Why cloud technology will aid SMEs in being ready for a recession

By Damian Hanson, Co-Founder & Director of CircleLoop


The state of the UK economy has been brought to light in the news by reports of high inflation and skyrocketing cost of living. Additionally, SMEs are facing uncertain times as a result of the most recent announcement that the Bank of England increased interest rates to 2.25%, the highest increase in almost thirty years. There is no doubt that we are currently experiencing one of the most taxing macroeconomic environments in a while and we anticipate additional rate rises next year.

According to Barclays SME Barometer, three-quarters of small and medium-sized companies are worried about the long-term impact the cost of living crisis, soaring energy bills and rising inflation will have on their business. So how can adopting technology changes and making investments in cutting-edge cloud technology will help them navigate these turbulent times?

What is likely to happen?

SMEs are the backbone of a healthy economy and are important contributors to job creation, new markets opening and global economic development. Unfortunately, when a recession hits new enterprises, startup funding and valuations suffer the most. Less money will be available for investment, making it more difficult and expensive to raise the capital needed to launch or expand a business. Some businesses won’t even get a chance to launch before they fail.

The difficulties differ for more established SMEs that depend less on funding. As there’s less requirement to start something new and more emphasis on holding onto what they already have, the aim is to withstand the pressures long enough to survive the recession. Some SME owners will need to acknowledge that growth may be unattainable during this time and focus on simply surviving the crisis instead with minimal losses.

Sales in some industries such as retail and consumer goods could struggle as customers tighten their belts. SMEs need to be cost conscious by streamlining business operations to reduce costs if needed  and satisfy the declining demand for goods and services,

Recession-proof your tech stack

All of this seems a little bit gloomy. However, your businesses can stand a better chance of being recession-proof with a little early planning and innovative thinking.

A good place to start is by reviewing your software and technology stack. Your company’s use of technology has a big impact on how much it costs to operate. Inefficient hardware or an overabundance of overlapping software may not seem like a huge deal in normal circumstances, but during a recession, these problems can quickly become a drain on money, time, and resources that SMEs simply don’t have.  Using software delivered in Software as a Service (SaaS) models is likely to be lower risk because these can be activated and scaled up or down, or even off, as required without long contractual commitments.

While it’s important to invest in the appropriate support for your business, it’s equally important to reevaluate those demands during a recession. Are there any technologies that your company doesn’t use frequently enough to make the investment worthwhile? Or perhaps there are ones that are vital but create more work because they don’t do everything you need and a better solution is required?

Advancements in cloud computing for business now enable easy integration of common tools. For example, a cloud-based business phone system used by your sales team can be connected to your CRM app(https://www.circleloop.com/integrations/hubspot), Office 365 and your email provider on one platform that’s easy for them to use and gain insights from, increasing their productivity and chances of success when it matters most.

The significance of maintaining marketing activities throughout the crisis is another recession-proof strategy to take into account. Many businesses changed their plans for scaling up and drastically reduced their marketing expenses during the 2008 recession.

Another recession-proof tactic to consider is the importance of retaining marketing efforts during the recession. During the 2008 downturn, many companies diverted their plans away from scaling up and cut marketing budgets dramatically. Later research found businesses that retained their marketing strategy and budget emerged from the financial crisis stronger, outperforming the market average by more than 30%. Food for thought in the coming months.

Stay Flexible 

A final but important note for SMEs and startups facing uncertain times ahead is to be prepared to adapt. Stay flexible.

As the recession turns the market upside down, what worked for your business in non-recession times may no longer be effective. Refusing to acknowledge the rapid changes happening to your customers, your employees and your supply chain is the equivalent of sticking your head in the sand. Making significant changes to your business model or pivoting your offering in the middle of economic uncertainty may seem high-risk but it could also be the difference between survival and failure.

Cloud-based or remote-enabled business tools are becoming more and more important for creating a modern and future-proof organisation. During a recession, businesses can’t afford to ignore the additional benefit of agility and flexibility afforded by these technologies during the turmoil. The abundance of data that these technologies can easily supply will turn into the crucial insights that your company needs to track to assure growth once the dust settles.

It’s not impossible for SME’s to survive a recession. Those that survived the past recession emerged from it leaner, more effective, more adaptable, and more conscious of how they define success. Instead of overreacting or underreacting to what lies ahead, adopt this mindset to stay afloat.


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