“There’s a recession, but we’re not going to participate in it.”

You have been running a business and you are doing well, however the economy begins to weaken and recession looms. Julie Clarke, Community Economic Development Officer with Monaghan Integrated Development looks at how you can make your business recession proof and emerge with a healthier more profitable business no matter what the economic climate.

Can you please tell me what exactly a recession is?

The established definition of a recession is a contraction in the GDP (gross domestic product) for at least 6 months. Basically, it means less money is exchanging hands - people change their spending habits. They still spend, but just not as much.

I need to reduce my business expenses, but how can I go about doing this?

Now is the time to tighten up on all your expenses, especially those which are not crucial to keeping your business going. Renegotiating deals with your current suppliers can offer numerous benefits. You can extend your payment terms and thereby avoid borrowing money to pay your suppliers, or you can negotiate a lower cost of goods.  If you have cash try and negotiate a deal for prompt payment and don’t prepay for supplies. If you don’t have cash then try and negotiate extended payment terms. There are three points to leverage in these negotiations;

1. Timing; is the contract set to expire soon;
2. Under performance; are there shortcomings in product, delivery or service;
3. Contract imperfections, are their unintentional errors or omissions in the contract

Take advantage of these points to renegotiate a deal with your current suppliers, as they will be very keen to retain your custom in a slowing economy.

If you have a bank loan that you are paying on, consider renegotiating the rate or shopping around other banks for lower rates.

Forward planning will allow you to anticipate if the business is likely to experience future cashflow problems. You should project what a 10% decrease in sales would mean for your business over a twelve month period. If cashflow problems are anticipated then the best time to meet with your bank is before you need money or run into financial troubles.

How can I retain customers and gain new customers in a slowing economy?

Your customers are your goldmine. Make sure that each and every customer gets special treatment and leaves satisfied that you have delivered much more than was expected. Your employees should also understand that tough times require a gentler touch and your customers need to be treated as VIP’s now more than ever. Since all your competitors may be selling the same products/services as you are, it will be your satisfied customers’ who will not only bring in repeat business but also new customers.

There are plenty of opportunities to gain market share in a slower economy, with less business to go around, it becomes a buyers market. Customers will scrutinize their current merchant and perhaps give a new business another look, you can find opportunities in underserved or untapped markets when people begin looking to get more value for their money.

Will lowering my prices increase the chances of my business surviving?

Don’t lower prices, instead add value. Many businesses are tempted to lower the price of their products or services during tight economic times. Lowering your price tends to hurt your brand, unless you can find a way for the price reduction to make sense to your buyer, e.g. offer a discount to existing customers, this can help to maintain the loyalty of your more important customers. It is a good time to strengthen bonds with existing customers and clients and prevent your competitors from trying to wrestle your customers from you.

However it is better to add value than to lower price, low price alone is not the only way to win customers and it may be difficult to raise your prices later.

This may also be a good time to consider accepting payment by credit card, many customers might need to pay you by credit card if they are experiencing cash flow problems many consumers turn to credit cards as a way of dealing with financial downturn.

I have been advertising my business since January 2010 but business is really slow, what are the best marketing techniques to use in a slowing economy?

In marketing your product or service you must know your customers and why they need your product or service. Why they buy it, what they think of it, what they read, who they get advice from etc. The more information you have about your customers the more chance you have of selling more to them

Guerilla marketing tactics work better in recessions, instead of concentrating on getting new customers, aim for more referrals, more transactions with existing customers, larger transactions and concentrate more on cooperating and networking with other businesses. In order to sell a product or a service, you must establish a relationship with the customer, you must build trust and support, you must understand the customer's needs, and you must provide a product that delivers the promised benefits.

You have to get the maximum benefit from the resources you have that means making the best use of the marketing that is carried out. Businesses can take trade from weak competitors and position themselves for future growth by advertising more when competitors start advertising less. You cannot stop advertising your products or services, but make sure that the expenditure that you do make brings as much return as possible.

Consider moving more resources towards new media such as internet and mobile phone. In comparison to traditional media such as newspaper and radio, the cost is very reasonable. A website is a must for any business operating in today competitive market place, ensure your website is attractive and interactive, tweak your website to generate leads by having the proper keywords to promote top placements in online search results.

I’m worried that people will not want to buy my products or services during a recession, what can I do?

You must keep in mind that during a recession people sacrifice luxuries and this might mean some readjusting of your business focus from luxury goods to essentials, from expensive products to their cheaper equivalents. Therefore you ought to consider diversifying into products and services that are more practical at times of crisis. Customers are not loyal particularly when discretionary income begins to disappear. Customers will choose the best value and the most desirable experience. If your product or service provides this then they will buy from you, if not they will buy from your competitor.

If business is slow should I look at participating in training programmes?

Absolutely this is an ideal time to build on your knowledge and learn new skills regarding the technical and financial aspects of your business. Your customers will be impressed with your product knowledge, which will enhance your reputation and will ensure that they come to you if they run into difficulties.

Remember if you think you are going to suffer from a downturn then you probably will. It is your determination that will take you through, in business there are very few easy times, and if you hit obstacles you must find a way around them.

If you are unemployed, in receipt of a social welfare payment, have determination and are interested in starting a business then contact Julie Clarke on 042 9749500, e:mail jclarke@moanghanintegrateddevelopment.ie or log onto www.midl.ie for information on the free supports available to individuals interested in self-employment.

Check out www.midlbusinessdirectory to see the many businesses in county Monaghan who received support from Monaghan Integrated Development formerly County Monaghan Partnership during their start-up stage.