10 Ways to Strengthen your Business in an Economic Downturn

(originally written August 2009)

The improving economy is on everyone’s minds lately, and there’s been substantial evidence in recent months that things really are starting to grow again, as the stock market has gained more than 50% from its lows in March earlier this year. Yet, just because that sector has seen gains does not mean that things are all rosy again. Unemployment is likely to remain high for the next few years, and the people in our communities who most need to credit in order to begin rebuilding their lives following job loss or home foreclosure are least likely to be able to get it. It’s not all doom and gloom though. There are opportunities for those in business who wish to make the difficult decisions to strengthen now where they can.

The immediate challenge for small- to medium-sized businesses in a down economy is how to attract new clients while at the same time maintaining old clients. You may be in a position of having customers reach the end of their contracts and not be opting to renew. This means, obviously, that you are facing a revenue shortfall, while at the same time possibly having difficulty enticing new clients to sign on.

Working alongside this is the fact that people are becoming more price conscious. Clients and potential clients want more for less. They are stretching an already thin budget even further, and being extremely reluctant to sign contracts, even though deep down, they likely know that hiring a professional, whether it be for web design, marketing, or whatever, would be in their best interest.

How should you position your business over the next few years, given what is likely to continue to be a very difficult financial environment for many people? Here are 10 ways to strengthen your business despite the economic downturn:

1. Contact Your Clients

Check in on each one with a phone call. If they are local, offer to take them to lunch or coffee. Find out what their needs and concerns are. They may have a need that you are not anticipating, or concerns that you hadn’t thought of.

Don’t feel worried that hearing from you may be the trigger that they’ve been waiting for to drop you. If a client is going to drop you from the job, and they’re really serious about dropping you, then a phone call from you isn’t the reason why. They’re going to drop you anyway, and if you get them on the phone and can begin to understand the reasons behind their decision, you are in a position to actually change their minds.

Call your past clients, don’t email or send a letter. Make some real-time contact. Ask them how their business has changed over the past few months and ask them what they might need help with that you are in a position to provide. Reinforce that your business is stable and you’ll be there for them, whenever they need someone.

2. Reinforce Your Value

For most small- to medium-sized businesses, when they have a need that their in-house staff can’t meet, they are unlikely to hire a new employee for that position. Most businesses will understand that they don’t need to employ someone for every possible job and are quite comfortable outsourcing when the need arises.

This puts you in the position of being valuable. They don’t need to pay for insurance, benefits, training or ongoing costs to hire you. Remind your clients that your services are valuable and can save them money in the long run.

3. Look at Your Pricing

As mentioned above, now is the time that contracts may be dropping off with no renewals and few new clients to replace them with. If you feel that this is happening, it’s a good idea to consider a restructure of your pricing plans. You don’t want to slash your prices to the lowest on the block, but you do want to make sure that your pricing is competitive. The clients that are looking for the cheapest option probably aren’t going to recognize the value of your work and what they’re paying for, so those likely aren’t the clients that you want anyway. You just want to reach that sweet point where you are attracting clients and still making money.

4. Consider Expanding

It may seem counter-intuitive to suggest this right now, but a downturn is an excellent time to consider an acquisition or expansion. For people with excellent credit, loans are available.

Expanding might also mean expanding your staff. Due to extreme job cuts in nearly every sector and industry, many highly qualified people are out of work, or looking for something more stable. Hiring a talented person, even if it is just part-time at first, can give your business new focus and life. Failing that, see where you can cross-train the employees you already have. Asking a new person to do a job can reveal sticking points that the person who does the job on a regular basis has either become used to or has never figured out how to deal with.

5. Choose The Right Add-On Services

Offering clients extra services can be a great way to earn trust and repeat business in times of economic growth, but it is especially true now.

However, make sure that you add on services that you know you can provide, that you can do well with your same attention to detail, and can complete promptly. Don’t offer any work that you aren’t 100% confident that you can provide. It’s OK to agree to do jobs that you normally wouldn’t do, but outsource them if they’re not your strong point.

6. Enhance Your Marketing

Many of your competitors have halted or drastically cut back on their advertising, so if you jump in there, you’ll be poised to reap the business they are losing out on.

Avoid trying to capitalize on “the recession” in your marketing. It has a negative connotation that can actually backfire, if it reminds your potential clients too strongly that they have less to work with. Also, if you don’t change your ad campaign fast enough when things start to improve, your message will seam fearful and dated.

The factors that drive people to buy goods and services are always the same, regardless of the economic situation: reputation, service, and price. Offer those things and position yourself to be there for them when they are ready to make that decision to hire you. Then follow through.

7. Go After Bigger, More Stable Clients

Smaller businesses that were struggling financially before the downturn will be the first ones to collapse when the economy is depressed as it is now. In order to keep your own head above water, don’t pursue the smallest fish in the pond. Go after the larger, more stable companies that still have weight to throw around and money to spend.

8. Form Alliances and Networks

When people have less money to spend and really want to be sure of their decisions, word of mouth recommendations become even more important than they usually are. Take advantage of local opportunities for networking that you may have shunned earlier. Get your name out as a valuable resource by calling other companies and seeing if there is any way that you can help them out. You may be able to teach their employees Flash skills; they in turn may be able to teach you SEO skills.

Also, join or start a peer-to-peer business group (such as Young Professionals Network, or Business Leaders Exchange) to elicit candid feedback and alternatives on what you are doing and what other businesses are doing to remain strong.

9. Reduce Your Overhead

Any expense that isn’t absolutely related to your business management should be cut. Where you can, identify items that you can recycle or reuse rather than buying new, such as printer cartridges. Dollars add up, here, there and everywhere.

10. Focus On Staff

It’s likely that your bottom line is hurting just as much as everyone else’s is. You probably can’t promise all of your employees big raises or better benefits, but your staff needs to know that you still value them. Your staff is the backbone of your business. Keeping them happy keeps them loyal to you and ensures that they will remain strong workers, working for you, not against you. Reduce your staff numbers only if you believe your business is in serious trouble and that is the only way you can survive.

Reassure your staff and contractors that you are doing everything possible, including the steps outlined above, to keep your business strong. Talk to them and find out what they need. Perhaps some would appreciate more flexible hours, or the opportunity to take classes to keep their skills current.

Maybe you are the only “staff” your business has. In that case, take care of yourself. Don’t go into “panic mode.” Realize that things will change, and new opportunities arise where moments ago there wasn’t one in sight.

Summary

The above steps are only 10 ways in which to keep your business strong when things are looking bad. Depending on your specific circumstances, there are other options you have. Take advantage of the business resources that are in your community that you might not be aware of. Cities and governments want to keep businesses strong and growing, and they are there to help.

The most important thing that you can do in this difficult time is to assess the state of your business and see where your processes, pricing, goods and services can be improved. It may mean learning to do more with less as many people are having to do, but when things pick up again, your business will be lean and mean and ready to take action.

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