because they do not require any additional travel expenses. Any type of online course or webinar you could offer to a specific niche could mean big profits.
Other ways you might cash in while people cocoon at home:
- Offer your products for sale online. Online shopping feels thrifty because it allows people to still buy what they need (or want) while saving on gas.
- E-books are becoming a popular form of entertainment for avid readers. The market for e-books is wide and growing…almost any topic or interest can be turned into an e-book. They are also surprisingly easy to create, sell, and share online with a high return on investment.
- People still need to eat and drink no matter how bad the economy. Instead of eating out, people are cooking at home more. Gourmet cooking has become very popular, and anything that caters to this niche is hot – home brewing kits, winemaking courses, cake decorating classes, how-to books and DVDs for making your own breads and cheeses…the list goes on and on.
- Working about the house has become a popular pastime as people stay home more and vacation less. Homeowners are busying themselves with home improvement projects and DIY projects…products and services that cater to this market are seeing some growth.
Even in tough times, people still want their creature comforts. Rather than changing their spending habits and becoming thrifty, consumers are simply trading down to more affordable luxuries. Chocolate is one such affordable luxury that’s enjoying a bump in sales despite the recession. According to Time magazine, chocolate makers Hershey Corporation and Cadbury’s profits have risen steadily throughout the past two years.
How can you enjoy similar profit increases? Try changing your business model to offer stepped-down versions of full-blown luxury packages. Instead of offering the full-day spa package, offer a three-hour version at half the cost. At the beauty salon, give a complimentary paraffin treatment with a cut and color. Photographers, throw in a free bridal portrait for brides who book you for weddings. This strategy can work for almost any service-oriented business.
Strategy #2: Cut Costs… but cut the right ones
Cutting your costs can be a money saving strategy, but you must be sure that you cut the right ones. Trimming your manufacturing or administrative costs are probably your smartest bet. One study by Profit Impact of Marketing Strategy (PIMS), found that there are two areas where you should never cut costs:
- Do not cut costs that are associated with your product quality. In other words, don’t cheapen your product to save money. Customers will notice, and sales will drop.
- Do not cut your marketing costs. While it is a quick way to save cash, you’re likely to see your overall sales fall.
Strategy #3: Market more, not less
Marketing should never be considered an expense for your business. It’s an investment. Slashing your marketing efforts during a recession is like cutting off oxygen to a scuba diver – you simply won’t survive without it. An article in Adweek found that firms who choose to cut marketing costs typically see their sales fall by 20 to 30 percent in a two-year period. There’s nothing more dangerous than losing money in an already unstable economy.
Instead of cutting your marketing dollars, choose to spend them wisely. Use a mix of several different marketing techniques, and don’t put all your money in one area alone. Opt for marketing that allows you to build relationships with customers to encourage repeat business. In a tough economy, volume is important, and you want to keep your customers happy and coming back for more.