Times are tough, and while you may be tempted to limit spending on marketing or advertisements, this can be a critical mistake. According to CNBC, the economy has a toe or two dipped in recessionary waters, and while you’ve likely already cut back as a business owner, there are some additional steps you may want to consider. In the second quarter of 2022, the economy in the United States fell by .9 percent, which means we’ve had two quarters in a row with negative GDP. While this does not, in and of itself, spell recession, it shouldn’t be ignored either.
Two of the key economic points shared by CNBC include:
- In the U.S, two negative GDP numbers are generally considered good indicators that a recession is at hand.
- A slowed economy requires business owners to make cutbacks, but cuts in relation to long-term growth or employees should never be entertained lightly.
Cutting the Fat
The chief executive of Small Business Edge shares that he advises his clients and followers on Facebook and beyond to pull back on all unnecessary spending to see what the economy brings . . . in the second half. And these are words for small business owners to live by. If you aren’t sure about exactly what you can cut out without taking an essential chunk out of your business, there are three primary tips that can help you find your best path forward.
Take a Closer Look at Your Inventory Levels and Bargaining Power
It’s important not to lose sight of the fact that you have negotiating power with your suppliers. If you’ve been a loyal customer for decades, a decade, or several years, the supplier doesn’t want to lose you and may be willing to dig a bit deeper in terms of negotiating some kind of deal. Buying in bulk at discount rates is one option, but plumbing all available avenues into discounted prices – without jeopardizing quality – is encouraged. Another example is broaching the subject of locking in prices on specific products that you regularly purchase. With recession comes inflation, and a sure thing like a price that’s locked in can prove invaluable.
In an about turn, it’s also a good idea to consider how you may be able to streamline your inventory, which means fewer dollars going out.
Do a Self-Audit
You’ve been doing this for a while, and at this point, you may not know exactly how much you are spending on what – you just know that it’s been working for you. Now is an excellent time to conduct a self-audit, which won’t cost you a thing but may provide you with very valuable information about where you can make cuts. Start with the last three to six months of your business’s bank and credit card statement and do a deep dive into where your money is going, which is likely to supply you with valuable insight into areas in which minor shifts in spending could save you money.
Areas to consider include:
- Periodical subscriptions that your business can carry on without
- Online subscriptions that aren’t pulling their weight – or that you’ve completely forgotten about
- Apps that you don’t need
- Software that is gathering dust
- Networking groups that never panned out
These costs can add up quickly, and you’re unlikely to feel much of a pinch when you cut them loose.
There are, of course, more concrete expenses to evaluate, including rent, bank service fees, utilities, phone lines, and beyond. As a small business owner, you should not be afraid to explore services that may offer better rates and to use your negotiating power with your current providers. For example, your landlord may consider a moratorium on rent increases – or even a slight decrease – in return for your continued prompt payment and loyalty.
Keep Cash Close, But Do So Wisely
If you are operating on net 30 but paying in a week or two or even a day or two, consider pushing out and using the full 30 days allotted to you. There is absolutely no denying that time is money, which makes taking advantage of those 30 days paramount. Further, it can’t hurt to broach the subject of extending that window to 60 or even 90 days in the face of trying financial times.
Do You Need All that Space?
In a post-pandemic world, another important consideration is whether you need all that valuable real estate your business is taking up. If you’re a brick-and-mortar business, cutting back on your real-world presence is unlikely an option. If, on the other hand, you’re one of those businesses that are capitalizing on remote work or have adopted a hybrid approach, less may be more.
Where Not to Cut Back
There are two areas in which cutting your expenses without carefully parsing the effects are not going to do you any favors, and these are in relation to your employees and your advertising. In a harsh economic landscape, having a loyal crew whom you can count on can prove invaluable, and advertising is more important than ever.
Staying the Course
Many small business owners facing an economic downturn immediately cut their advertising budgets, but this is shortsighted at best. Advertising is an investment in current sales, in sales growth, and in your business’s future, and penny-pinching in this space can lead to trouble. Consider the wisdom shared by Wharton’s business journal, Knowledge at Wharton:
- A downturn in the economy is the most efficient time to advertise.
- Companies that stay the course and continue advertising in the face of recession are better off in the financial long run.
- A five-year study conducted by McGraw-Hill Research found that companies who maintained or increased their advertising spending during the recession of 1981 and 1982 generated significantly higher sales upon economic recovery.
When it comes to advertising through a recession, it pays to stay relevant and speak to connect with customers on the level of going through difficult times together.
Digital Marketing Pros Have Got Your Back through Troubled Financial Times
The digital marketing professionals at The Web Guys recognize the gravity of the impending recession and have the savvy to help you maximize your advertising dollars. Learn more by contacting or calling us at (317) 805-4933 today.