Profit Secrets in a Recession

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CORONAVIRUS IMPACT

How to increase sales and profits in a recession

Although the doom and gloom merchants in the media would have you believe otherwise, recession does not go on forever. You wouldn’t believe it from picking up a newspaper, but the sky has not fallen in, the birds are still chirping, and life does go on as normal.

Contrary to popular belief, recessions are good for shaking up the established order. A large corporation making a small profit during the good times, will often make a loss during a recession. So for a small business, this may be your time to shine!

The money is still there for those who know how and where to look for it, and it can present a fantastic opportunity for those who know how to maintain a business in a recession. You may not be able to sell products and services for the price you did pre-recession, but some of the costs at the other end (purchasing items, services and other overheads) often tend to go down, meaning your profit margin should stay constant if you know what you’re doing.

So how can I increase sales and profits in a recession?

Well, there’s a lot you can do. Remember that some people will have less disposable income than they did previously, so here are some ideas to help increase sales and profits:

• You may have to drop prices and go for volume rather than a high profit margin.

• Secure whatever it is you sell for a lower price. Be pro-active and shop around for suppliers or service providers. There is no reason why profits in a recession should be lower than pre-recession profits. There are still customers out there, you just have to work harder to attract them.

• Remember your existing customers! Are you in regular contact, are you looking after them? If possible, invite them to special loyalty events, or go and visit them. Indulge them so that they feel important. These people are a lot easier to sell to, as they already know and trust you, your products or services.

• If you operate predominately online, or even if you do not, getting customers to view a website of yours can increase sales volume substantially. Even if you’re only operating in a local area. This is because most people search or view a business online first, using a search engine, even if they are buying locally. To get more people to see your website, you can try investing in SEO (Search Engine Optimization). This can increase sales significantly over time, but it’s often a slow process. A quicker way is to get your business and/or website properly listed within business directories, this will help people (searching for your exact products or services) to find you more easily.

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• Cut down on waste -This doesn’t mean that you should hire a downsizing expert with the morals of Genghis Khan. But all companies needlessly waste money, no matter how big or small. Go over your accounts with a fine tooth comb and look at where you can make savings. For example:

  • Do you really need that expensive water cooler for your employees, or would you rather save an employee’s job?
  • Would your assistant manager prefer to keep his company car, or his house? The best thing you can do for any employees, is to keep them employed.
  • You could cut down their hours or salary for a limited period, if it means the continuation of the company.

• They may grumble at the loss of privileges or reduced income, but isn’t it better than the alternative? You should always explain to your staff what’s going on and why you are making savings. This may mean using outdated computers, old office furniture and an end to perks, but if you wish to survive and keep on making profits in a recession, you may need to make these savings.

• Look after your cash flow- invoice promptly and chase overdue invoices, offer a small % discount for invoices paid quickly, ask for bigger deposits up front etc

• Offer finance – This is a surprisingly simple solution, but many small businesses still do not offer “buy now, pay later” schemes. Just remember to use a reputable finance company, and not one whose interest rates verge on the ridiculous; any customer who get a bad deal from the finance company will associate this with your business, leading to a loss of repeat custom! As the saying goes, “It takes many good deeds to build a good reputation and only one bad one to lose it”.

*By Andrew Terry

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