The UK has been suffering from the effects of the 2008 recession ever since a credit crunch was first mentioned in the media, and the country is only starting to see real news of recovery in recent months. However, some experts argue that in 2011 the UK is likely to re-enter a recession. There are ways for small business owners to help their companies to survive economic downturns.
Manage your money
It is harder to raise money during a recession as banks become more reluctant to lend. On a similar note, banks are more likely to pursue you for late payments, and bigger firms may request price cuts from smaller suppliers, or make later payments.
To find out if you are likely to need to raise any funds, check your finances. Ensure that you do not have any long-overdue payments owed to you and that you have enough cash to cover what you owe. Always ensure that you are paid on time in order to keep your cash flow healthy.
See if you can make any savings – perhaps you have too many staff. Rather than making staff redundant, however, you could ask them to reduce their hours. Alternatively, if you need to hire new talent, you could try to hire them on short-term contracts. You could also try to renegotiate contracts with your suppliers to make savings.
Some companies have found that they can save money by going green. An example of this is Ikea. The company introduced energy-saving lightbulbs across all their shops, reduced their packaging and restructured the way in which they delivered items to people’s homes – by reducing packaging, they could fit more items into each delivery van. Ikea then assessed the routes taken by drivers to ensure they took the shortest routes to save on petrol.
You could also try travelling less – for example, use conference calling or video conferencing wherever possible rather than travelling to meetings, or hold meetings at your premises instead of hiring a venue.
Change your marketing methods
Too often, small businesses make the mistake of stopping their marketing activities, thinking it will save them money. As marketing is the main avenue to getting your company’s name out there, it would be unwise to cease your activities – however, there are ways to market on a budget.
Spend more time with your customers in order to find out what they want, and what you can do to encourage them to return to you. Try to sell more to your existing customer base – it is always cheaper to retain your current customers than it is to find new ones.
You could cut prices, but you may find it more worthwhile to make your product or service more appealing to customers. Add value to the product or service – e.g. offer a discount the next time a buyer purchases from you. This means that you sell at least one product at full-price and do not have to cut the price unless the customer returns to you.
Check our article, Low-cost marketing for small businesses, for further ideas on how to save money from your marketing budget.
It’s always a good idea to keep an eye on your competitors’ activities, especially during an economic downturn. You should always aim to compete on both service and quality. A competitive advantage is even more important during difficult times as this may be what helps your business to survive.
You could always aim to work with other small businesses in order to save money. Recently, Groupon has become very popular with consumers – it is a site that allows consumers to group together to purchase items at special prices. Businesses are now able to do the same – one such service is Huddlebuy.
Recessions will usually change consumer spending habits, so you may want to plan for this. You could launch new, lower-cost or more efficient products and services, or rebrand your business to ensure customers associate your company with both value and quality. You could also consider diversifying into a new market to ensure that your business is not relying on one sector – according to research by Aviva, 56 percent of UK SMEs were diversifying in order to survive the recession.