How To Recession-Proof Your Business

Last month, Chancellor Jeremy Hunt revealed that the UK economy would not only avoid recession in 2023 but that inflation was due to plummet. Unfortunately, the recent financial instability instigated by the fall of Silicon Valley Bank (SVB) in the USA, and Credit Suisse in Switzerland, has brought a new threat: a banking crisis. 

The International Monetary Fund (IMF) states that this risk has increased considerably over the last six months, driven by higher interest rates. Luckily, the Bank of England is secure for now,  and it is highly unlikely that any banks will collapse. 

However, this still means businesses should be prepared for the looming threat of recession on a global scale, rather than one localised to the UK. This is especially important as the Bank of America’s ‘dirty dozen’ charts have indicated that a recession may actually have already begun – so being ready is imperative. 

As a result, the retail experts at UK Shopfront have put together a guide on how to recession-proof your businesses: helping you to prepare, address and adapt. 

Diversify Products & Services 

In a recession, you want to cater to as many consumers as possible, entering new markets to retain your competitiveness. With consumer spending always down during periods of financial turmoil, you do not want to rely on any singular products or services, as if interest in these falls, your business will suffer. 

Instead, you should have contingency plans of any similar products and services that would appeal to not only your current customer demographic but new ones. For example, any retailers that specialise in home goods could also consider stocking clothing, providing interior design services or even offering in-house DIY classes and workshops that teach you to make your own home decor. 

Having these plans in place will allow you to implement them as soon as possible. This means you will be five steps ahead of any competitors and could also benefit from highly profitable or popular products and services that you can retain when the period of financial turmoil concludes. 

Invest In Relationships

From client or customer relationships to forming partnerships with similar businesses in your industry, a recession is a perfect time to cultivate loyalty. Collaboration for one-off products or the provision of unique services can be a great way to form a relationship with a brand while appealing to both of your consumer bases. You may also benefit from reduced costs, an essential measure during periods of financial turmoil. 

Most importantly, by rewarding some of your long-term customers for their purchases, you can ensure their continued custom throughout the recession. While this may seem counter-intuitive, offering these customers discounts means you receive their trust and continued revenue. They are also more likely to recommend friends and family to your business, leading to further income. 

Finally, you should make sure to protect ongoing relationships with your employees during any periods of financial difficulty. Your staff are one of the most important elements of your business, and keeping them happy should be a priority. Hiring during a recession can be difficult, especially as top talent tends to be retained, so rewarding your employees is a vital means of encouraging them to stay at your business. 

Innovative & Excite

Throughout fiscal turmoil, you need your business to retain a competitive and attractive edge, or you will fail to achieve sales. Many businesses also tend to enter ‘self-preservation’ mode during a recession, meaning less money is dedicated to marketing. By investing in quality marketing during this time, your business is resultantly in a better position to capitalise on the market – especially if you offer exciting options. 

Whether something as simple as rebranding one of your products to offering a service that no one else in your local area does, offering something ‘different’ makes your business more likely to gain revenue. This is especially important as the business landscape is constantly adapting, especially during a fiscal crisis, and demonstrating your ability to adapt puts you at an advantage for survival.

Cut Unnecessary Costs

Slashing overheads is one of the most important ways you can ensure longevity for your business. You should begin by conducting a cost analysis of your business and assessing any areas that are not performing well, whether products, services or internal processes. If any of these are not essential, you should be cutting the costs. 

Alternatively, you should look into ways you can streamline your operations and offset any costs. For example, some providers may be much cheaper than others, and some delivery services may charge much lower fees. There may also be loopholes for certain areas, such as relying on online communications instead of travelling for work or marketing your products with a free tool, such as TikTok. 

Unfortunately, it may also be a good time to assess your staffing. If you are oversubscribed on hours, it may be a case of asking some members to go down to part-time, or, as a last resort, considering any non-essential staff go. 

Start Forecasting 

Looking to the future is the best way to prepare for all eventualities. From assessing which markets, trends and services will be successful to targeting new audiences, forecasting gives you the tools to succeed.

All businesses should be keeping a record of their products and services, tracking any patterns in consumer behaviour and other market research metrics. These are invaluable for forecasting, as you can identify any incoming trends or changes that could necessitate changes to your business model. But they aren’t only for the future – these figures should be utilised regularly to inform your current sales method and marketing strategies.

Luckily, with the rise of AI models, such as ChatGPT, you can no input data and have the chatbot do all the work – meaning forecasting, and recession-proofing, has never been easier. 

Marina Vassilopoulos writes on the behalf of UK Shopfront, a retailer of high-quality and bespoke shopfronts based in London.