It’s official, we’re in a recession, and new government restrictions on social gatherings and regional lockdowns could be indicative of a worrying reality: the current situation may be bad for an SME but hoping for a rapid improvement is fanciful.
Indeed, in June the IMF predicted that the global economy would contract by 4.9% in 2020. Among the worst-hit in the global cohort will be the UK, with the service-industry-laden economy set to fall by 11.5%, and as much as 14% should a second wave come to full fruition.
And the downturn isn’t all we have to concern ourselves with. With the WEO forecasting an underwhelming 5.4% global growth in 2021, the UK now slumping into recession and vaccine hopes somewhere in the long grass, we ought to think that the grey clouds might be here to stay. So, how can we adapt?
Five steps for staying afloat
- Maximise Accessibility: With a mixture of official government policy and general anxiety affecting consumer behaviour on the high street, any effective SME will look to access their customers through non-physical channels. While an obvious piece of advice, it is worthy of being repeated: expand your online, deliveries and communications capabilities. Having an online store allows customers to browse and purchase goods from the comfort of their own home; a strong delivery framework allows products to be taken reliably to a customer’s home or workplace; and good communications – such as Microsoft Teams or Zoom – allow staff to communicate face-to-face with one-another and with clients.
- Covet Loyalty: In a time where consumers are counting pennies and looking to brands they trust, it is vital your SME looks both attractive and rewards returning customers. Both of these considerations can be achieved by way of different offers and deals for new and existing customers. But perhaps the best way to do it is to follow the example of a company such as Pret A Manger’s subscription scheme – which incentivises customers to use their service, and then keep using it. By offering a monthly subscription service, a customer feels like they’re snatching up an ostensibly good offer, but in fact it’s something of a quid quo pro arrangement. What an SME gains is not just a customer who keeps coming back to make the most of their subscription, but someone who regularly incorporates a product into their routine and lifestyle, and thus will inevitably showcase said product(s) to their peers.
- Expand Your Offering: Though a recession might not seem like the ideal time to spend cash wildly on new ventures, stagnancy can also see an SME fall behind the crowd. To avoid this, a two-pronged approach can be employed: extension and adjacency. Extension strategy is nigh-on self-explanatory – take your current offering a step further and add new opportunities to customers (for instance as a restaurant owner, you might consider loyalty schemes, deliveries, or themed events). A more daring route is adjacency strategy, which means looking at your current offering, and then attaching something related but ultimately new to what you’re doing (once again, if you run restaurants, you might consider opening a bar). One way this latter option might be achieved is via mergers and acquisitions, which allow a business to expand and create alliances without investing in something entirely new.
- Keep Your Business Watertight: Again, this a measure of basic prudence and good business practice, but one that ought not to be overlooked. According to Andrew Millet, having strong corporate governance embedded in an SME’s culture, as well as up-to-date audits, can help a company survive a downturn in its performance. Not only can good financial management help a company to conserve cash and reduce costs, but also track the staff and products of each business division, and weigh up their respective expenses versus returns.
- Get the Word Out: While it may seem counter-intuitive to spend more on advertising, it is important to ring-fence a healthy marketing budget. Not only should an SME spread the word about any new products or deals on offer, but in times where consumers are being careful about spending, creative marketing might be the difference between your brand being chosen over a competitor. It also shows that your company is upbeat and open for business – though of course it is important not to focus more on style than substance.
In summary, and as stated by Cameron Gunn:
“A free market economy is a living thing, constantly changing and evolving. In an ideal world, we would all return to our places of work in city centres and to the shops, bars and restaurants there – but we have to accept that that may not happen on the previous scale. Many people have found that they are just as productive at home – and we’re urging small and medium sized business owners to think outside the box and find new ways to reach customers.”
“[…] The future shape of the economy is uncertain and owners will increasingly need to go directly to their customers, wherever that may be”