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Small Business and the Recession Part 2: Strategies by tuggljosh

[NOTE: This post is part of a series that tuggl will be posting once or twice a week to help small business owners not just survive the recession, but capitalize on it. Much of our research has led us to believe that this can be the case with nearly every small business, and we hope it helps you!]

In Part One of this series, we squelched a couple of high-profile myths about this recession when it comes to local businesses so that you’re primed and ready to find out how to fight the current economic funk. In this and the next post in the series, we’ll lay out some strategies that will help you to find opportunities that exist only in recession so that you as a local business owner can turn pessimism into optimism.

The Strategies

1. Attack while defenses are down!

Your larger competitors have their advantages, no doubt. But in times of recession, stock market turmoil, and credit tightening, their flaws are exposed more than they will ever be. Additionally, small business advantages become more useful.

Corporations are hindered by large staffing numbers which they must reduce to cut costs and cover liabilities. Lending rates are too high for expansion needs, and equity shares are plummeting as part of a larger sell-off by institutional investment houses. In other words, corporate competitors are majorly hampered by these conditions.

Local businesses, on the other hand, do not feel the same extreme levels of economic pressure. Moreover, small businesses are inherently less bureaucratic and more nimble. Your business has the ability to change tactics much faster than an institutional competitor, and this means that not only could you respond to changing needs of consumers more rapidly, but you could easily use this opportunity to steal market share away from the major players. Consumers are naturally more suspicious of corporations during times of recession, and there could be no better time to ask people to switch to local businesses for their needs.

2. Avoid recessionary No-Man’s Land

During a recession, bargain outfits win. But, perhaps surprisingly, the businesses with the highest-cost products and services aren’t necessarily the worst-off. Middle-market items are. When consumers decide what they are going to cut back on, they will typically dial down the level of the more frequent purchases they make as opposed to the purchases themselves. For instance, if a consumer or business requires building repairs, economic conditions do not change that need substantially. However, instead of eating at that full-service restaurant for lunch meetings, people are more likely to arrange it at a deli.

The fiercest battlefield of competition during a recession is the mid-market. Do not panic if your business is centered on large purchases. But if your business is largely perceived by consumers to be a mid-market option, consider reinventing your business as either a high-end market competitor, or a low-end, dealoriented competitor while consumer confidence is down. Once people start relaxing their vice on discretionary income, resume reaping the benefits of the mid-market.

3. Get back to basics

This strategy combines some of the other concepts already covered, namely small business flexibility with avoiding the middle of the market. The power behind it lies in your ability to establish what you do that people inherently need accomplished, whether they have an abundance of disposable income or not. It may be bland, and it may have low profit margins, but it’s still necessary nonetheless. Essentially, you need to find your industry’s version of milk. Milk is naturally an inelastic commodity – meaning that over time, even when price levels change, demand for milk stays relatively similar. What product or service that you provide, or that you could provide, is one that provides steady consumer demand? Find it and focus marketing efforts on that product specifically. Because your small business does not have necessarily have a brand stigma like larger businesses do, you are in a position to roll out a marketing campaign quickly and change consumer perception at the same speed.

What is the basic service that your industry provides? For an accountant, it may be tax preparation, but for a homebuilder, perhaps its simple installations. Whatever the case, try to increase numbers of simpler jobs by marketing yourself as the industry’s premier provider of that service. Do not simply reassure consumers that you offer this service, but actually try to sell it to them through your marketing. Ask a question about the last time they had your basic service performed and include relevant contact information. That way, consumers are driven to consider contacting you for service immediately. Once you have booked basic services, you can try to up-sell customers for additional revenue. Even simply asking, “Is there anything else I can do for you,” is a powerful way to unlock hidden demand, supplement your income, and gain loyalty from new clients.

Next week, we’ll post some the last three tips tuggl has for small business owners right here to help you battle through the recession. In the meantime, don’t be shy to offer your own tips or share experiences in the comments below or on Twitter @tuggl.

Best,

Josh Clauss, Communications Guy

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