Businesses that are not a part of recession-proof industries can use the following below-mentioned strategies to reduce the impact of an economic downturn.
A lot has already happened in the first half of 2022, and we can’t ignore it. The financial markets have changed rapidly, a war spiked mass inflation, and the global stock market took a dive. Also, how can we forget to mention the tail-end of Covid-19 and the resulting economic ramifications? That’s all we hear about in the news today.
Keeping your company afloat during a recession or an economic downturn is not easy, especially if you are encountering such a situation for the first time. Although nobody can control or predict when a recession strikes, you can control what you do to prepare.
In this article, we will dive into the key strategies that have helped protect many companies across different industries during past recessions. These recession-proof business ideas will help your business weather a recession and come out stronger on the other side. So, let’s get started!
The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity that lasts more than a few months, normally visible as declines in the gross domestic product (GDP), employment, industrial production, and income.
Recessions have lasted from two to 18 months since 1950, which can be stressful for business owners as they are not sure how long such situations will last. A business can freefall without an end in sight — if it isn't ready.
However, not all businesses are affected in the same way or to the same extent during an economic downturn. According to a Harvard Business Review study, nearly three-quarters of U.S. public companies with $50 million or more annual sales had declining revenue growth during the last four economic downturns, while 14% accelerated revenue growth and increased profitability.
This difference in outcomes can be attributed to the type of product or service they sold and how they met the demands of customers. In addition, certain services, such as healthcare, education, and automotive repairs, are still in huge demand during a recession.
Businesses that are not a part of recession-proof industries can use the following below-mentioned strategies to avoid or reduce the impact of an economic downturn on their operations.
In this section, we will discuss the key ways to recession-proof online businesses when the economy goes south. These strategies may not be all appropriate for any particular business, but selecting the right ones from this list can help recession-proof any organization.
Don’t wait for the first signs of a recession before you start to do something about it. By then, it may be too late. So, if you don’t have a strategic financial plan, now is the time!
A strategic financial plan is a great way to understand how financially sound your company is today. This, in turn, will help you start saving for an economic downturn. If you already have a financial plan in place, it’s time to start building a cash reserve. This may be the most important step you take.
Build enough cash reserve to cover at least six months' worth of crucial business expenses. Doing so will help you sustain your company, and the longer you can maintain your company through the recession, the more likely you will survive in the long term.
One of the key ways to recession-proof your business is to have multiple streams of revenue. Having several ways of bringing in revenue at a wide range of price points s necessary to maintain your income, regardless of any economic downturn.
Incorporating ad revenue, affiliate marketing, and sponsored content can help your bottom line if the economy takes a downturn.
You don’t want to be stuck in a situation where you are unable to make a shift or pivot. Multiple revenue streams will help your organization stay flexible and be able to persevere.
A large number of small business owners see massive corporations taking huge amounts in debt and assume those companies are struggling to survive.
However, the fact is that they are typically using that amount to scale their operations. The trick with financing is to maintain a healthy level of business debt, which many small businesses find difficult. Smaller businesses don't have the same backing as their larger counterparts, so they need to be more cautious when handling debt.
While you might not think of it as the first step when trying to save money, promoting your business is essential to weather a recession. Investing in strategic promotions helps you gain new customers, which can help offset lost business.
Look at your current recession-proof marketing strategy and reevaluate your marketing process in the current environment. Make sure to reexamine your company's website and keep a close eye on analytics to ensure that you are generating revenue for your business. Sometimes even minor changes to your website and social media strategy can prove to be a boon for your business.
You will need to rely on your team to help your business stay flexible, pivot, and think creatively during a recession. Hence, it becomes important that employees are in prime shape to meet these challenges.
Cross-training staff and building up skills can help achieve that end. In fact, investing in employees would help them feel more connected to the business and willing to go the extra mile when they are called on to do so.
Considering all the key business recession strategies, prioritizing customer service is an effective way to guarantee long-term stability for a business. Customer service is important to getting repeated sales, which, in turn, are essential for a company to survive during a recession.
While this depends on your industry, attracting new customers is generally more costly than keeping existing ones. Realizing this will help your business to become recession-proof by channeling your focus on the wants and needs of existing customers.
Pay attention to their concern and take steps to resolve them. You can enhance customer satisfaction by ensuring that your staff is fully trained on your products or services and customer care.
Find innovative and unique ways to reach your target audience. The food service industry drastically changed its perspective pool of customers during the Covid-19 pandemic by shifting its focus to delivery efforts. Businesses that previously did not focus on delivery created new lines of income by partnering with food delivery apps and expanding their services to reach new customers.
With time, these customers became loyal and continued ordering from their favorite restaurants long after restrictions lifted.
For instance, Airbnb opted for a similar approach by shifting its focus from short-term to long-term rentals. Their customers included affluent professionals with high incomes who could find relief from stay-at-home orders by finding a long-term change of scenery. As restrictions lifted but work from culture still remained, Airbnb was able to retain these customers while picking back up focus on short-term travel again.
However, one thing to keep in mind is that recessions are not everlasting. Tunnel vision marketing can drastically affect future revenue if you no longer offer a service needed outside of a recession. If your core offering remains on clients’ needs during a recession, your revenue will stagnate or drop significantly once the market steadies.
The right technology can help businesses stay afloat during challenging times while also saving money. It’s best to have the technology installed and tested in advance to avoid costly or embarrassing errors during a crisis.
For instance, adopting technology to change distribution methods, such as switching to virtual delivery, allows businesses to earn revenue when in-person or physical delivery isn't an option, like in the case of tutoring.
Similarly, contactless payment technology and online ordering can help customers continue to buy products from retailers and restaurants. Such technologies can be a permanent addition, allowing customers another way to interact with a business.
By the time business leaders know they are in recession, many may feel it’s too late to do anything meaningful other than slashing costs. Recession-proofing a business may start long before an economic downturn arrives. Recession-proofing is best approached in a measured, thoughtful way to avoid potential errors, which are more likely to take place when managers are ill-prepared for a crisis.
It requires a balance of smart customer marketing, cost cuttings, and strategic investments. Consider the above-mentioned tips to recession-proof your business and thrive during an economic slowdown. In case you need more help, consult the best app development companies for startups to prepare for an economic recession.
With a mixture of literature, cinema, and photography, Manish is mostly traveling. When he is not, he is probably writing another tech news for you!
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