Small businesses don’t just survive adversity, they often thrive in it.
When a global health crisis caused many small businesses to close, newly formed American companies contributed to a historic peak in new job opportunities.
But for all their determination, some small business owners may not realize the opportunities that exist—and those they can create—when an economic downturn hits.
Given their resilience, involvement in local communities, and propensity for innovation, small businesses are uniquely poised to bridge at least some of the economic gaps after a crisis.
Read on to learn how.
The cornerstone of recovery
Recessions are difficult for small businesses, but they’re not insurmountable.
During the 2008 financial crisis, many small businesses either closed outright or drastically downsized, fewer entrepreneurs started new businesses, and commercial lending decreased significantly.
It was a bleak time for all businesses, but small ones seemed disproportionately impacted. Instead of creating jobs, small businesses lost an estimated 60 percent of available roles during the recession.
Despite these conditions, small businesses still managed to account for 62 percent of net new jobs from 1995 to 2020—a stat that speaks to their longstanding history of job creation.
It’s also significant because the very next year (when many businesses closed due to COVID-19), entrepreneurs began new businesses at record rates.
According to the Census Bureau’s Business Formation Statistics, these entrepreneurs filed nearly 1.4 million applications to form new businesses likely to hire employees through September of 2021—the most for any third quarter on record.
Naturally, all this job creation has a ripple effect. As the Small Business Administration reports, small businesses make up 44 percent of U.S. economic activity. As these businesses hire more, their employees pour money back into the economy. If they hire locally, their employees’ spending directly benefits the local economy.
The best small businesses also benefit the communities they serve in non-monetary ways. From locally-sourced products to innovative experiences and services, a small business can support environmental sustainability and improve its customers’ quality of life in ways many big companies don’t.
In-house strategies that boost the bounce back
Navigating periods of economic uncertainty will always mean waiting for market conditions to improve, but it shouldn’t end there.
For the savviest small business owners, preparation and creativity can minimize losses and boost resilience in a way that:
- Enables the business to bounce back better
- Reduces the potential for serious harm in the long term
Here’s what we (and the experts) recommend:
1. Focus on revenue.
Small businesses that successfully weather economic storms don’t stop at cutting costs. They take a long hard look at each revenue stream and allocate their resources accordingly.
For some businesses, this might mean optimizing several revenue streams to maximize their potential. For others, it might mean doubling-down on the company’s best sources of revenue while easing the focus on less-profitable streams.
If you fall in the latter camp—and it makes more sense to focus on your best revenue source—consider how the business might expand on its top money-maker.
Are there opportunities to deepen the value of the product or service you provide without adversely impacting resources? Can your business reallocate resources from revenue streams that don’t yield the same ROI?
2. Nurture adaptability in your workforce.
When tough times hit, it’s often easy to overlook the toll it takes on employees.
Whether you’re forced to lay people off, reduce working hours, or decrease production, any less-than-ideal changes a business enacts will inevitably make work more challenging for individual employees and the team.
Resist the temptation to avoid communication or worse, spout platitudes during times of unsettling change. If your employees are old enough to work, they’re old enough to level with—and they’ll appreciate your transparency.
In its survey of 1,100 employees and 200 managers, Paychex found nearly 3 in 4 employees wanted more transparency from their employers. Specifically, they wanted transparency around:
- Job growth/opportunities (89.9 percent)
- Salaries (84.2 percent)
- The hiring process (78.6 percent)
- Vital decisions affecting business growth/direction (59.4 percent)
- Major business spending (45.7 percent)
In times of economic uncertainty, we’re willing to bet “vital decisions affecting business growth/direction” ranks much higher, especially as it relates to job growth and opportunities.
Your employees always want to know where they stand—and when the future of the business seems uncertain, your best defense is confronting their concerns directly.
Start with being honest with yourself if the idea of being candid with employees feels uncomfortable. Remember: identifying challenges in front of your team opens the door to crafting solutions as a team.
Ideally, you’ll have your own ideas around mitigating certain issues and maximizing resources. Come prepared to share those too.
In the end, conserving capital also means keeping your team motivated so the business can progress despite external factors.
3. Invest in customer relationships
One of the chief reasons people choose small businesses over big ones is customer service.
But they don’t just expect small businesses to deliver better support, they also expect more personalized experiences than a large business might offer—even amid an economic crisis.
When consumer and business budgets are tight, you’ll want to lean into the customer experience even more.
How can you sustainably drive and maintain loyalty? Can you find meaningful opportunities to learn more about and act on customer needs? Are referral programs possible?
Experiment with whatever low-cost, customer-first marketing strategies make sense for your business.
Collaborative ecosystems for sustained recovery
For all the clichés about business being cutthroat, small businesses benefit greatly from teaming together. As America’s SBDC notes, businesses that combine skills, perspectives, and expertise can solve problems and achieve goals that may seem out of reach otherwise.
During periods of economic recovery, collaborating with other organizations can make all the difference for a small business, whether they’re sharing intellectual capital or raw materials.
Through collaboration with other organizations, small business owners can—at the very least—save time and cut costs. In the best case scenarios, they can also:
- Achieve mutual growth
- Expand their networks
- Fuel innovation
- Expand product/service portfolio
There is one catch: Strive to keep your partnerships on-brand. Whether you work with local government, banks, fellow businesses, or local communities, making sure your initiatives align and the collaboration makes sense for customers.
The more on-brand your partnerships, the easier it’ll be to sell them. That matters a lot in a tough market.