“Are we headed into a recession?” You can’t pick up a newspaper without seeing that question.
Richard Eisenberg a contributor to Forbes Magazine admits to having been, “involved in the Financial market since the Stone Age” and while he doesn’t have a crystal ball, he does claim to know “with 100% certainty” that a recession is coming.
And while this may send shock waves of fear across the average small business owner. We’re here to help you plan correctly and be anything but average.
“If you have a plan for the recession, it can be a real opportunity; you can pounce. That’s the idea.”
- Jonathan Slain author of Rock the Recession: How Successful Leaders Prepare for, Thrive During, and Create Wealth After Downturns.
Everyone knows the old adage of hunkering down and simply surviving a recession.
But we’re here to pose the question that is, what if you use the recession as an opportunity for leverage you wouldn’t normally have access to?
Does size really matter?
It’s easy to think that recessions hit all businesses equally, resulting in similar levels of underperformance. However, according to studies, this presumption couldn’t be further from the truth.
While some firms might experience a decline in sales as a result of the recession, other businesses experience a strong rise in sales.
Furthermore, the thinking behind small businesses being especially vulnerable to recessions is largely open to debate.
What small businesses lack in resources and cash, they more than make up for in terms of speed and flexibility.
The one thing we can be certain of is that irrespective of your company’s size, your ability to adapt quickly is your biggest defence against recession.
Therefore, be sure to completely understand the forces your company will be exposed to at this period before choosing your battles.
It’s important not to make big decisions with a lens of either excessive pessimism or optimism.
You can achieve this by monitoring the health of your top clients and their evolving needs, looking into the stability and relevance of your current supplier base, and developing a deeper grasp of your business’s competitive advantage in the current economy.
Get productive
Everyone knows that during a pandemic you’re supposed to begin full scale cost-cutting strategies right? Well, Ironically, it becomes abundantly evident from HBS research on recessions that adopting a single-minded, “cost cut only” strategy is a surefire way to fail.
This is because such a strategy believes that a company would simply have access to personnel, technology, and opportunity after the recession is gone. This is almost never the case, and a business that simply employs cost-cutting measures would find it difficult to recoup its capabilities once the economy stabilises. Performance never returns to its pre-recession levels because of this.
It is much better to gear up your organisation for a sharp increase in productivity during this lull period.
So start with your clients, which of your existing customer-facing operations can be automated or simplified to provide goods and services more quickly, affordably, and effectively?
Can you eliminate underperforming product lines and simplify your proposals?
Can you spend money on tools, training, or technology that can help you perform better fairly quickly?
By offering higher-quality goods and services than your rivals, such an approach will not only help you cut your cost structure but also gain an advantage over them.
You may need to get rid of certain personnel who are no longer necessary during this process. However, these figures are probably lower than you would have expected.
Get strategic
Companies, buildings, equipment, and land all become cheaper to acquire during a recession. However, just because an asset is cheap does not mean you should necessarily buy it.
Instead, for example, retailers could use this time and resources to invest in upgrading their technology stack and digital talent. In the process, they’ll accelerate their shift towards an ecommerce-centric business model.
Get selective
As with the last point, it is not a smart idea to increase all pre-recession R&D and marketing expenditures.
However, if done carefully, greater spending in these areas is one of the most powerful growth generators.
Spend more money on R&D initiatives that will help you strengthen your pertinent competitive edge in the new global economy.
The same applies to marketing expenditures. Do not invest marketing funds in anything if it is not essential to resolving customer issues in light of the current financial crisis.
If you are spending money on customer service, increase your investment right away to increase your market share.
An excellent example is Hyundai’s Genesis, which during the financial crisis became a runaway hit thanks to a savvy marketing strategy and a distinct positioning towards “affordable luxury”—something the other manufacturers at the time could not possibly follow.
In spite of the overall declining automotive market, Hyundai gained record market share and boosted shipments in 2009, earning the prestigious North American Car of the Year honour.
Time to change for the better
Recessions are a tough time for most businesses and it’s no doubt that some businesses will struggle. However, recessions can also be a great opportunity to shake things up for the better. As business owners we can often turn into auto-pilot mode, letting things just continue to get by.
Now is the time to truly step back, look at the big picture and begin fine-tuning every aspect of your business.
We should use this time to take some creative risks and take our companies long-term performance up a notch.
If you found this article useful then you’re not going to want to miss MOMENTUM Business & Mindset event, taking place on the 22nd of September 2023.
We’re bringing together Northern Ireland’s, hottest, sharpest, most creative minds in an action packed night unlike any other.
Hear from some of NI’s most successful and resilient entrepreneurs as they share their journey to success with tips and hints along the way.