Business budgets in a recession are volatile things. When the economy takes a downturn, countless business owners are beset by panic. Rather than looking for opportunities to grow and thrive, they start focusing on just one thing: cutting costs.
While surviving a recession definitely requires a change in strategy for most business leaders, it’s important to ensure the steps you take now don’t derail your success in the future. After all, as daunting as an impending recession might be, downturns don’t last forever.
A careful plan for recession budget allocation is necessary to ensure companies can continue to invest in the right ways to attract, engage, and convert their target audience. Here’s everything you need to know to prepare your budget for the evolving economic climate.
When the economy dips, the standard response from most business owners is to search for new ways to save money. Often this means slashing the marketing budget, freezing hiring plans, and even laying off countless crucial employees.
However, there are two ways to respond to the threat of a recession. Either you can dive into action and potentially risk losing your position in the market as a result, or you can take the smart approach.
For some businesses facing tough times, reduced spending on certain initiatives may be essential, but it’s important to think about how your recession budget allocation will affect your business in the long term, not just the short term.
Here are some quick tips to help you use your budget more effectively.
Recessions affect different companies and industries in different ways. Some companies will see a drop in their number of new customers, while others might encounter more buyers hoping to negotiate on price and payment terms. Looking at the trends in your market, think about how a recession might influence your company, and your go-to market strategy.
If you’re worried about retaining customers, offering VIP clients an opportunity to extend their payment terms, or “downgrade” to a slightly cheaper package might minimize your losses. If you’re concerned customers may not see your products as a necessity during an economic downturn, look for new ways to showcase your value, and the benefits you can deliver to clients.
During tough times, it’s common for businesses invest heavily in cutting costs. Typically, most cost cutting initiatives start in the marketing space, where companies reel back their ad spending, and lay off employees they consider unnecessary.
However, while it is important to keep costs low when your budget drops, remember that cutting costs too aggressively could also mean missing out on new customers, increased brand awareness, and a strong share of voice in your target market when the economy rebounds.
Don’t be tempted to make decisions based solely on short term revenue. Think about how each cost-cutting activity will impact your organization in the long term.
Sometimes cutting costs in a recession doesn’t have to mean eliminating every marketing campaign, or getting rid of useful employees. Simply improving efficiency and reducing waste can help you to save money, while still achieving the same results.
Look at your current business operations and determine which activities are wasting time, or using up excessive resources. For instance, if your sales team is wasting a lot of time writing follow-up emails, consider giving them access to a generative AI tool to help accelerate the process.
If your marketing team isn’t seeing results from paid search, but your social campaigns are driving traffic, consider switching away from PPC and focusing more attention on social. Make intelligent, data-driven decisions based on your findings.
Whether your business caters to huge clients or individuals, relying on just one or two revenue sources during a recession can be risky. Study your customer base carefully, and consider opportunities for pursuing new revenue drivers.
For instance, if you have a number of loyal customers who rely on your products and services, consider introducing a new “premium” solution that addresses some of their accompanying needs. If you’re struggling to attract customers with a smaller budget, think about creating a simpler, more affordable version of your product or service for their needs.
While advertising these solutions may require a higher marketing spend to begin with, it will give you more opportunities to increase your profits in the future.
In a tumultuous economic environment, waiting until the end of the year to review your budget, or your finances, is a dangerous strategy. Throughout the recession, it’s important to keep a close eye on consumer spending, and your own outgoing cashflow.
Consistently monitoring your incoming and outgoing cash will allow you to make agile and informed decisions about how you should re-allocate your budget at different times. You might find you suddenly need to spend more money on content marketing, and less on traditional advertising.
You may discover you need to double your sale efforts in a specific territory or region as buyer trends shift and change. Be ready to adapt quickly.
As mentioned above, one of the first things many companies do during a recession is cut their marketing budgets. The world of digital marketing makes it easy to turn campaigns on and off at a moment’s notice, this means marketing spend during a recession often falls drastically.
However, if you don’t invest in marketing at all, you risk losing your market share, and your opportunities for consistent revenue. During a recession, consumers will be paying attention to which companies continue to deliver value, entertainment, and education.
While consumer spending might drop temporarily, when budgets begin to rise again, it’s the companies that continued to invest in marketing that will have the attention of their audience. Studies have proven that companies that invest in marketing during a recession are more likely to thrive.
100 years ago, a Harvard Business graduate found companies that boosted their marketing spend during the great recession increased their sales by 20%. Alternatively, those who spent less on marketing witnessed a drop in sales of 7%.
The key to making the most out of your budget during a recession isn’t cutting marketing activities completely, but finding smarter ways to use your money.
If you want to keep costs low now, but still ensure you have room for growth in the future, make sure your business budgets in a recession focus on:
Don’t make the mistake of assuming the only way to survive a recession is to cut back on your marketing and sales activities. Otherwise, you could risk dooming your business to failure.
Keeping on top of business budgets in a recession can be complicated. An economic downturn presents challenges to everyone, from consumers to businesses alike. However, recessions don’t last forever. Implementing the right strategy with your business budgets in a recession will ensure you can come out of the downturn stronger than ever.
Learn more about how you can boost your chances of success with both sales and marketing strategies during a recession here at Hypcccycl.
Our gamified training and educational resources can prepare your team to overcome any hurdle.