It's official. We are in a recession. If you're like most small business owners, once it was confirmed the big storm was coming, you started looking around to see what could be tossed overboard to make your ship more seaworthy and recession-proof your business.
Cost cutting is a natural response to uncertain economic times, and done properly, it can certainly help your small business stay profitable. But some of the things you're thinking of jettisoning are too valuable to lose.
Here are five business mistakes you don't want to make during a recession.
Business Mistake # 1: Laying off or firing employees.
Yes, salaries are an obvious expense, and yes, the demand for your products and/or services may be declining. But trained employees are too valuable to lose and if you fire them, there's no guarantee you'll be able to get them back when your business picks up; they may have moved elsewhere. Lay off instead of firing; cut hours instead of laying off; do everything you can to retain your pool of talented, enthusiastic workers.
Business Mistake # 2: Not actively marketing your business.
I know. It's so tempting to cut that marketing budget. But resist! In recessionary times, customers are more fickle than ever and you need to make even more of an effort than usual to capture their attention and get them interested in your products and/or services. If you don't have a marketing plan, create one. And spend as much as you can on getting the word out about your small business.
Business Mistake # 3: Changing suppliers just to save a few bucks.
If you have an established business, you have probably been using the same suppliers for a while so why throw away a relationship? Yes, you might find the supplies your small business needs somewhere else at a cheaper price. But are you comparing apples with apples? Are the supplies of the same quality? Does the supplier have the same reliability? Even if the answer to these questions is "yes", talk to your current supplier before you abandon them; they may be able to compete.
Business Mistake # 4: Slashing prices.
Slashing prices in the hopes of increasing sales volume is a no-win game. Sure, it will increase sales for a period of time. Then they'll flatten again. Then you'll have to lower your price again. Then... well, you get the picture. Discounts and sales for a reason are fine but slashing prices as a sales strategy will hurt your business’s profitability.
Business Mistake # 5: To stop providing credit.
This is not to say that you should provide credit to all and sundry or that you shouldn't be following debt collection procedures. But I'm seeing some small businesses refusing credit to long-term customers and even in some cases trying to become cash-only operations. These practices will alienate some customers and annoy others. If you make it hard for people to buy, they won't. Now or later.
Successfully steering your small business through a recession is not an easy task. But avoiding basic mistakes will make keeping your business ready to take advantage of the turnaround when it comes much easier. For more on what you can do to keep your business profitable during a recession, see How to Recession-Proof Your Business.
