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We want to discuss something important in this week’s episode of Priority Pursuit: the upcoming recession and how to get ready for it so that your small business can both thrive and survive the next couple years of economic turmoil.
Most economists agree that the United States will face a recession in 2023. That said, even if we aren’t officially in a recession yet, as a marketing agency for small businesses and as a small biz ourselves, we know that small businesses are already feeling and fearing the country’s economic situation.
Over the next several months—or possibly years—you and your team will likely need to find ways to reduce costs. As you look at your expenses, however, we want to caution you from making a common mistake small businesses tend to make during recessions: drastically cutting their marketing budgets.
In this episode of Priority Pursuit, we’re breaking down three reasons why marketing should be a top priority for small businesses during a recession based on data from past recessions.
Why are small businesses affected by recessions more than big businesses?
Unfortunately, recessions tend to affect small businesses more than big businesses. Yes, a decrease in consumer spending affects nearly all businesses. However, small businesses tend to be more vulnerable to economic downturns than large businesses because most small businesses have less of a financial cushion and fewer resources to weather a recession.
On top of this, it can be a struggle for small businesses to access financing or credit to fund their operations during difficult times.
Furthermore, some small businesses may face increased competition from big businesses during a recession as larger companies with deeper pockets often lower their prices or increase their marketing spending, which can make it harder for small businesses to compete.
According to a study by the National Bureau of Economic Research, small businesses were hit harder than large businesses during the Great Recession (which was the U.S.’s last recession from 2008 to 2009.) The study found that small businesses experienced greater employment losses and that between 2007 and 2010, 27% of small businesses were forced to close their doors.
Another study by the Kauffman Foundation found that from 2007 to 2010, small businesses with fewer than 50 employees accounted for nearly two-thirds of job losses in the private sector. This study also found that small businesses were slower to recover from the recession than larger businesses.
After the Great Recession, the U.S. Census Bureau reported that 1.8 million American small businesses closed during or as a result of the Great Recession.
While we don’t tell you this to be all doom and gloom, the fact of the matter is that a recession is likely coming, and if you aren’t ready, there’s a good chance your small business won’t make it. So, you need to take the time to prepare your small business for an economic downturn.
Three Reasons Why Marketing Should Be a Top Priority for Small Businesses During a Recession
We highly recommend talking to your financial advisor and accountant as we go into a recession as they’ll be able to help you with the financial aspects of running a small business. However, like we said, we want to discuss the marketing side of your business—specifically three reasons why marketing needs to be one of your small business’s top priorities during a recession.
Reason 1: Effective marketing is essential to your small business’s survival.
When people ask us how to build a thriving small business, we always tell them that they need:
- A solid product or service that meets their ideal customer’s needs
- A great customer experience
- An effective marketing strategy
Marketing is always an essential piece of having a successful small business. However, during a recession, effective marketing is critical to the survival of a small business.
During a recession, many businesses reduce their marketing budgets and efforts hoping to save money. However, when businesses stop marketing, they lose visibility, which results in lost business.
During periods of economic downturn, consumers do less shopping and spend less money. As a result, if they don’t know your business exists and if they aren’t familiar with the value you can give them, they’ll go elsewhere or they won’t purchase from you.
However, according to a study by McGraw-Hill Research, businesses that continue to invest in marketing during a recession experience higher sales growth compared to those that cut their marketing budgets. This study found that businesses that maintained or increased their marketing spending during a recession had a 256% higher chance of gaining market share.
Now, just to clarify, we aren’t telling you to blindly throw your hard-earned money at random marketing tactics. We’re encouraging you to invest in an effective marketing strategy that delivers results, because data shows that small businesses that invest in marketing during a recession are better off than those that don’t.
Over the course of a recession, you likely will have cuts to make. However, rather than drastically cutting your marketing budget, reallocate your budget toward a strategy that actually works. Basically, if you want your small business to survive this recession so it can thrive later, put your marketing dollars toward a strategy that drives results.
Reason 2: Marketing will help your small business stand out.
Again, during a recession, many small businesses significantly cut back on their marketing efforts. However, those who continue to market their businesses well and either maintain or increase their marketing spending create even more opportunities for their businesses.
Basically, because many—if not most small businesses—spend less on marketing during a recession, if you continue to market your business, you will have less competition—giving your small business an opportunity to stand out. In fact, according to the American Marketing Association, companies that increased their marketing spending during the Great Recession experienced a 2.5 times higher increase in sales compared to those that reduced their marketing budgets.
Therefore, continuing to prioritize effective marketing, increasing your marketing budget, or even starting to market your business strategically for the first time will put you in a much better position than many of your competitors to both survive and even thrive during a recession.
Reason 3: Marketing during a recession sets you up for future success.
While running a small business during a recession can be challenging, it’s important to remember that it’s temporary and that businesses that continue to market themselves during a recession are better positioned when the economy recovers and are more likely to be successful after a recession.
In fact, a study by McGraw-Hill Research analyzed 600 companies during the recession of 1980-1985 and found that companies that maintained or increased their advertising spending during the recession experienced an average growth of 275% in sales over the next five years.
By continuing to build brand awareness and customer loyalty during a recession, you’ll be in a much better position to capitalize on the recovery of the economy when it eventually comes.
Failing to prioritize marketing during a recession is a mistake your small business might not recover from.
In conclusion, marketing should be a top priority for small businesses during a recession. Drastically cutting your marketing budget may seem like a good way to save money; however, this mistake will likely cost you more in the long run and even force you to close your doors.
By strategically and effectively marketing your business during tough times, you can stand out from the competition, build customer loyalty, set your business up for years of success, and build a thriving small business.
Three Ways to Recession Proof Your Small Business
Now, in case you’re thinking, “That’s great, but I don’t want to waste my marketing dollars. Where and how should I be spending this money?” there’s a resource we would love to share with you.
If you’re ready to set your business up for success even during times of economic turmoil, download our “Three Ways to Recession Proof Your Small Business” guide! This guide walks you through three things you and your team can do to make sure your small business survives and even thrives during the next recession. And, because we want your small business to succeed now and always, this guide even includes the exact, four-step marketing strategy we use to help our agency clients see growth of up to 880%.
To recession proof your business and make our proven marketing strategy your own, download “Three Ways to Recession Proof Your Small Business”!
Links & Resources Mentioned in This Episode
- “Three Ways to Recession Proof Your Small Business”
- Receive 50% Off Your First Year of HoneyBook
- Learn More About Treefrog’s Small Business Marketing Resources & Services
- Join the Priority Pursuit Facebook Community
- Follow or DM Treefrog Marketing on Instagram
- Follow or DM Kelly Rice on Instagram
- Follow or DM Victoria Rayburn on Instagram
The Priority Pursuit Podcast is a podcast dedicated to helping small business owners define, maintain, and pursue both their personal and business priorities so they can build lives and businesses they love.
You can find The Priority Pursuit Podcast on Spotify, Apple Podcasts, Amazon Podcasts, Stitcher, and wherever you listen to podcasts.
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