Want to future-proof your business? Plan for all scenarios—both for growth periods and in downturns. While all businesses struggle in downturns, small businesses tend to get hit harder. Consider the Great Recession of 2007-2009, where small business jobs fell 39% faster than at larger companies, and the failure rate of very small businesses (fewer than 5 employees) jumped 500%.
During an economic downturn, consumers are more price sensitive and tend to spend less. Customers today have a lot of choices, and the key to managing a recession successfully is to offer them something they can’t easily get elsewhere. Whether it’s a special experience, in-person advice, or a little of both. Small businesses who have a good plan for pricing and cost issues, fluctuations in cash-flow, and steep competition have a stronger chance of surviving. Ready to take action? Here are 5 actionable tips to future-proof your business against slowdowns.
1. Manage inventory wisely
Research shows one powerful way small businesses manage fluctuations in sales is to reduce inventory. Certainly, selling off slow-moving inventory can help with cash flow, but that’s just the beginning. Simply putting things on clearance until they are gone won’t get you the biggest bang for your buck. Managing inventory is as much about taking advantage of upswings and introducing new products as it is getting rid of the old.
Consider first what led to slower sales in previous cycles, or imagine factors that could impact you down the road. Is your pricing model competitive? Are your top-selling products tied to a particular fad or trend that might become obsolete? Do you need to attract new customers? Inventory management apps can help you track inventory real time and show you trends over time, so you can make informed choices about your pricing and marketing based on your existing sales data.
If you’re considering promotions, there are other questions you can ask yourself: When did sales slow down? Who is still buying specific products? Who is more likely to buy if you have a promotion? Which product sales bring in the highest return? These questions give you insight into what kinds of promotions to run and how to stabilize your cash flow even when your best customers become price-sensitive.
Inventory management software can also help you adapt to changing preferences. For example, you can easily set up a new product or add modifiers so that customers can get exactly what they want. Adapt your best dishes to be dairy free, Keto friendly or vegan. Break up services like a haircut and blow out. You want to keep customers moving through your doors, even if they aren’t spending at the levels they used to. Modifiers can help customers who are watching every penny stay engaged with your business even if they have to scale back. And hopefully, when the economy turns up, they will start to spend more again.
If you’re throwing a sale to get rid of excess inventory, take the opportunity to entice folks to buy other things as well. (Psst… here are some tips for running a successful promotion.) Offer people who buy the overstock a discount on other products that will bring you a bigger return, or possibly a discount on a future visit in a specified time frame. Bundling products together helps the customer rationalize their spending (after all, they’re getting more for their money). Inventory management software helps you bundle things easily, and will keep track of your inventory so you don’t run out of stock.
2. Give new life to your products with creative bundles
Speaking of bundling, there’s no reason you have to stick to overstock. You can take two popular products and bundle them together to make them more attractive. Even popular products can get more mileage if you repackage them.
If you run a coffee shop, offer a commuter special by bundling a baked scone with your customer’s morning coffee at a slight discount. If you run a beauty salon, bundle together makeup, a mani-pedi, and updo for the entire bridal shower. If you run a bookstore, make gift basket bundles that represent your local history, combine useful cookbooks, or pull together puzzle and activity books to comfort people when they are recovering from an illness.
Gift cards are another great way to offer more value and keep the income streaming in. Offering a $5 gift card with your overstocked items can entice people to spend more. Even better, instead of training them to expect lower prices, you’re offering them just enough value to rationalize buying something else without eating too much into your profits. Use Clover’s small-business CRM to design a promotion that will keep customers coming back.
3. Partner with other local businesses
Consider whether you can partner with another nearby business to bundle your products with theirs. This entices shoppers to come to your corner of the neighborhood and helps capitalize on foot traffic that might not have come into your shop otherwise.
Another option is to work with complementary businesses, even if they aren’t in your immediate vicinity. For example, If you’re an antique shop, you could partner with a local hardware store to offer a “remodeling” bundle. You can offer them advice on what pieces fit in with the style home or local history, and the hardware store can offer advice on how to restore the home itself.
You can also work with local businesses that don’t have a physical shop at all. For example, if you’re a quick-serve or counter-service restaurant, perhaps you can work with a party planner to establish a catering practice, with local HR departments to provide food at meetings, or even offer Friday afternoon treats to corporate offices for a special price.
You can set up a reciprocal relationship by offering a 10% coupon to the other store on your receipts. You can also redistribute the discounts for a more equitable profit share. Alternately, you can offer a gift card on a reciprocal basis.
4. Rethink your space
Another way to handle slower periods is to rethink your space and how you can bring more people in. Can a portion of your space be rented out for an event or photo shoot? Consider hosting an auction, charity event (where you donate a portion of profits to a charity), or a preview of upcoming products or services to get your customer base excited.
Here are other creative ways to use your space profitably:
- Rent out a pop-up space to a local artist—and take a percent of the profits
- Rent your QSR or restaurant for a party or celebration
- Book a special event like a meeting, book signing, or conference
- Rent your space to local photographers for photo shoots during off hours
5. Offer bulk sales
Got a lot of stock you need to move quickly? Think about who might be interested in buying in bulk and how you can market to them.
- Schools—Include teachers, parent-teacher organizations, and student clubs.
- Businesses—Would your products make good gifts? Perhaps you can sell in bulk as an employee appreciation gift.
- Event planners—Market your inventory as party favors.
- Realtors—Realtors often give special mementos to homeowners to be memorable. Offer them a discount.
- Care centers—Hospitals, senior centers, and other care centers may be interested in offering your products or services to patients.
Worst-case scenario, ask your accountant if you can donate excess stock to a charitable organization and take a loss against your taxes.
Think about your business creatively
Efficiency is crucial to running a successful business, but sometimes it’s more important to step back and look at your business holistically, asking a bunch of what-ifs. What kinds of goods and services could you offer if your best-sellers no longer sold? What could you do with your space if you shifted things around in your store? How could you increase sales if foot traffic dwindles?
Business is bound to ebb and flow, and preferences and needs will change. Planning ahead for recessions and economic downturns helps you respond quickly to sudden changes and keep fluctuations in perspective. Be nimble and flexible. It’s the best way to future-proof your business.
To learn more about Clover, visit www.clover.com.