The Bank of England has predicted that the UK will once again slip into recession towards the end of 2022. They also predict that such a recession would last until at least the end of the first quarter of 2023. Inflation has already risen above 10%.
Wages are flatlining. The energy crisis is threatening everyone. Everyday prices continue to soar out of all proportion, leaving businesses across the country struggling to maintain their equilibrium against the threat of insolvency.
So, what can you do to help protect your business in the event of a recession?
Louis Carbonnier, co-founder and co-CEO of Hokodo, looks at four steps tradespeople can take to recession-proof their business:
1 – Build your customer base
While customers are always the key to a successful business, at such turbulent times it becomes doubly important to not only retain your existing customer base but also to add to it. However, acquiring new customers during an economic downturn is far from easy. While some installer jobs are unavoidable – emergency boiler repair or replacement will rarely be delayed in the winter months – there will be few people seeking renovation or upgrades in straitened times. When finances are so stretched, any kind of sizeable investment will almost automatically be off the cards, which is why it is so important to invest in your customers.
Improving your customer experience – everything from the way your team members interact with customers, to your contact options – becomes integral to the success of your business. Consumer behaviour (including that of business customers) always changes at a time of economic downturn. Your ability to enhance the value proposition of your customer interactions through exemplified service could make the difference between survival and surrender in the coming year.
2 – Build your team
It’s no secret that there is a trade skills shortage, and one of the quickest ways to lose customers and damage your reputation is to make customer promises that you can’t keep. While taking on new employees right now is a scary – and potentially unwise – proposition, taking steps to retain your existing team members is a sensible move. This doesn’t necessarily mean immediate wage increases. Talk to your team. Ensure that you have an open dialogue, so they understand where the business is going, how you’re managing through the recession, and how much you value their work. You might not be able to promise a pay raise now, but if they stick with you through the tough times, you can make plans to reward them later.
3 – Reassess your suppliers
Regularly shopping around for new suppliers is usually a low priority, especially once you’ve found a few that are reliable and you’re happy working with. However, it’s a good idea to check out alternatives as you might be able to find lower pricing on items you regularly buy or better payment terms. Using deferred payment plans with low or no-interest, such as trade credit or B2B Buy Now, Pay Later (BNPL), can be a great way to access the goods you need while protecting your cash flow.
4 – Selective marketing
One of the first steps that most businesses will take during times of economic strife is to reduce outgoings. And the marketing budget is inevitably one of the first things to be cut. The problem is, that without marketing, your ability to reach new customers dramatically decreases. And if your existing customer base is not spending as much as usual, then your business is going to struggle. Dropping marketing completely shouldn’t be an option. You need to assess your customer profiles, work out what each group needs, and research where they’re most likely to interact with your brand based on your previous marketing experiences. Then, carefully market your solutions, highlighting your service proposition. By taking steps to understand your customer’s changing behaviour, you have the power to market most effectively.
Working through an economic downturn or recession is never easy. However, with the right approach and the right solutions, it is possible to not just retain your existing customer base but to attract new customers and potentially grow your business when many around you are struggling to stay afloat.
Louis Carbonnier is the co-founder and co-CEO of Hokodo where he leads the commercial and product functions. Hokodo is a fintech startup that enables B2B merchants and marketplaces to offer a Buy Now, Pay Later solution to their customers.