The experts have declared it so: the US is officially in a recession.

Everywhere you turn, the media bombards you with negative news about the economy. These are exactly the times when you MUST remember: Your attitude about the current state of the market will guide YOUR future in the market.

If you think that your business will fail during the recession, you are setting the precedent for a self-fulfilling prophecy. But if you believe that your business will stand strong, you are far better prepared to be a competitor in a tight market. So decide to weather the storm by preparing your business for what lies ahead.

A recession can ultimately make or break your business, depending on how you handle your strategic planning and money management during these rough times. Studies show that businesses that maintained or increased marketing during past recessions saw huge sales growth in the five years following.

Is your business ready to use the next several quarters to gain greater footing over the competition? Wouldn’t it be great if you could come out of the recession steady and ready for growth? Here are some ways to position your growth and prepare your business in the current market.

Get Your Finances in Order
No matter what your current financial situation, you must perform a financial analysis. Figure out where your money comes from (your total income, not just profit) and where your money is being spent. Be sure to include EVERY PENNY so that you have accurate information.

Create a business and personal budget that you check - at the very least - on a weekly basis. If the idea of creating a budget terrifies you, don’t do it. Instead, create a business spending/saving plan.

It is crucial to know WHAT your business spends money on, HOW MUCH money it spends, and how effective those dollars are in their use. If you have no clue about how to reach these findings, you should work with someone who can help you. Every time I’ve worked with a client to create a financial plan for their family or business, they have been shocked at where some of their money goes. Once YOU know where your money is going, you can make wiser choices, thus allowing much-needed flexibility during a recession.

This may also be the time to drop your weakest sales distributors, and upgrade your sales team. There are a lot of great sales people who have been let go by companies scaling back. They are looking for jobs, so take advantage of someone else’s loss and get these talented people onto YOUR team.

Recognize the 80/20 Law
Believe the hype - it IS true that 80% of your business comes from 20% of your customers!! For this very reason, it will benefit your business to know WHAT your customer needs, and WHY they buy your products/services. This knowledge will equip you to give them more of what keeps them coming back for more.

One way to keep your loyal 20% customer pool happy during a recession is to give them more bang for their buck. Offer greater value to your customers without lowering the list price of your goods or services. Accentuate the appeal of your great quality products and services, your incredible customer service, and a full money-back guarantee. These are all added benefits for your customers to consider when staying loyal to YOUR product or service.

Some businesses may be tempted to expand their product distribution to lower-priced channels. This is not in the best interest of your business, as this is not your top 20% - where, once again - 80% of your profits come from.

A shift of this kind can weaken your brand image as well as your current relationships with higher-priced channels. It is better to keep list prices at their usual, and offer more promotional discounts, coupons and specials.

Keep in mind that there is another 80/20 rule: 80% of the results in your business are yielded by 20% of what YOU do.

So, said another way – 20% of your activities will produce 80% of your profits. So once again, maximizing that 20% is key. You should immediately begin tracking your marketing, promotions and activities to determine exactly what 20% of your workload is bringing in 80% of your profits.

It may surprise you to realize that most of your time is spent on things that do not bring your business a profit. This is when it is important to look into outsourcing.

If you don’t have to do it or don’t want to do it, but it needs to be done, definitely spend the money on someone who wants to complete your unwanted tasks efficiently and effectively. Then spend the time you saved doing more of what brings in your profits.

Spend money on what EARNS you money

So you’ve looked at your spending, and you know where your money is going. But now it is time to cut some wasteful spending, or “fluff” as I like to call it. As much as we’d like to ignore it, most of us have fluff in both our business and personal budgets.

In order to cut the fluff in our budgets, it is important to know how consumers are redefining value. During a recession, continuing market research on a routine basis will help you do just that. You will need to eliminate the fluff to concentrate your efforts on a crucial aspect of earning – MARKETING!

Here’s the rational for the importance of marketing: In general, people tend to become very home-focused during a recession. They spend more time at home, in the company of their family and friends. This affects advertising, so you may want to adapt this information for upcoming campaigns. There is a shift from quirky humor, fear appeals, adventure and extreme sports to more home/family/friends orientation.

Harvard Business School Professor John Quelch says this about how to market your business during a recession:

“This is not the time to cut advertising. It is well-documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands, and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency of advertisements by shifting from 30-second to 15-second advertisements, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact”

Flexibility

During a recession, your business will need flexibility in spending money.

It is better to rent, even if it costs a bit more, because this gives you the flexibility to cut back without any large financial damage to your business. It is better to have the cash available for your business than it is to have equipment and property that you can’t shed if you need to.

The reality is that sales may go down a bit during a recession. This does not mean that sales will stop – not even close! But ask yourself the question: Can your business survive a 10% sales drop? If not, you are playing too close to the edge, even in a good market. So develop a detailed plan that has a 10% cushion built in. Also, have a plan for what fluff to cut if you need to.

This type of pro-active planning will benefit your business once the recession ends so you should have growth plans prepared as well. This is a fun way to look beyond the current market.

Successful companies do NOT abandon marketing strategies during a recession – they simply adapt them. Be flexible - change your marketing strategies but don’t stop them. There are many alternatives or adaptations to make to your current marketing activities.

I hope that you’ve found these tips for maximizing your business efforts during a recession useful. If you have any questions or concerns, I urge you to Ask Coach Kate! by emailing kate@askcoachkate.com

 

Kate Powers is co-founder of Wild Women Entrepreneurs and CEO of Ask Coach Kate! She helps women achieve personal fulfillment and business success through discovery, goal setting and accountability. To learn more visit http://www.askcoachkate.com or to Ask Coach Kate! email her at Kate@AskCoachKate.com

This entry was posted on Tuesday, April 22nd, 2008 at 1:37 pm and is filed under Home business, business, Marketing, solopreneur, mamapreneur. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.