There is no denying that recessions are an inevitable part of market cycles and can be terrifying for consultants and the companies they work with. No matter the size of your business, a recession can pose serious financial risks. As consumer spending declines, so do corporate revenues and profits.
This can create an unstable situation. Businesses may become more inclined to view B2B services as an unnecessary expense. This is especially true during times when budgets need to be tight.
Entrepreneurs, apart from ensuring that their services become truly essential to their clients, must find ways to inject new capital into their businesses to weather these periods of economic uncertainty. Hmm. Expanding your earning options can greatly increase your chances of long-term success. To do this, we need to ensure that declines in one area don’t completely wipe out the business.
Injecting new sources of money will not only help us weather a recession. It also allows us to provide greater value to our clients, regardless of their economic circumstances, so we can thrive in the long term.
Why new capital injections should be a priority
Entrepreneurs who rely on a single source of income can be exposed to significant financial risks, even during relatively stable times.
In the Journal of Social Entrepreneurship article, “Diversification Reconsidered,” Peter Frumkin and Elizabeth K. Keating explain: […] Organizations can avoid over-reliance on a single source of revenue and stabilize their financial position, thereby reducing the risk of financial crises. “
Few things are more likely to disrupt client relationships than a recession. Changes in their (or your own) financial situation may require contract renegotiation. You may get similar services from cheaper providers.
Entrepreneurs who focus on a single type of service or a small group of customers are at greatest risk. Losing a large number of customers suddenly due to a recession can be catastrophic. You may run out of cash before you run out of time to deal with the situation.
Diversifying your earnings and finding new ways to inject capital can help mitigate such losses. So, even if you have to tighten your budget, you can at least maintain enough cash flow to stay on track.
Options for finding new capital (to resist a recession)
Now that you understand the value of making your business more resilient to the effects of the recession, you may be wondering where and how to start. The following ideas are some of the best ways to bring in new capital (or better hold the cash you already have). This allows you to increase your earnings even when economic conditions seem tough.
1. Adjust your rates.
Perhaps the easiest thing an entrepreneur can do in the midst of a recession is to adjust interest rates. After all, the cost of doing business can increase significantly during periods of rising inflation. If you keep charging your clients the same rate, your cash flow will suffer because your profit margins will drop.
Of course, in a recession, a big interest rate hike could cause some clients to stop doing business with you. Therefore, this option should always be approached with great caution. Increasing or decreasing rates may need to be approached on a client-by-client basis to balance risk and reward.
If you decide to increase your rates, notify your clients in advance of the pending changes in your rate increase letter. The letter should be clear and direct, explaining what the increase is and when it will take effect. You must also provide a justification for the rate increase, such as an increase in your company’s operating costs. The letter should also express appreciation for the client’s assistance.
There is no guarantee that you won’t lose customers if you raise your rates. However, if you can replace it with new clients at a higher rate, you can stay ahead of inflation.
2. Use the referral program.
A referral program rewards existing customers who refer family, friends, or colleagues to use your products and services. Compensation options include offering a discount off the next bill after a person referred by a current customer signs up for your service. You can even offer bigger discounts if more people sign up for your service.
Getting referrals from existing clients is a cost-effective way to grow your client base when you need to reduce your marketing costs.
Prospects are more likely to seek referrals from people they trust. At the same time, they are more likely to benefit from your services because they are in the same “circle” as their current clients.In fact, 78% of marketers believe referral marketing provides “good” leads reported 4x higher conversion rates than other marketing methods.
A referral program allows you to create a true “win-win” scenario that helps you find new clients while increasing the loyalty of your current client base.
3. Serve new types of clients.
Focusing on a specific niche helps entrepreneurs develop a unique selling proposition to potential clients. However, targeting too narrow a niche can create limitations. To combat this, entrepreneurs can strategically evaluate how to serve new client groups that do not fit into their current target market.
For example, if you provide consulting services to a local grocery store chain, you might consider expanding your services to help other companies in related niches, such as food and beverage manufacturers. Alternatively, you can continue to focus on your core target market, but expand your reach into new areas by marketing to clients in different parts of the country.
When targeting new audiences, your current message may need some adjustments. See how others who are already targeting that market engage with your audience. Identifying successful tactics, such as key marketing channels and marketing tone, can help you identify how best to appeal to new markets.
You should also be aware of the opportunities and challenges that potential clients face in new markets. Long-term success can only be achieved if we can deliver reliable results. Don’t jump into a new market until you’ve completed your research.
4. Join the reseller program.
The only thing more powerful than making a few bucks from your referrals is joining a software company’s “reseller” program. These are often partnerships that allow consultants and entrepreneurs to sell third-party apps as a core value offering to their clients.
For example, as vcita’s Amy Wilder explains, the company’s reseller program offers substantial commissions. The program allows entrepreneurs to easily co-manage their clients’ use of their small business management platform. Essentially, you can offer “digital transformation as a service”.
The program can also be adapted to the needs of individual entrepreneurs. “For example, let’s say you run a marketing agency. Your focus may be on selling training packages that focus on features such as lead generation and development. If so, we might focus more on our CRM capabilities,” Wilder suggests. “Either way, you can choose accordingly. Based on your business, you are free to choose features a la carte.”
By partnering with a third-party reseller program that is relevant to their clients, consultants are able to generate even more revenue as they offer greater value to their target audience. Please select the program relevant to your current service area. Or choose a program that helps expand the types of services you can offer. Your success as a reseller ultimately depends on partnering with a brand that reliably matches your client’s needs.
5. Introduce new products and services.
When introducing a new product or service to your client, choose one that complements your primary product. You should be able to potentially increase the lifetime value of your existing customers by serving the same target audience and offering something that appeals to them.
Successful additions of products and services further improve client outcomes. This usually helps you save time, money, or make better use of your current resources. The new service should fit the entrepreneur’s current skill set and strengths. Another way is to hire additional staff with expertise in that area. During a downturn, focusing on services you can provide yourself without hiring additional staff could be key to being able to keep costs under control during launches.
Promotions must start with existing customers. This may require the provision of special previews or samples of the Service. Or you can offer discounts on new services as an existing customer. An existing customer is 50% more likely to buy from you in the first place, so this is the ideal place to start marketing efforts to ensure your new service starts generating revenue right away. is.
6. Niche down.
The idea of niche down may seem counterintuitive after you’ve talked about introducing new services and targeting new audiences. However, targeting a more specific and narrow niche can be the key to generating revenue growth. Strengthen the customer loyalty you need to keep your business running.
The idea behind niche down is to become a specialist rather than a generalist.
Niche down has some inherent advantages. For one thing, fewer competitors tend to focus so much on their target audience. Niche Down can also help you grow your capital as you become the go-to expert in your niche.
Of course, make sure you’re really an expert before you niche. If you market yourself as a specialist but continue to provide generalist-level service, your customers will quickly become dissatisfied.
7. Know what to cut.
The phrase “addition by subtraction” is usually used to describe the acquisition of something of value by removing the negative. Essentially, you can make your business leaner and more agile. To do this, remove the bloat that prevents you from being as efficient as possible.
For example, let’s say you offer 10 service packages, but only 4 are generating significant revenue. As a result, you’ll probably lose money by continuing to sell low-margin services. Eliminating underperforming services allows you to focus your marketing budget on the services that generate the most revenue.
Auditing your business operating expenses can also help you identify if current expenses are necessary or if the same services are available elsewhere at a lower cost.
Recession Inevitable – Failure Inevitable
Yes, recessions are scary. But proactive planning and infusing new capital into business initiatives can help us weather the storm ahead.
Acquire new capital expenditures and move forward with confidence by managing your cash supply well and using the right methods to reduce costs and diversify your revenue (even if only temporary) can.
The post on 7 ways entrepreneurs can bring new capital to their business during a recession first appeared in Due.