• Brandon Michael Barron

Operating Your Business In Unsure Economic Climates

Business is funny sometimes. Just being in business, you never know what trends will happen that will affect your business in a positive or negative way. But that's why most business owning entrepreneurs get into business right? The exhilaration, making something successful out of nothing, the pride, and most importantly- the prospect of substantial capital gains.


Economic Pits Are Business Owners Peaks

Personally, I have been an ardent student of history because it is cyclical. The events which we’ve been taught are abnormal are in fact normal. Normal collapses, normal breakdowns, normal crises occur within most human lives.


The Great Depression was trying for most consumer product companies, but Procter and Gamble came out of the whole ordeal smelling better than it had in 1929. How did the soap giant beat the Depression? Things were tough at first when mainstay grocery customers started cutting their orders and inventories piled up. P&G apparently realized that even in a depression people would need soap, though, so they might as well buy it from Procter and Gamble.

Thus, instead of throttling down its advertising efforts to cut costs, the company actively pursued new marketing avenues, including commercial radio broadcasts. One of these tactics involved sponsoring daily radio serials aimed at homemakers, the company's core market.

The program was so successful that P&G started cranking out similar programs to support its other brands, and by 1939, the company was producing 21 of these so-called "soap operas." In 1940 the company started its own production division for soap operas, and in 1950 it made the first ongoing television soap opera, The First Hundred Years.

Microsoft – During the recession of 1973 to 1975, a Harvard dropout named Bill Gates started a small company that specialized in developing computer languages.

Fedex – Incorporated in 1971 as Federal Express, Fedex didn’t begin operations until the 1973 recession.

General Electric – Thomas Edison founded General Electric in the depression of 1873.

Hyatt – Jay Pritzker purchased the Hyatt House motel next to Los Angeles International Airport in 1957 and turned it into an upscale hotel chain, smack dab in the middle of a recession.

Why is a Recession Good For Your Business?

  • Recessions create an abundance of problems, all of which are great opportunities for startups to come into play and try to solve them.

  • Startups will have to make do with less capital than in other economic times — if one can solve a problem for cheaper, then it’s a perfect pitch because clients and people will be looking for the cheapest alternatives to most things during this time.

  • Highly-skilled and talented workers will be in greater abundance, because layoffs are more frequent during a recession (this isn’t an issue for a flexible, fast-growing startup).

  • Because things in general are cheaper (e.g. furniture, equipment, offices), overhead costs are lower than they otherwise would be.

  • As of the time of writing, there are lots of startups being formed because the economy is stronger and funding is easy to obtain. In a recession, the inverse is true — this means less people are looking to start-up a business, which means less competition.

  • Most importantly, a startup formed during a recession is designed to be efficient and low-cost from the ground up. When things get better, the subsequent increase in profit margins will reflect that.

How To Make Your Business Thrive In an Economic Slump

1. Protect Your Cash Flow

Cash flow is the lifeblood of your business; to keep your small business healthy, cash needs to continue flowing through. Now no matter how tough times get, having cash flow out of your business will never be a problem.


As long as your business exists, you will have expenses. But the harder times get, the harder it can be to keep the cash flowing in. Recession-proof your business by implementing strategies to keep the cash flow moving.


2. Manage Your Inventory Effectively and Efficiently

See what can be done to reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many of particular items? Can an item be sourced somewhere else at a better price? Is there a drop-shipping alternative that will work for you, eliminating shipping and warehousing costs?


Just because you've always ordered something from a particular supplier or done things in a particular way doesn't mean you have to keep doing them that way - especially when those other ways may save you money.


3. Focus on Your Core Competencies

Too often small business owners simplify the concept of "diversification" to "different".

Just adding other products or services to your offerings is not diversification. At best, it's a waste of time and money. Worse, it can damage your core business by taking your time and money away from what you do best and/or damaging your brand and reputation.

Drop the extras and focus on what you do best that is most profitable to recession-proof your business.


4. Develop and Implement New Strategies to Steal The Market Share.

If your small business is going to prosper in tough times, you need to continue to expand your customer/client base - and that means drawing in customers from the competition.


How can you do this? By offering something more or something different than the competition does. Research your competition and see what you can offer to entice their customers into becoming your customers.Providing better customer service is often touted as one of the easiest ways to outdistance the competition.


5. Take Care of Your Current Customers and Clients

We've all heard the old adage that a bird in the hand is worth two in the bush. The bird in the hand is your customer or client and he or she is an opportunity to make more sales without incurring the costs of finding a new customer.


Even better, he or she might be a loyal customer, giving you many more sales opportunities. If you want to recession-proof your business, you can't afford to ignore the potential profits of shifting your sales focus to include established customers.


6. Market, Market, Market

In lean times, many small businesses make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing.


Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there. So don't quit marketing. In fact, if possible, step up your marketing efforts.

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