Pandemic v. Recession: What I Saw Small Businesses Do in 2008
Sudden economic downturn. We've been through similar experiences before. My wife assures me we will make it through the current situation because we made it through 2008. I believe her.
Here are a few questions I saw my small business clients ask and act upon in 2008 to make it through:
What Can I Do to Keep Cash in My Business? My clients became more cash conservative. They found ways to cut expenses: cancelling unnecessary subscriptions or services, limiting travel, no more eating out, implementing salary cuts, slowing the pace of asset replacement. The idea was to keep enough cash flowing through the business to keep it alive until the economy improved.
Who Can I Talk to to Slow the Pace of Payments? My clients communicated with lenders, landlords, vendors, suppliers, etc. This was an extension of becoming more cash conservative. They worked with creditors to slow the pace at which they paid expenses. This is a delicate dance, however, and you need to be careful about your timing and your message. Don't do anything without first reading and understanding your legal documents - e.g., your loan documents, your lease, contracts with vendors and suppliers, etc. You don't want to put yourself in a position where your creditor feels like you are threatening to breach the contract because that might give the creditor the basis for terminating the contract and accelerating the total amount of the debt to be due on termination. Also, double-check your legal documents to identify which obligations you have personally guaranteed. Lack of a personal guarantee will become a significant factor in determining how to approach working out obligations with creditors.
What Can I Do to Retain Customers or Clients? My clients adapted their offerings. They retained customers or clients without giving everything away for free (to keep the cash flowing in). They looked for ways to help their clients or customers with the challenges they were facing as a result of the downturn. Some of my clients developed new or expanded services or products, while others decided to focus on core services or products.
What Can I do to Gain New Customers or Clients? My clients filled their extra time with inexpensive marketing. They renewed contacts, started blogs, wrote digital marketing plans, improved websites. You could post on social media, write and self-publish a business authority book, start a YouTube channel, or get interviewed on a podcast. You'll be more likely to catch fish if you cast more lines in the water.
Are these obvious? Perhaps, but my observation and experience are that small businesses (including mine) stray from these principles when the economy and business are good. An economic downturn forces us to reset our discipline. Good luck out there.