According to the World Economic Forum’s recent Chief Economists Outlook survey, 64% of respondents believe it at least ‘somewhat likely’ that the world economy will fall into a recession at some point during 2023.
Warnings of a 2023 global recession are growing louder every day. In the past few weeks alone, high-profile figures such as the head of the World Trade Organisation (WTO) and Nobel Prize-winning economist Paul Krugman have voiced their concerns about the increasing likelihood of a worldwide downturn.
With such an abundance of gloomy news and unwelcome predictions, B2B merchants and marketplace operators would be forgiven for seeing little hope for business survival over the coming months. However, this is far from the reality of the situation. With planning, preparation and perseverance, business owners can successfully brace themselves for what’s to come – and emerge from the recession in growth mode.
What is a recession?
The generally accepted definition of a recession is when an economy experiences two consecutive quarters of decline in gross domestic product (GDP). The characteristics of a recession include significant, prolonged and widespread declines in economic output, consumer demand, and employment levels.
Lasting from December 2007 until June 2009, the most recent global recession will still be remembered clearly by many business owners.
Five tips for surviving a recession
Beginning to prepare for a recession before it hits gives your B2B e-commerce business the best chance of survival and will help to position you as a category leader when the economy begins to recover. Here’s our tips for beating the slump.
Grow smart, not fast
Although it’s inevitably going to be harder to reach new buyers, business growth is possible during an economic downturn. But only if you don’t fall into a very common trap.
When times get tough, the first department to have their budget slashed is often marketing. The vast majority of your competitors will likely pursue this route in an ill-advised attempt to save money. Don’t be tempted to follow suit. A strong marketing strategy, revised to meet new budget restraints, will help you to grow and, importantly, dominate the space while your competitors have paused their marketing spend.
When the economy begins to recover, your content will be ranking highly on Google, while new buyers will know the name of your business from paid ads and press features, positioning your B2B e-commerce business as the go-to brand in your niche vertical.
It’s not about throwing everything at your marketing department and expecting to grow fast, but maintaining a strong growth strategy with long-term payoffs.
Spend smartly, save smartly
During a recession, buyers and sellers alike become far more careful with their money. Here’s a few ways that merchants can spend and save smartly during an economic downturn.
Reassess your suppliers
When business is good, it’s easy to get into a routine with your suppliers. You’ve built up a relationship with those who are selling materials or products to you, and it can be a lot of effort to scope out the competition. However, when times are tough, it can be financially beneficial to spend some time looking at your options. You may find a new supplier offering the same items at a lower price point.
Signing off on purchases
Check which members of your team currently have access to a company card. If you have a large number of employees authorised to make non-essential business payments, it might be a good idea to implement a stricter spending and expenses policy, even if only temporary.
Reduce your overheads
Take a close look at your overheads and decide whether there’s anything you can cut back on. If your sales slow down during the recession, do you still need as many staff in your sales or admin teams? If your headcount is reduced, can you get away with outsourcing tasks like payroll or HR? Do you still need as much office space and equipment, or can you rent it out?
These are tough decisions for any business owner to make, but are they not preferable to seeing your business fail during a downturn?
Consolidate or pay off your debts
Find out how much money your business owes to its creditors and see if you’re able to pay off any of your outstanding debts before the recession hits in full force. If not, consider consolidating your debt or trying to arrange a more easily achievable repayment plan.
Cut costs, not quality
When considering any changes to your business spending or saving habits, the most important thing to assess will be whether you can make the change without impacting the quality of your product or service. Saving money is not worth the long term impact of being known as a poor quality supplier.
Adapt and innovate
During a recession, the buying habits of your customers are likely to change. Just as you’ll be looking to reduce your overheads and minimise outgoings, your customers will too.
Instead of sticking to the same business model you’ve always had, think about how you could pivot your product or service to suit your customers’ changing needs. Part of this involves assessing your existing customer journey, and, in particular, the payment options you offer.
A recent survey carried out by Hokodo found that 23% of business owners believe access to longer payment terms is crucial to their company’s survival over the coming 12 months. Meanwhile, 41% actively search for suppliers who offer payment terms. This means that offering a trade credit facility on your online store is more important than ever. If you don’t already have an effective process for offering payment terms online, book a demo with Hokodo today to find out how we can help.
Protect your cash flow
Just as you may have outstanding debt to pay off to suppliers, you likely have a backlog of late and missed payments from your own buyers which need to be chased. If you don’t already have a robust, automated invoicing system in place, now is the time to invest. Although there will be an up front cost, the long term time and cost savings associated with such a system mean that this investment will pay for itself.
When chasing payment from your customers, pay close attention to those who have missed several payments in a row or owe you particularly large sums. In order to protect your business during a recession, you might consider not working with these buyers anymore, or ask that they pay for part (or all) of their order up front.
Check out our article on how to protect the cash flow of your B2B e-commerce business for more tips and advice.
Finally, ensure that your cash flow doesn’t rely too much on one or two large customers. It’s great to have these loyal buyers making frequent purchases when the economy is buoyant, but if something should happen to one of them during a recession, it could have a significant impact on the amount of cash flowing into your business.
Communicate transparently (with everyone)
Communication is essential for the survival of any business at any point in time, but it can be simultaneously more important and more difficult to communicate during a recession.
It can be difficult to bring your staff in on the discussions around changing policies or redundancies. However, the most effective business leaders are those that can be transparent, open and honest about tough subjects. It’s important that you explain what’s happening and why, in a way that everyone can understand. The benefits of this go two ways, as the more your team understands, the more they’ll be able to help.
It can also be difficult to communicate with your suppliers during a recession, especially if you can’t afford to pay them for an order that’s already been fulfilled. Our advice? Don’t bury your head in the sand. Usually, the best results are achieved by having transparent conversations with your creditors. Although these conversations might feel embarrassing or difficult, it’s far more inexpensive and less damaging to come to an agreement this way than waiting for your supplier to take legal action.
Being prepared for a recession also means being prepared for when the markets begin to bounce back. Every item in this article will help to prepare your B2B e-commerce business for a recession, but each one is also a best practice which should be maintained even when the economy is strong. Economies are cyclical, and, although we can’t predict accurately how long any given recession will last, remember that it will eventually pass – and when it does, you’ll be on the front foot ready for business growth.