When it comes to running a successful business that stands the test of time, it helps to learn from the proverbial “school of hard knocks.” The last financial crisis of 2008 taught many small business owners about surviving in a tough economy.
Lessons learned by entrepreneurs during the Great Recession of 2008 can be applied to today’s uncertain business landscape. As small businesses struggle to stay afloat amidst the fallout from the COVID-19 pandemic, it helps to look back.
True, today’s crisis is fundamentally different than the Great Recession of 2008. That situation stemmed from specific financial vulnerabilities in key sectors of the economy, primarily the mortgage industry. COVID-19, on the other hand, was caused by an outside factor (the virus) that has caused the shutdown of entire segments of the economy.
What coping strategies did small businesses successfully employ in the 2008 recession?
Despite the differences between the cause of the Great Recession and the current crisis, both situations led to serious financial fallout for small businesses. Many small business owners took specific actions 12 years ago that can be successfully applied to today’s crisis.
While many of the solutions from 2008 may not be one-size-fits-all, we can learn a great deal from how business owners navigated the Great Recession. Here are several ways that business owners made their way through the 2008 crisis and how they’re applying what they learned then today.
Cutting costs as the first order of business
The 2008 recession saw many companies cutting back and doing more with less. This included reducing spending on nonessentials. To stay afloat, many owners discovered that the key to successfully reducing costs required striking a balance. This meant cutting as small an amount as possible from a wide variety of operational expenses. So, for instance, across-the-board cuts from overhead, professional fees, utilities and supplies, rent or lease, and repairs and maintenance.
Business owners in today’s financial crisis are finding it necessary to cut a wide variety of costs. As was the case in 2008, it’s currently necessary to make do with less in order to survive.
See our blog on turning the tide on your business’s cash flow crisis, for more cost-cutting tips.
Focus on networking to retain and obtain business
Paige Arnof-Fenn started her business in 2001 and managed to come out of the Great Recession even stronger. She is the founder and CEO of Mavens & Moguls, a global branding and marketing firm.
“Just as Bear Stearns and Lehman Brothers were imploding and the stock market started to free fall, I had three six-figure projects just about to launch get postponed within a few days of one another,” recalls Arnof-Fenn. “That’s significant for a small business like mine.”
Maven was scheduled to appear in several cities to speak and attend board meetings, so with her extra time, she decided to ramp up connecting during those events.
“Speaking at conferences and networking events and serving on boards has been a great source of lead generation for my business,” she says. “In 2008, I made a list of the movers and shakers and prospects at the various events and met with them. With things so slow, they were happy to get together. Listening showed me plenty of opportunities to help them. I picked up several new clients and came through the slowdown stronger as a result.”
Arnof-Fenn is using this same method today. “With social distancing, it’s easy to set up conference calls and virtual coffee meetings,” she says. “Start listening with no strings attached. You'll be amazed how it will work out for you.”
Continue marketing despite the slowdown
Some businesses may consider marketing nonessential when times get tight and cut back, but that method didn’t work in 2008, and it’s not likely to be effective today, says Sean Pour, co-founder of SellMax, which provides cash for cars. Pour started his business during the 2008 recession at the age of 14 and has since scaled the company to nationwide.
“In order to stay relevant, a company has to make marketing a priority,” says Pour. “Otherwise, your business gets lost in the crowd.”
Edith Pearce agrees. She is a personal injury lawyer and founder of The Pearce Law Firm. For Pearce during the 2008 financial crisis, making her company stand out was critical to survival.
“We are one of few women-owned law firms in Philadelphia,” says Pearce. “I continued marketing and let people know of my firm’s unique position in the marketplace. That led to a loyal following of clients.”
As Pearce sees it, no matter the source of the downturn, it’s vital to be creative and unique. “I am currently considering new ways for our law firm to stand out,” she says. “For instance, I immediately posted on our website that we’re open for business and can service clients' needs via teleconference during the COVID-19 outbreak. I am also looking to be creative and unique when we re-open our physical location.”
Develop and refine processes during the downtime
During the Great Recession, Lisa Tadewaldt, owner of Urban Forest Pro, a tree service company, found her time was best spent refining her company’s processes and products.
“During the 2008 recession, I took the extra time to refine processes so that we could remain competitive during the uncertainty,” she says. “This led to the company being better positioned post-recession. I accomplished tasks I’d been thinking about doing but never had the time prior to complete properly. It was essentially an audit of our entire business model that looked for ways to save or become more efficient without sacrificing the quality of the deliverable to the clients.”
In today’s COVID-19 business environment, Tadewaldt is using lessons she learned during the Great Recession. “Even if your business is closed, go to work every day,” she says. “If you’re at home, sit down at your kitchen table, and develop and refine processes. That way when you weather the storm, you’ll reemerge stronger while your competitors are still strategizing.”
Pivot to survive the economic crisis
Jerry Haffey opened Ambrosia Treatment Center in 2007 not long before the Great Recession. The company’s CEO and founder started with one facility and a handful of staff members. Today, his company has grown to 250 employees and five addiction treatment centers across the U.S.
“Like most companies that survived the recession, we had to be flexible and adaptable in terms of competitiveness of our services,” says Haffey. “Our personnel also had to be quick to adapt and reframe for the changing economy.”
As Haffey sees it, pivoting is now much easier and quicker than in 2008. “Today, there are even more opportunities for small businesses to adapt. For example, many brick-and-mortar stores have quickly shifted to online sales, curbside pick-up and delivery to retain a baseline of revenue that's sustainable, even if only temporarily. Some small companies have even completely shifted their product line to include in-demand products to help protect against COVID-19. This all illustrates how capable today's businesses are of adaptation.”
Become an authority
Those companies that survived the Great Recession, and will spring back from the latest financial crisis, were influencers in their fields.
“Content marketing and thought leadership are just as important today as they were in 2008,” says Arnof-Fenn. “Activities like writing authoritative articles, hosting webinars and podcasts, and building your following on social media all contribute to increasing your awareness with potential customers and building your credibility within a larger community,” she says.
Arnof-Fenn believes that the most trusted leaders and brands will have a competitive advantage in the new normal that evolves in a post-Corona world. “Employees, customers, and clients will remember if your business treated them well during the crisis and will reward your company with loyalty for earning their trust during the bad times,” she says.
Strategies that didn’t work during the Great Recession
Several coping strategies tended to not help during the Great Recession. These included cutting back significantly on advertising and marketing and offering services at drastically reduced rates.
“Aggressive sales and discounts didn’t seem to be effective back in 2008, and they still don’t seem to work for our offerings when customers are scared about their finances,” says Tadewaldt. “Those customers with disposable income have found you and are likely to buy despite the economic climate. That means you're essentially discounting a service that was already sold at retail value.”
Tadewaldt gets around this by offering an incentive to those who are price-shopping, which is something she is also doing today. “We prefer to price match if the customer mentions a competitive quote,” she says. “We find this prevents us from losing sales to our competitors.”
What lies ahead for small businesses
Given the volatility of the current world, the business landscape is changing moment-by-moment. Chances are you’re going to find yourself and your company changing right along with the times. Put one foot in front of the other and keep these tried-and-true methods in mind, and your business is likely to come out the other side much stronger.
While weathering the financial situation is difficult, it helps to know that Swyft Filings has everything you need to ensure your company’s important paperwork is in order.