If you think COVID has gone on forever, wait until you hear about how long it’ll take the economy to recover.

Technically, we might not be in a recession by the time you read this. That’s because recessions measure growth, not absolute

By the same standard, a multi-millionaire who files bankruptcy and lose everything—but then finds a minimum-wage job—is doing well.

But I’m not here to bemoan the times.

And I definitely won’t offer the same vague consolation as your bank: “I’m here to support you in these uncertain times.”

Nope. I’m here with real solutions. And most importantly, good news.

The good news about a recession

You and I both know recessions are, in general, bad news.

They hit the poor and minorities the hardest.

But if anyone of color had a tough time building a business, it was XXXX. Born into slavery, he went on to found Tuskegee University, funded with a successful brick business.

Here’s what he had to say in his autobiography, Up From Slavery:

“I have learned that success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed.”

And that, my friends, is the good news. Opportunities abound.

Any difficulty—and especially a recession—forces us to become more resiliant and to leverage our strengths.

That’s of course always true. But very few companies put in the hard work and tough decisions that actually make it happen.

Which means there’s even more of an advantage for those businesses that can adapt to the times.

As sales expert Grant Cardone stated about the 2008 recession:

“Everyone else is constricting. So I’ll expand.”

He came out of the recession stronger than ever, and we can, too.

Here’s how.

What research says about how to survive a recession

As the 2008 recession was upon us, Harvard Business Review did a study of other businesses during recessions.

Some survived and a few years after the recession got back to normal. Others struggled and a few years later were slightly worse off.

But a third group, shortly after the recession, was better off. More sales, more growth, more profit.

We want to be in the third group.

Here are the two steps they took.

Step 1: Become more efficient

The first step is to aggressively focus on the efficiency of your business.

The exact way you do this depends on the nature of your industry, but the basic principle is to cut costs. Shut down anything that doesn’t directly affect sales.

It’s as simple as that.

If you need a wakeup call, I’d recommend reading Profit First or Double Your Profit in 90 Days. They’re both great books on why cutting costs is urgent for any business.

There is one caveat here, and that is not to cut wages or salaries. This is the advice of Double Your Profit and it’s also what the HBR study recommended.

Some companies first look to layoffs as the only way to stay profitable, but that’s really the last option. First, study every other option.

Step 2: Invest wisely

There are a lot of places to put your money.

But according to HBR, there are three that make the most sense:

Equipment and resources

During a recession, a lot of “stuff” is on sale. Companies are looking to make back something, so you can make some purchases that will be more expensive once things pass.

Now is a good time to look carefully at what you’ll need to buy in the upcoming years and put down that investment now.

Marketing

As the Cardone said, marketing is oftentimes easiest during a recession.

The reason is a bit counterintuitive.

You see, most companies are cutting back on their marketing expenses. But this is actually a critical time for them.

The reason is leverage.

With most of your competitors disappearing from the marketing landscape, it’s far easier now to set yourself apart.

And while there is a general cutting back on costs, that’s actually great news for your business. Because whatever your industry is, you help people work more efficiently and effectively, right?

So for a lot of industries, you can position yourself as a solution to this type of problem.

And COVID has added two additional benefits—ads now are cheaper than ever, and more people are spending time on the internet than ever before.

—————

1. Survival (not benig bankrupt)

The first and perhaps most important shift that needs to happen in your business is avoiding going out of business completely.

During a recession, 17% of businesses fall prey to this, so it’s a real threat. (As if you didn’t know that already).

Here’s what research suggests.

Improve efficiency

When times are good, it’s easy to add more and more to your business. New software, new systems, new processes.

Now that times are tough, your goal is simple:

Deliver the same quality, at the same price, with more margins.

The reason you want more margins is to be able to stay afloat. As Michael Michalowitz explains in Profit First, your profit margin has an outsized effect on your operating cash.

So a 5% profit margin means two weeks of cash, while 10% means two months.

Making $500,000 in yearly sales with a 4% profit margin means the company spends $480,000 and earns $20,000. Your profit will last two weeks.

But if you bump that up to $500,000 with a 8% profit margin, you’re spending $460,000 and now that $40,000 lasts you longer. Double the profit covers three times the amount—now six weeks.

Improve leverage

There are a lot of factors that go into making a company “recession-proof.” But one aspect that hinders everything is debt.

The best companies had around 20% of debt compared to assets, while the worst had around twice that.

Take a realistic look at your debt and see if there are ways to de-leverage it. Of course, this is much easier said than done.

Surprisingly, one research finding is that firms with capital investment tend to do better. But of course, capital investment has more debt. So why the success?

Because the “stamp of approval” from that capital investment helped them raise more money. So if you’re a small startup, look to build credibility to raise capital.

Keep employees as much as possible

Letting employees go may be the most painful part of a recession.

But it’s not a great strategy. Massive layoffs actually set a company back in the long run. The reason is that the work required to re-hire and re-train is usually far greater than the savings once the recession is over.

If you must cut employee costs, look towards options that don’t result in layoffs, like furloughs, wage reductions, or performance-based salaries.

A great example of this is US electronics company Honeywell. In the 2000 bust, they let go tons of employees. But did poor afterwards.

In the 2007 recession, they instead chose to let off a small number of employees. Instead of giant layoffs, they had furloughs, etc. As a result they did better post-recession than in 2000, despite a much worse recession.

2. Staying afloat (maintaining sales)

Congratulations, you’ve survived the biggest push. But now comes the real challenge—can you maintain sales at a level that supports and sustains the businesses?

There are a few ways to do this.

Stay agile and decentralized

While there are some advatantages to top-down companies, sticking it out during a recession isn’t really one of them.

That’s because much of the gains to be had in operational efficiency (see above) are hidden away in different departments.

A solution to this is to break down silos.

Think about what would make sense for your team. The important thing is to keep information flowing so you can make decisions about what really matters as soon as possible.

Trim product lines

One of the hidden costs when doing sales is having a number of similar yet different product lines.

What these offerings bring in increased sales, they can just as easily reduce in distractions and a shift away from the most profitable areas of the business.

To maintain sales during a recession, look at the different plans and offerings you have. Choose the most profitable and see if there is a way to cut or avoid the rest.

Cut prices (or do it the smart way)

Your customers are looking for lower prices.

But this introduces a problem—if you cut prices of your current product, it can be difficult to raise the prices on your offering when you come back out of the recession.

So then, what’s the solution?

There are a few ways to face this problem. But perhaps one of the best is to create a separate product line or plan that allows customers to reap the rewards without losing the brand’s value.

During the 1980s recession, Charmin introduced the Banner line. After the recession, they took the line off the shelves.

A good example from SaaS is Notion’s restructuring of their product. Before they had a size limit on their free plan, but now their free plan is unlimited but lacks version history, which is only available on a paid plan.

It’s a small shift that can help provide a framework for how to structure our businesses.

3. Growth (increasing market share and post-recession growth)

The final stage, after keeping your doors open (figuratively) and building enough sales to sustain operations, is to start growing.

This is the most challenging step during a recession, and one where most companies fail.

But there are a few guidelines to make sure you do it right and stay as one of the success stories.

Invest wisely in assets, R&D, and marketing

A number of companies are tempted to spend lots of money on what seem like “almost free” investments.

But the reality is that these often mere increase costs without making a significant change in the company’s bottom line.

Stick with brand marketing

The third category of investment is marketing.

But surprisingly, not all marketing works in quite the same way. The most effective campaigns can be fairly neatly divided into two groups: short-term and long-term, without too much focus on the medium-term.

What that means, practically, is to focus on immediate strategies to continue growing sales as outlined above—specifically, offering low-cost options.

But the second category is to work on building the brand. You must indicate two values with the brand—a sense of caring and togetherness, and trust and credibility.

An excellent example of the former during COVID-19 times has been Loomly. The launched a free program that matches agencies and companies working toward the same goals.

For the general branding strategies, the goal should be to keep the brand front-of-mind in the category.

In the content marketing world, a good way to do this can be to ensure interesting and unique content. While your run-of-the-mill articles may be interesting to existing customers, a strong content marketing strategy during a recession would be to cement your brand in people’s minds as the expert.

How to put it into practice

It’s easy to get carried away with the numbers from HBR and think that budgets are everything.

They aren’t.

What’s most important isn’t the amount of money you’re spending, but what you’re getting from that money.

Here’s my recommendation for marketing in a recession.

Step 1: Double down on what works

If you’re like most SaaS marketers I know, you have a lot of different ideas, campaigns, projects (ongoing and on hold), and everything else.

The first step is to organize and sort them.

Take every strategy you’re currently doing or have recently done. Everything—as long as you’ve actually put into practice. No new ideas here.

Then, you’re going to put them along two axes: effort and impact.

Now, pick the next time period (a month, a quarter, a year, etc.) and play this thought experiment. If you could only do one thing, which which would you pick?

Come up with one answer. Again, this must be something you’ve already done so you know it works.

Now, how can you double your impact on this?

Maybe you could do twice as much outreach, double your ad spend, or publish twice as often.

What you’ll notice is that doubling the impact of something that already works almost never requires doubling the effort.

You’ve already fixed your outreach scripts, you know which ads work best, you already have a publishing routine set up.

It’s easier to grow a process you already have than create a new one from scratch.

That’s your new focus: doubling what already works.

Step 2: Eliminate what doesn’t

Chances are, you have a dozen or more projects you’ve tried.

Repeat step one again. With your XYZ project off the board, and only the ability to do one thing for the next timeframe, what will it be? How can you double the impact?

Now do it for a third time. You should now have the three highest-leverage projects, and a plan to double all of them.

Now, you’ll need to eliminate everything else on the board. It’s just not a good idea.

Now, a fair warning—this will hurt. You will have to kill far more ideas than you’re comfortable with.

That weekly newsletter of the best industry reads? Gone. (It’s never brought in a client.)

Your booth at the annual trade show? Not anymore. (Fourteen of your 15 trade show clients came from connections away from the booth.)

The Google Ads management budget? Now it’s zero. (They bring in customers… that break even.)

This will hurt, because people will ask about the newsletter. Joe at the trade show will ask why you’re not reserving a booth this year. Your social media agency won’t appreciate that you’ve fired them.

Stick to your guns, because your company is your priority.

Step 3: Test and improve

You now have three projects and a plan for doubling their impact.

To start, you’ll want to do exactly what you’ve been doing. Gradually work towards your doubling strategy, small increases at a time.

With some of that extra space, you’ll want to keep doign what you’re doing. And with some of it, you’re going to want to experiment.

Instead of publishing a second article this week, what about updating and republishing an old one? What about doing original research? Interviewing experts?

Keep growing

With these strategies in place, you’re ready to grow.

Keep pushing forward and making progress.

Any questions, or want a team to guide you through this process? We’re happy to help.