Recession-Proofing: Is your Franchise Business Prepared?
Small franchise businesses are often more agile than large franchises, as they are able to adapt quickly, in order to cut costs or switch strategies in troubled times. Small franchise businesses are able to easily adjust their product offering. This gives the ability to step in to supply outsourcing services to larger businesses during economic recessions.
Guidelines to recession-proof your small business franchise:
- Focus your business franchise offering: Provide necessity-based products or services. Even in a ‘down’ market, consumers and businesses need staple goods like computer services and food. Ironically, even luxury items like boats and designer handbags can succeed if you can hang on long enough for the market to pick up again. The trick to staying afloat is to avoid the ‘middle’ segment of the market.
- Secure significant customers. Acquiring one or two big contracts could easily help you cover your overhead cost. Therefore, it can be worth your while to offer these larger customers a discount to encourage them to give you their business.
- Hire part-time staff. Hiring part-time employees or outsourcing some of the functions in your business can cut costs dramatically.
- Buy an existing franchise instead of a start-up franchise. Many existing franchise opportunities are still worthwhile; often the owner has just run out of the time and/or energy to keep going. If you can find the right franchise you already have a foundation and an income stream that can be cultivated, rather than having to start from scratch. This way you can have money coming in from day one.
- Protect your cash flow. Cash flow is the life force of your business – to keep your small franchise healthy, cash needs to continue flowing into it.
- Review your inventory management practices. Reduce inventory costs without sacrificing the quality of goods or inconveniencing customers. Are you ordering too many particular items? Can certain items be sourced somewhere else at a better price? Are there alternatives that will work for you, to eliminate shipping and warehousing costs?
- Develop and implement strategies to win your competition’s customers. For your small franchise business to prosper in tough times, you need to continue expanding your customer base – that means drawing in new customers from various sources, including your competition. A means of doing this is offering something more or something different to your competition. Research and analyse your competition to see what you can offer to sway their customers into becoming your customers.
- Continue marketing your franchise business. During tough times, many smaller franchises often make the mistake of cutting their marketing budgets or eliminating it entirely. However, it is during these times that your small business needs marketing the most. Consumers are often restless and are looking at how they can make better choices, thus making changes in their buying decisions. To attract there attention, you need to help them to find your products and services and to choose them rather than others. This can be done by getting your name out there. So instead of cutting your marketing budget, use this time to increase your marketing efforts.
It is important to stay positive. Many franchise businesses stop doing things that will help them grow because they fear the recession, and then do just that – stop growing.