CEO & Founder of National Business Capital, the leading FinTech marketplace offering streamlined small business loans.
During a recession, entrepreneurs often focus on just treading water–they put any business growth plans on hold while they wait to see what happens with the economy. However, according to MarketWatch data, that may not be the best strategy.
Over half of all Fortune 500 companies, like General Motors, CNN and Hyatt, were started during a recession or bear market. Considering that recessions introduce unique opportunities for business owners, it’s possible that their timing contributed to their success.
There’s less competition during a recession, and you’ll have access to top talent. Since recessions are known to disrupt consumer trends, it can be a great time to introduce products and services that solve problems in a new way.
How To Grow Your Business During A Recession
It’s not easy, but there are many advantages to starting or growing your business during an economic downturn. Still, you want to make sure you go into it with the right strategies in place–here are four ways to grow your business during a recession.
1. Focus on customer retention.
Every business owner knows they should focus on customer retention, but most people don’t think of it as a growth strategy.
As this HubSpot article demonstrates, even “a 5% increase in customer retention can increase company revenue by 25-95%,” so it’s critical to your bottom line.
Before you can improve customer retention, you need to know your churn rate. This is the rate at which customers stop doing business with you over a period of time. Once you know your churn rate, you can come up with a plan to improve it.
One way to improve customer retention is by implementing customer relationship management (CRM) software. CRM software will help you discover customer buying patterns and see how your customers are engaging with your business. It can also alert you to changes in customer behavior that indicates you may be close to losing them, putting you ahead of the curve.
2. Introduce new products and services.
During an economic downturn, customers are going to be more hesitant to part with their money. If you don’t have a strong value proposition, it’s going to be harder to get them to do business with you.
One way to do this is by introducing new products or services into the market. Recessions are economic disruptors, so you have the opportunity to capitalize on changing buying trends.
Begin focusing on research and development in addition to your ongoing business operations. This will help you identify new opportunities and ways to diversify your income. You may even uncover ways to break into an entirely new market.
3. Continue marketing.
When finances get tight, marketing is often one of the first expenses businesses cut back on, but this is often a mistake. Consistent marketing is necessary if you want to grow your business, and by eliminating it, your business could end up in a worse financial position when the recession ends.
Instead of cutting out marketing altogether, focus on pivoting your strategy. Start by identifying customer spending trends and how they’re affecting your industry. If you notice that customers are cutting back spending in one area while increasing it in another, you can reposition your business to align with consumer trends.
Brand marketing is an inexpensive and effective way to continue marketing your business. Through social media and email marketing, it allows you to continue building a relationship with customers and prospects.
Most importantly, focus on your long-term vision for your business and how you’ll measure success. Recessions in the U.S. only last for an average of 17 months, so where do you want to be once it ends?
4. Consider taking out financing.
Most businesses try to hold onto as much cash as possible during a recession, making it harder to invest in marketing or developing new products and services. That’s why it may be worthwhile to consider applying for financing. A small-business loan or line of credit can help you access the funds you need without dipping into your cash reserves.
Loan interest rates tend to go down during a recession since the Federal Reserve will lower rates in an attempt to stimulate the economy. Still, economic uncertainty often causes lenders to become more cautious and raise their lending standards.
If you’re having a hard time qualifying for a small-business loan, you might consider applying with a nonbanking lender. Many online lenders have an easy application process and lower credit requirements and can provide fast funding.
The Bottom Line
A recession doesn’t automatically mean you need to put your business goals on the back burner. By implementing the strategies outlined in this article, you can be better positioned to come out of the recession stronger than ever.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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