How to Remain Profitable as a Small Business During an Economic Recession

Topics: Small business, Business, Entrepreneurship Pages: 4 (1231 words) Published: February 17, 2012
The recent economic recession faced by not only the United States, but also major countries across the globe, has made it tough for businesses to keep operating at a profitable level and forced many to downsize their personnel or to even go bankrupt. In fact, this tough economic period has caused consumers, whether they are manufacturers buying raw material or an average person buying food at the grocery store, to be a lot more conservative with regards to their needs and spending. Consequently the small business sector, which relied on niche markets and customers that value quality over price, became the sector most affected by the economic recession. As a result of this lower demand, many small businesses have had to implement new or improved business practices to remain profitable.

The most effective way for small business owners to remain profitable during tough economic times is to reduce operating costs, using methods such as inventory reorder point systems, vertical integration, or by cutting down on unnecessary business expenses incurred. Other practices such as benchmarking are also used by small businesses to remain competitive in their respective markets. On the other hand, businesses regularly try to attract customers by offering incentives to buy their product or services. Rebates, discounts, free merchandise, and reward systems are all examples of incentives used by businesses to attract consumers. Also, business will often increase their level of customer experience and social responsibility in order to seduce customers and establish strong brand equity.

During a time of recession where revenues are lower, small businesses still incur the same amount of fixed expenses; therefore cutting down on theses expenses is essential to realize positive earnings. The most effective yet unpopular way to cut down on fixed expenses would be to lay off personnel or outsource some business functions. However there are different ways to cut reduce...
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