The cost of living crisis is currently at the forefront of people’s minds. Prices are rising at their fastest rate for 40 years; energy bills are soaring; the cost of filling a family car is expected to hit £100; and UK inflation jumped to 9% in the 12 months to April, with the rate of inflation predicted to rise even further to 10%.
Following its May 2022 Monetary Policy Report, the Bank of England increased interest rates to one percent and forecast a sharp slowdown in UK growth in the latter part of 2022.
All this has led economists to talk of the UK economy going into recession at the end of the year.
Businesses are already feeling the pinch. The rise in corporation tax from 19 per cent to 25 per cent in 2023 seems counterintuitive as companies begin to scale back their investment as the markets fall due to fears of the oncoming recession.
So, what can businesses do to survive a recession?
A recession in the UK is typically defined when gross domestic product (GDP) falls in two successive quarters.
Gross domestic product (GDP) is the total market or monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It provides a strong measure of overall domestic production and is a key metric of a country’s economic health.
High Risk – Your business will be going into a recession with large debts and heavy overheads.
Medium Risk – Your business sees a recession as an opportunity to review costs and develop more efficient processes.
Low Risk – Recessions are factored in as part of the economic cycle, and your business is prepared for better times ahead.
No sooner has the government wound down its Covid economic support programmes, it’s now looking to manage the new cost of living crisis. But there is a limit to what the government can do.
Due to the lockdown in China and the war in Ukraine, supply chains and overseas trade have been impacted. It’s imperative that businesses plan successfully to navigate these new economic challenges.
Where possible, reduce your business debt levels. If monthly cash savings are a priority in the short term, and you have numerous outgoings, consider clearing what you can or consolidating your borrowing over a longer time frame. The interest may be slightly higher, but the short-term benefits may outweigh the long-term cost.
If you’ve struggled to receive prompt payments from creditors during the good times, it’s unlikely that receiving those payments will be any easier during the bad times. Positive relationships are the key to business success. But, if a creditor is unable to pay on time, pausing your service until they do will ensure resources aren’t wasted on a business that may never pay you. Rather, it will improve your credit control, improve your cash flow, and focus resources on retaining the clients who do pay their bills.
Covid changed the way many businesses operated in order to survive. Looking ahead to the next economic challenge, businesses once again need to look at creative ways to cut back on their costs. If your office space is expensive and your staff can work from home, consider scaling down to a smaller office or going fully remote.
Tough decisions like scaling back staff working hours may need to be made. Similarly, outsourcing some of your key operations to keep your company afloat until the economy picks up may be required.
Lowering the price of your product and service may also be necessary in the short term, if you can ensure quality isn’t compromised. The challenge in the long term is bringing prices back up to normal levels once the economy is back on track.
It’s vital that businesses have thorough contracts. All the areas covered above are underpinned by contracts, and the only way to effectively enforce clauses, resolve disputes, and bring about change is with airtight contracts.
Securing legal advice is highly recommended, if the expertise is not available in a company.
It’s integral that marketing continues during a recession, even if it’s at a lower level. If a company’s brand awareness drops off the radar, they will struggle to win new business. Combined with the challenge of retaining current clients who may be looking to cut their own costs, this combination can cause a business to shrink.
Marketing activity can be maintained with a smaller team, freelancers, or an outsourced marketing company. The advantage of outsourcing marketing is that you’re able to tap into an agency’s wide resources, staff, and tech. This means you get the impact of an in-house team, but at a lower cost.
Targeting clients with a strong LTV
Understanding the value your clients bring to your company is key to surviving a recession. It’s important that you’re able to identify which clients from which industries drive larger deals or have higher retention rates. This will allow your sales team to focus their efforts on winning clients that will bring the highest value to your company.
Similarly, targeting companies that have higher retention rates increases the likelihood of good reviews and referrals. This will help to drive further business without the need to increase marketing budgets.
Increase employee happiness
Targeting higher-value clients means you get to understand their pain points, and, more importantly, the solutions to address these points. This can then feed into your company’s messaging, ensuring your marketing efforts are connecting with those high-value leads.
This approach can also produce a happier workforce. Happy clients tend to produce a positive working experience for your staff. This can help to reduce staff stress levels and make them more productive. It can also help to reduce churn and the cost/time needed to hire and retrain replacement staff.
If your company operates within a certain niche or industry, this may afford you the opportunity to partner with associated companies who also operate in that field. Similarly, it may be worth considering partnering with charities and nonprofits. These affiliations can help to strengthen the brand, maintain brand awareness, and help to drive new business and convert leads.
Keen to learn how outsourcing your lead generation can help your business? Contact Growthonics today.