How to build a recession-ready small business

With weak economic growth and continuous load shedding in South Africa, small businesses need to be able to weather any economic storm.

But how do you build a recession-ready business?

The South African economy recorded zero growth for the first quarter of 2023 after a fourth quarter of negative growth in 2022. Everything indicates that a technical recession, defined as two consecutive negative quarters of growth, is on its way, despite finance minister Enoch Gondwana ruling out the possibility.  

This is also evident in the latest FNB/BER consumer confidence index that decreased -23 points in the first quarter, down from -8 in the fourth quarter, also indicating increasing financial strain among consumers.

Although the economic climate is forcing consumers to become more price conscious and thrifty, businesses in South Africa face unprecedented operational costs that they cannot absorb and have to pass on to consumers.

Businesses find themselves in a uniquely challenging position, says Craig Pitchers, chief operating officer at courier service The Courier Guy. However, he says, companies can become stronger and more resilient to withstand the economic storm.

He recommends that businesses focus on what he calls the three Cs of building a recession-ready business, namely costs, customers and collaboration.

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Lower costs to get recession-ready

When it comes to costs, Pitchers believes there are many creative ways to lower operational costs, but he warns it is critical that cost-cutting does not negatively affect the quality of a business’ final product or service delivery. 

He suggests outsourcing certain non-core activities to reduce overhead costs and free up internal resources to focus on core business activities. “The Courier Guy offers competitive and transparent pricing options for business clients nationwide, that reflect the quality and reliability of its services, including special rates for selective industries or delivery volumes.” 

Customers are important because there would be no business without them. Studies show that it is between five and seven times more expensive to acquire a new customer than to keep an existing one.

Another good way to get recession-ready is to ensure that your business strategies place a heavy weighting on client retention. To keep clients happy and satisfied during a recession, Pitchers says companies must prioritise excellent customer service and a personalised experience.

“By focusing on customer satisfaction and loyalty during a recession, businesses can ensure they keep their existing customer base, while also attracting new customers through positive word-of-mouth and reputation.”  

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Work together to get recession-ready

Collaboration involves identifying suppliers in your industry or related industries that can help you to stay up to date with market trends and identify new opportunities. This goes hand-in-hand with another robust recession-proof strategy for businesses to be agile and adaptable to ensure they can pivot their business strategy, if necessary, by shifting focus to a new product or service, or targeting a new audience or market.  

“Never underestimate the power of reliable, loyal and like-minded partnerships in times of economic crises. By depending on each other, businesses can provide a more comprehensive solution and increase the value proposition of their services.”

He says for example, the Courier Guy offers last-mile delivery services for businesses that require assistance with the final leg of their supply chain.

“With the economic sentiment suggesting a muted national outlook for the year ahead, it is more important than ever to be creative and open to new ideas that can help your business survive and thrive.”