How to Keep Your Small Business Afloat During a Recession

We aren’t technically in a recession yet, but the signs are definitely pointing in the wrong direction. Over the holiday season, major tech companies such as Amazon, Meta, Salesforce and Twitter – cornerstones of the American stock market – collectively laid off tens of thousands of employees. That’s just the beginning. Whenever companies begin cutting back due to recession fears instead of positioning themselves for growth, it becomes something of a self-fulfilling prophecy. 

Before long, workers everywhere will find themselves either without income or settling for lower pay, and that means consumer spending is going to drop. Large corporations can almost always weather these sorts of storms – especially when they bear some of the responsibility for creating them. For small businesses, however, things aren’t quite so easy. During the last major recession that began in 2008, a reported 1.8 million small businesses closed in the United States. 

If you’re a small business owner, you have every reason to worry about whether you’re going to survive a potential recession – especially if you struggled to keep your doors open during the 2020 COVID-19 shutdowns. Surviving – and even thriving – during poor economic conditions is possible, though, but it requires having a concrete plan. It may also require you to make some significant changes in your day-to-day business practices; changing nothing and simply hoping for the best definitely isn’t the best way to weather a recession. 

So, how can you keep your small business afloat during the potential 2023 recession? These actionable tips can help. 

Find New Revenue Streams for Your Business

During a recession, your business won’t earn as much money from its core products as it normally does. We’ll talk about some potential ways to alleviate that issue, but there’s only so much that you can do if consumers simply don’t have enough money to spend. One thing that you can do, though, is find new things to sell – you can create secondary revenue streams that stabilize your income by generating new business that didn’t previously exist and by bringing new people to your store who didn’t previously shop there.

Here are a few ideas that can help you get started.

• Do you have a convenience store? Add products like Fume vapes and CBD oil to your product selection.
• Do you have a clothing boutique? Highlight products made by local jewelers and clothing designers. You might also consider selling lightly used luxury items on a consignment basis.
• Do you have a hardware store? Launch a consulting service for people who need advice about home improvement projects.

Keep Your Business in Your Customers’ Minds

Does your business have a modern point-of-sale system that collects identifying information such as email addresses and phone numbers in order to manage a loyalty program? If so, you have a golden potential marketing opportunity that you might be ignoring if you have a brick-and-mortar business without an online sales component – you can communicate with your customers even when they aren’t in your store. 

Use the contact information in your system to build a marketing list and keep your customers informed via email and/or SMS about your latest deals and product additions. Communicating with your customers wherever they are – and on their preferred devices – helps to keep your business on customers’ minds when they’re trying to determine how best to spend their money. You might assume that digital marketing is only for e-commerce businesses, but it isn’t – it can be just as effective for brick-and-mortar businesses.

If your business doesn’t have an e-commerce component, though, now is an excellent time to consider adding online sales to your website. We’ll discuss that next.

Start Selling Products Online

If your website doesn’t already have an online sales component, it’s a great idea to add one because selling online exposes your products to a virtually unlimited potential customer base. As a brick-and-mortar business, on the other hand, you can only sell to the people who live in your immediate area. Any change that increases the size of your addressable customer base can be a great thing. There’s an enormous level of competition in the world of e-commerce, but it’s well worth the effort to figure it out.

Have you avoided e-commerce up to this point because the products that you sell are difficult or impossible to ship? In that case, it can still be a good idea to add an online sales component for your local customers. People will appreciate the convenience of being able to buy at home, and they’ll like having their items ready for pickup when they arrive. Moreover, if your competitors don’t offer online purchasing, you’ll have a potential opportunity to capture some of their business.

Sell Products at More Affordable Price Points

If your business model centers primarily around luxury product sales, you’re likely to be hit particularly hard during a potential recession because people will always trim back on unnecessary spending during poor economic conditions. Given that fact, you would do well to begin looking for products that you can sell at lower price points while maintaining the same profit margin. That’s easier said than done, of course, but you shouldn’t forget that things will be just as difficult for your distributors as they will be for you during an economic downturn. There might be some room for you to renegotiate the terms of your relationship. 

In certain industries, it might also make sense to find locally made products that you can sell in your store. Buying directly from a product’s maker gives you an opportunity to obtain better financial terms for yourself by cutting out the middleman.

Become Famous with a Crazy Promotion

In truly difficult economic times, it may not be easy to keep your small business afloat even if you employ all of the traditional best practices – and in that case, it’ll be necessary for you to think a little more creatively. Having a crazy promotion can be a very effective way for you to make your business thrive even when your customers don’t have a lot of extra money to spend.

Here’s one example that might help to get your creative juices flowing. In 2022, Houston furniture seller Jim McIngvale held a promotion in which any customer who spent at least $3,000 on a new mattress would get his or her money back if the Houston Astros won the World Series. The promotion virtually guaranteed that anyone interested in an expensive new mattress would go to his store. Those customers ended up being quite happy, as the Astros actually won the World Series in 2022. That wasn’t a problem for McIngvale, though, who hedged with a large bet on the Astros that resulted in a $75 million win.