You don’t need to see the figures again – it’s now common knowledge that the UK economy is in very bad shape. Record-high inflation rates mean virtually every business cost has shot up, putting entrepreneurs on the back foot when it comes to growth.
Despite the recent challenges of COVID-19, the latest economic pressures will feel unprecedented to many business owners. For some, however, it’s a familiar crisis. After all, we’re only fourteen years after the last financial catastrophe, and the UK is again teetering on the cliff edge of another recession.
Then, as now, business owners across the country wondered how they could budget through the challenges ahead. Of course, most survived, and some even flourished, giving them the knowledge of how to make the next crisis a little easier to navigate.
So, what learnings can SMEs take from their 2008 counterparts? We spoke to multiple business owners who navigated their way through the last recession, seeking their top tips on how to survive an economic downturn – as well as the mistakes to avoid.
Resist the urge to forget about growth
To quote from Top Gun, it’s not the plane that sticks the landing, it’s the pilot. Whether or not your business can outlive a recession really depends on the direction you guide it in.
Often, business owners will divert their flight path away from scaling up. This is why the first department to have its budget cut by small businesses in a crisis is typically marketing.
The urge to cut marketing costs is understandable – promoting your business might feel counterintuitive during a period of stagnation. But, continuing to market your brand is actually a smart choice that can bring plenty of reward.
Invest as rivals scale back
If your business is experiencing difficulties, then it’s the hard truth that so will others in your industry. Our expert commentators suggest concentrating on strategic brand-building decisions designed to speed past nervous rivals and emerge triumphant in your sector.
Charlotte Nichols is the Managing Director at pay-as-you-go PR service company, Pay-as-Hugo. For Charlotte, marketing and PR investment was the key that helped unlock her business’s growth potential when she first launched the firm in 2009.
“We did as much marketing for ourselves as possible,” she recalls. “[Recessions are] the perfect opportunity to gain market share, as many of your competitors will cut back on their spend or completely stop PR activity altogether.
“It’s hard, but you have to hold your nerve and see it as an opportunity. Your money will go so much further during this time due to there being less competition in the marketplace.”
Marketing is also necessary to recession-proof your brand. Mckinsey’s analysis of the most-innovative companies in 2009 found that they tended to emerge from the financial crisis stronger, outperforming the market average by more than 30%.
Market your offering around emerging trends
During the 2008 financial crisis, Nichols recalls spotting a market opportunity as users sought flexible PR, social media and content marketing services.
“The economic uncertainty meant that many small businesses and solopreneurs were – understandably – reluctant to commit to longer term contracts,” she says. “Our fixed-fee, contract free model offered a solution for firms who were concerned about the future.”
Nichols tells us that publicising this specific USP to customers is what helped the organisation to grow during a slowdown.
“It’s easy to get bogged down by all the recession doom and gloom and start using it as an excuse. You can really talk yourself into it,” says Nichols. “I also rise to the challenge and see [the impending recession] as an opportunity to gain market share on my competitors.”
Stay on top of market trends – and act on your learnings
Analysis of Companies House data reveals that more than 402,000 businesses were registered in the UK between January and June 2022, an increase of 18% from 2021.
Such statistics naturally garner scepticism with today’s bleak economic outlook. Will this impressive growth be sustainable as inflation continues to batter business bank accounts?
The answer depends on how well your business offering aligns with what the market is looking for. Yes, consumers will want cheaper products and services. But, there are also behavioural shifts to cater for, such as people spending more time at home and online.
When Adam Taylor lost his job at Lehman brothers in 2008 as a result of the crash, he began brain-storming for business ideas that would be more durable in the unstable economy. Having moved back into the family home, he noticed there was no subscription service available for dog and cat food.
To Taylor, this seemed “bizarre”. Repeat purchases are more popular during recessions, as customers look for cheaper ways to source products. At the time, subscription services like Spotify and Netflix were also becoming increasingly prominent.
Adam Taylor, CEO and co-founder of Petshop.co.uk
“That’s when the penny dropped,” Taylor explains. His pet food marketplace PetShop.co.uk was born, launching the ingenious Bottomless Bowl, the firm’s first dog and cat food subscription service.
Understanding the shifting directions of your customer needs requires you to really dig into your desired market. Record their size, their inefficiencies, and the opportunities for wins – you can even use a competitor analysis template to stay ahead of rivals.
Certainly, this is a time investment. Still, the objective of improved customer satisfaction has countless benefits. Not least, to provide a service that your audience cannot afford to lose – when today’s consumers are already cutting back on spending.
“Remaining customer obsessed is paramount to business,” confirms Taylor. “We work closely with [our third-party suppliers] to offer customer promotions, and money saving tips.”
Let the right tech support your insights
Here is where technology becomes indispensable. According to Taylor, switching to a cloud-based management system like customer relationship management (CRM) helped Petshop.co.uk to store customers' preferences and personalise offers.
From this, they launched the UK’s first SMS reorder subscription service for dog and cat food. This was a major service upgrade that was perfectly-designed to meet customer demand, without costing the business a bomb.
“We couldn’t compete on price with the bigger players in the pet food market, but we did see the huge growth opportunities that innovation afforded,” Taylor explains.
Complete a financial audit and be honest about the findings
When the market is on the up and things are going well, it can be easier to spot the underlying issues that might exist within your business. When SMEs are forced to be thriftier and look for ways to save money, wastage areas become more obvious.
Being able to conduct a thorough cost-analysis gives firms a rare opportunity to take proactive and calculated steps to conserve cash flow.
Undoubtedly, the ability to do this now will be a critical success factor for UK businesses over the next year.
Victoria Tomlinson is the CEO and Founder of career advice service Next-Up. Having founded the business in 1989 (then known as Northern Lights), Tomlinson’s entrepreneurship helped the business to survive both the financial crash of 2009, and a recession in the early 1990s.
Tomlinson puts it simply. In order to survive a downturn, she reports that “cash and data are key, as are quick decisions.”
“Most businesses get 80% of their profit from 20% of clients or customers,” Tomlinson tells Startups. “Find out who these key customers are, [if] they are planning to make cuts, and if you are in those cuts. Don’t wait to be told.”
Hosting these conversations, rather than attending them, might seem like one and the same. But Tomlinson stresses that businesses should lead discussions in order to uncover the problems, “before you hit them.”
Similarly, she recommends keeping your bank clearly in the picture over the next year – even if you’re not in financial trouble currently.
“In a recession, banks and investors want their investees to survive,” says Tomlinson. “Make them a partner of the business, involve them, and be honest with everyone, including employees. If they know the figures, they can help you find solutions and cut back.”
Remember that after the fall comes the recovery
Each of the business owners we spoke to said that one of the most important ingredients for surviving a recession is an encouraging mindset.
As we’ve highlighted above, there are still opportunities available for growth in a recession. SMEs should avoid falling into the trap of thinking it’s all doom-and-gloom.
Ann Juliano is founder of Muse Finance, a small business cash flow forecasting app. Juliano, who has over twenty years’ experience in the financial sector, remembers from 2008 “the days of uncertainty and then panic as very quickly, trading floors disappeared and people everywhere were finding themselves without a job overnight.”
For Juliano, the experience was a big wake-up call – but not in the way you might expect.
“Pressure and a challenge are always where you have the luxury to see how people can really be incredible and great”, she says. “The number of business professionals that worked outside of the organisation that provided help and support was incredible and touching.”
We’ve highlighted the competitive advantages you can gain during a recession. However, Juliano emphasises support from fellow SME owners – who are also weathering the economic downturn in the same, small boat – as a life ring to hold onto.
“You are part of a community and network far larger than you may appreciate,” Juliano underlines. “Help those when you can and don’t be afraid to let your network know when you need the help. You will be surprised by who will be there to help you through the journey.”
via https://www.AiUpNow.com
August 23, 2022 at 07:27AM by Helena Young, Khareem Sudlow
