Some predict a recession, while others claim it has already begun. While a recession is a terrible phrase for any firm, it’s especially concerning for small enterprises, which may lack the financial cushioning of larger corporations. That’s why it’s critical to start planning now to recession-proof your company. As the economy worsens, it will be considerably more difficult for you to respond quickly and keep your firm afloat. Don’t be concerned. Here are five steps your small business may take to respond correctly during a downturn in the economy:
Focus on core competencies.
Your company excels at one thing in particular. It’s most likely your company’s main product or service, and it’s what will keep it afloat during a downturn. Reduce the number of goods and services you support to the ones that you know perform best, and don’t waste money on those that don’t. Find ways to produce numerous streams of money through promoting your core product or service, if at all possible. You can also boost your earnings by offering VIP and economy versions of a service you already provide. Consider a subscription option that includes additional perks and is automatically renewed.
Don’t stop marketing.
During a recession, it’s more crucial than ever to do everything you can to keep on customers’ minds. Regardless of your financial situation, set aside funds for marketing (including the cost of establishing a good internet presence) and do your best to keep in front of your clients. To get you started, here are a few suggestions:
- Send content-rich emails to your present customers on a regular basis.
- Make a convincing offer to past customers you haven’t heard from in a long time to get them back.
- Consider conducting social competitions, sales, or events, and post regularly on social media.
Be aware of the times in which you choose to engage with your audience. Maintain relevance in your messaging while keeping your company’s brand identity front and center. Also, avoid making a hard sell. Observe the crowd – during a recession, everyone is strapped for cash.
Protect your cash flow.
Recessions result in narrower profit margins, making it difficult to maintain a stable cash flow. So, for a moment, let’s get painfully genuine. If your cash flow stops, your company will most likely shut down. So, in order to survive a recession, you must plan ahead for measures to protect your cash flow. Here are a few possibilities:
- Reduce any unneeded expenditures. Examine your present expenditures. Is there anything in your business that you can go without for a period, such as services, subscriptions, or resources? If that’s the case, then do without and put that money toward business expenses.
- If possible, renegotiate vendor agreements to include more favorable conditions. Keep in mind that your vendors may be struggling as well. They’d probably prefer to renegotiate the terms of your contract rather than lose your business altogether. While the economy is shaky, see if they’re ready to offer you a lower price or more flexible payment terms.
- Make arrangements for financial help. Examine the possibility of obtaining a small company line of credit. To keep your firm afloat, apply for small business grants and small business loans. Small business loans like Kabbage might make the difference between survival and bankruptcy. Check out this list of the finest small business loans, and learn more about the Small Business Administration’s funding options.
Finally, make certain you are aware of your cash flow condition. You won’t know how to protect yourself unless you have a clear handle of the figures.
Invest in your existing customers.
Getting new clients is more expensive than keeping old ones. Even in the best of circumstances, this is true. People cut back on their purchasing during a recession, making it even more difficult to persuade a new customer to try your firm. As a result, investing in your existing consumers becomes even more critical. Now is the moment to establish genuine connections with your customers. Demonstrate that you are on their side. Treat them with deference and demonstrate that you appreciate their patronage with your actions.
Delegate and automate.
It’s time to start delegating if you’re planning for a recession. Determine which duties may be delegated to other employees and whether there are cost-effective automated solutions that can execute repetitive jobs faster than you or your team. Delegate the jobs that take the greatest time and provide the least financial return first. Try to get rid of any tasks that aren’t in your wheelhouse or that don’t bring in a lot of money. Your time is one of the most significant resources in your company as a leader. Make sure you save it for the projects that will have the most influence on the company’s bottom line.
It’s difficult to run a small business during a recession. A recession, on the other hand, does not have to be the end of the world. To adapt to the new reality, your small business will need to be agile and flexible. You can recession-proof your firm and emerge stronger on the other side if you plan ahead, execute properly, and stay focused.
What small businesses thrive during a downturn?
A number of vital services in the home restoration and repair business are recession-proof. With annual spending on home improvements in the United States exceeding $400 billion, it is an industry with a lot of room for growth.
Here are a few good business ideas that are still in demand even during economic downturns.
Plumbing: When a plumbing issue arises at home or at work, it is simply not possible to wait until a more financially secure time to have it repaired.
Auto Repair Services: Because many individuals rely on their vehicles and trucks to commute from home to work and cannot afford to be without one, auto technicians will be in high demand throughout a downturn.
In a downturn, how can a company stay afloat?
For any firm, large or small, a recession appears to be the worst-case situation. People lose their jobs or the income they need to pay their bills and stay afloat. This has a negative ripple effect, causing businesses and homes to close their doors and install shutters over their windows. Cities as a whole are in risk of becoming ghost towns.
My company is still in operation and intends to stay that way for a long time. While developing scales, we learned from the best and want to share what we’ve learned with you. In some circumstances, a crisis might even help your company expand.
What can a small business do to prepare for a downturn?
How Can Small Business Owners Prepare for a Downturn?
- Pay attention to your cash flow. Cash flow reigns supreme, especially during a downturn.
What types of businesses can withstand a downturn?
Businesses that are recession-proof are the only ones that are relatively undamaged during a downturn. They are perfect industries for meeting people’s basic needs, whether in the form of a service or a product. Despite being financially strained, consumers’ needs are continually directed to their trade, so they will likely thrive and withstand the effects of the crisis.
Take, for example, Disney. During the Great Depression, the company was created. The Disney brothers realized that America needed to be cheered up again in a moment of terrible despair. They were able to expand their firm as a result of this chance, and they were able to overcome the recession’s problems.
As a result, in current downturn, every individual, business, and investment should reevaluate and seek sanctuary in the so-called recession-proof industry.
The nine finest recession-proof enterprises for surviving this critical moment are listed below, in no particular order.
Grocery and Food Stores
In an economic downturn, the food business and grocery stores, unsurprisingly, thrive. During a recession, profits in grocery stores, fast food restaurants, and retail establishments stay relatively stable.
A good example is the frozen meal and coffee industry. Frozen food manufacturers should anticipate a 4.8 percent increase in total sales. The retail coffee market, on the other hand, expanded by 6%, a significant increase over the initial prediction of only 2%. No crisis, not even the apocalypse, is likely to stop people from eating and drinking.
However, this industry may still be vulnerable to the recession’s consequences. During the past recession, each household’s food consumption fell by 7%, possibly because customers were more likely to buy on sale or hunt for cheaper alternatives in order to save money. However, the reality is that consumers can only cut their food spending so much.
Consumers’ eating habits are stimulated and increased in times of crisis, which is interesting. When people are worried, they crave and eat more, especially sweets and alcohol. During the Great Depression, Snickers and Mars chocolate bars were created. Cadbury chocolate sales have reportedly increased by 30% in tandem with McDonald’s amazing business development during the 2008 recession. As a result, the food industry is one of the most recession-resistant industries.
Accounting and Tax Services
It must be so tempting to avoid paying those taxes! Regardless of whether there is a recession or not, taxes must be paid on time or face the repercussions.
What’s even worse is for an individual or a corporation to attempt bookkeeping on their own in the hopes of saving money. While it appears to be a quick gain, there is a lot of danger involved, and incorrect calculations could backfire and cause more problems down the road.
Entrusting a trained accountant to deliver the work while you focus on and target revenues is a prudent decision to make, especially during difficult circumstances.
Accounting firms are another business area that thrives during economic downturns. It’s extremely important for firms to have a robust accounting and bookkeeping system in place during recessions.
In times of slowing economic development, a company’s initial instinct will be to decrease costs and balance its books. When cash flow is limited, many businesses will want accounting assistance. When a business is in trouble, an accountant’s skills are needed to review spending, manage remaining resources, and offer sensible advise on how to resolve financial issues.
Unfortunately, most business owners are unaware of their tax obligations. Accounting assistance will be able to tell you where these tax benefits can help you. More importantly, these experts will assist a person in navigating and comprehending the latest adjustments in company regulations brought on by the COVID-19 pandemic. When an economic downturn strikes, it’s critical to rely on accounting help.
Financial Advisors
Have you noticed that a growing number of financial advisors and money managers are emerging from the shadows recently? The most basic explanation is that they’re in the business of providing services that people will require as the market falls. To put it frankly, their work was designed specifically for current economic downturn.
Investors and rich individuals, like business owners, want to protect their assets and ensure that they are well cared for during difficult times.
It’s only normal for us to be concerned and defensive with our resources during a downturn in the economy. Financial advisors frequently advance at this phase because their profession is in high demand. Their sound guidance will inform investors about the various types of investment accounts available.
Information Technology
I.T. jobs are unquestionably the most in-demand profession in today’s age of technical breakthroughs. Its major task is to promote innovation, which leads to business success. In reality, one of the causes for high traffic online is the present recession, which has resulted in an increase in sales.
Every department in the business world relies on information technology to improve their work procedures and strategies. A company can’t function without information technology. During this epidemic, the information technology industry has shown a lot of potential for enterprises, especially now that the work-from-home experience is widely accepted. More businesses are allowing employees to work from home.
In addition, information technology is one of the key factors that has contributed to the expansion of international trade and the market. Businesses that engage in linked assets and exploit information technology get closer to the international market, perhaps growing sales despite the recession.
We’ll even go so far as to argue that, in order to increase efficiency, every industry today will need to include information technology. Their service has shown to be beneficial to businesses. Businesses that refuse to adapt to technological improvements face a gloomy future. There are many reasons why information technology is regarded as the world’s fastest-growing industry. Their services are required today and will continue to be required in the future.
Telecommunications
The telecom business, like information technology, is here to stay, regardless of the economy. The COVID-19 crisis’ ramifications only served to highlight the industry’s current prominence.
To communicate online, people need their phones, among other things. As a result, the industry became inextricably linked to the global economy. People are interested in learning how to talk naturally in the local language of their clients as a result of the globalization of consumers. Furthermore, as the telecom industry has innovated, online enterprises have thrived alongside it.
Many people have been able to make money and learn new skills without having to leave their homes thanks to the online sector. People can also sell products online because of this sector.
Furthermore, the pandemic prompted universities to follow suit. Since the implementation of social distance, telecommunication has become a prerequisite in educational institutions, along with the instantaneous rise of study materials.
Despite the fact that some consumers have lowered their units, telecoms sales continue to grow, indicating that they are one of the most recession-proof industries. Even before the pandemic, the sector had demonstrated its efficacy, and it will undoubtedly play a key part in the current global catastrophe.
Healthcare Services and Providers
Someone will become unwell every now and then. When people are sick, they will always seek medical help, even if their funds are limited. Because of its price inelasticity, the healthcare industry might be considered recession-proof.
Clinical institutions and medical occupations are among the few industries that are unaffected by economic downturns. In a down economy, this company is unlikely to slash costs.
For example, during the Great Recession, the Occupational Employment Statistics (OES) assessed nurse employment in the United States. Focusing on the recessionary years of 2007 to 2010, the study found that, despite a nationwide job loss of roughly 7,257,090 million jobs, nurse employment increased by 7.6% over the same period.
Healthcare and food (discussed before) are two key industries that can thrive during a downturn. We’ve even seen the public health response to the COVID-19 outbreak today, and how healthcare providers play a key role in the midst of unprecedented financial instability.
However, due to the unique circumstances and emergencies brought on by the pandemic, several medical industries, such as surgeries, were forced to close and were unable to thrive in comparison to past recessions. Furthermore, we thank our COVID-19 front-line fighters, particularly doctors and nurses on the front lines, who are valiantly fighting the virus today.
Auto Maintenance and Utility Services
During recessions, companies that focus on utilities, repair, and maintenance will likely survive and prosper. People are even returning to do-it-yourself crafts and mending items on their own. Some fixes, however, are simply beyond our control. This is where the service industry comes into play.
Things will eventually fall down as time passes. The so-called wear and tear elements on autos will require special attention. Plumbers will need to inspect a leak in water pipelines for utilities. During times of adversity, the services provided by these handymen remain unaffected. This is also true of companies who sell tools and materials for home and car improvement.
Furthermore, as the current epidemic continues to spread around the world, coronavirus cleaning and disinfection services are gaining popularity as they become more valuable to businesses and residences affected by the outbreak.
During a period of considerable uncertainty, utility services remained afloat and continued to operate alongside the influx of new cleaning-related enterprises. The simple reason for this phenomena is that such services are already considered important by the general public, particularly in light of the current global health crisis.
The bottom conclusion is that, as a result of the pandemic, everyone appears to be more aware of and concerned about hygiene. As a result, demand for cleaning equipment and commercial cleaning services increased dramatically. Cleaning is unquestionably one of the few industries that thrived throughout the COVID-19 era.
Children’s Goods and Dating Industry
The necessities for a baby, such as diapers, milk, and bottles, are virtually recession-proof. You must provide for your child regardless of your financial status when you are raising a child. As a result, firms that sell infant and childcare supplies can weather a downturn and rarely fail.
For the sake of their children’s health, parents are now compelled to confine them within their houses. The times have changed, and many parents are left to instruct and entertain their children on their own. As a result of the pandemic’s consequences, the number of purchases of children’s books, games, and crafts increased dramatically.
Even children’s toys and clothing are recession-resistant for both practical and emotional reasons. Shortly after the epidemic began, total sales of children’s toys in the United States increased by 27%. Parents can’t deny the reality that their children grow up quickly, necessitating the purchase of larger clothing and shoes. And, while a toy is only a “wish,” parents will require it to calm their children.
Parents frequently prefer to save money in other areas rather than sacrificing their children’s necessities.
Another consequence of the COVID-19 pandemic today is disturbed family planning, which leads to unwanted pregnancies, as a result of long-term lockdowns and community quarantine. As a result, while starting a recession-proof firm, childcare items cannot be disregarded.
On that topic, the pandemic outbreak has shown the corporate world that the dating industry is still thriving and recession-proof.
Courier Services
This is what sets courier services apart from other companies. With the rise of e-commerce during this epidemic, freight and logistics companies are well-positioned and unfazed in today’s global market.
Industries that provide delivery services, such maintenance and utility services, are able to stay afloat during recessions. During today’s crisis, social distancing established around the world had a good impact on the freight business. Even routine errands such as grocery shopping are now available through delivery services. Of course, this means that the industry will have to adjust to the pandemic’s changes.
However, the sector has become sufficiently diverse to reap significant benefits and profit from internet transactions. Furthermore, shipping behemoths may save millions by leveraging fuel, a commodity that often falls in price during economic downturns.
Regardless of the state of the economy, courier services will continue to thrive since consumers will need to send items from time to time, whether for personal or business reasons. Being able to function and provide that one-of-a-kind kind of support to customers makes them less vulnerable to economic downturns. Furthermore, their ability to target both the business-to-customer (BTC) and business-to-business (BTB) industries qualifies them as one of the most recession-proof companies.
A recession favours whom?
Question from the audience: Identify and explain economic variables that may be positively affected by the economic slowdown.
A recession is a time in which the economy grows at a negative rate. It’s a time of rising unemployment, lower salaries, and increased government debt. It usually results in financial costs.
- Companies that provide low-cost entertainment. Bookmakers and publicans are thought to do well during a recession because individuals want to ‘drink their sorrows away’ with little bets and becoming intoxicated. (However, research suggest that life expectancy increases during recessions, contradicting this old wives tale.) Demand for online-streaming and online entertainment is projected to increase during the 2020 Coronavirus recession.
- Companies that are suffering with bankruptcies and income loss. Pawnbrokers and companies that sell pay day loans, for example people in need of money turn to loan sharks.
- Companies that sell substandard goods. (items whose demand increases as income decreases) e.g. value goods, second-hand retailers, etc. Some businesses, such as supermarkets, will be unaffected by the recession. People will reduce their spending on luxuries, but not on food.
- Longer-term efficiency gains Some economists suggest that a recession can help the economy become more productive in the long run. A recession is a shock, and inefficient businesses may go out of business, but it also allows for the emergence of new businesses. It’s what Joseph Schumpeter dubbed “creative destruction” the idea that when some enterprises fail, new inventive businesses can emerge and develop.
- It’s worth noting that in a downturn, solid, efficient businesses can be put out of business due to cash difficulties and a temporary decline in revenue. It is not true that all businesses that close down are inefficient. Furthermore, the loss of enterprises entails the loss of experience and knowledge.
- Falling asset values can make purchasing a home more affordable. For first-time purchasers, this is a good option. It has the potential to aid in the reduction of wealth disparities.
- It is possible that one’s life expectancy will increase. According to studies from the Great Depression, life expectancy increased in areas where unemployment increased. This may seem counterintuitive, but the idea is that unemployed people will spend less money on alcohol and drugs, resulting in improved health. They may do fewer car trips and hence have a lower risk of being involved in fatal car accidents. NPR
The rate of inflation tends to reduce during a recession. Because unemployment rises, wage inflation is moderated. Firms also respond to decreased demand by lowering prices.
Those on fixed incomes or who have cash savings may profit from the decrease in inflation. It may also aid in the reduction of long-term inflationary pressures. For example, the 1980/81 recession helped to bring inflation down from 1970s highs.
After the Lawson boom and double-digit inflation, the 1991 Recession struck.
Efficiency increase?
It has been suggested that a recession encourages businesses to become more efficient or go out of business. A recession might hasten the ‘creative destruction’ process. Where inefficient businesses fail, efficient businesses thrive.
Covid Recession 2020
The Covid-19 epidemic was to blame for the terrible recession of 2020. Some industries were particularly heavily damaged by the recession (leisure, travel, tourism, bingo halls). However, several businesses benefited greatly from the Covid-recession. We shifted to online delivery when consumers stopped going to the high street and shopping malls. Online behemoths like Amazon saw a big boost in sales. For example, Amazon’s market capitalisation increased by $570 billion in the first seven months of 2020, owing to strong sales growth (Forbes).
Profitability hasn’t kept pace with Amazon’s surge in sales. Because necessities like toilet paper have a low profit margin, profit growth has been restrained. Amazon has taken the uncommon step of reducing demand at times. They also experienced additional costs as a result of Covid, such as paying for overtime and dealing with Covid outbreaks in their warehouses. However, due to increased demand for online streaming, Amazon saw rapid growth in its cloud computing networks. These are the more profitable areas of the business.
Apple, Google, and Facebook all had significant revenue and profit growth during an era when companies with a strong online presence benefited.
The current recession is unique in that there are more huge winners and losers than ever before. It all depends on how the virus’s dynamics effect the firm as well as aggregate demand.
How do you get through a downturn in the economy?
But, according to Tara Sinclair, an economics professor at George Washington University and a senior fellow at Indeed’s Hiring Lab, one of the finest investments you can make to recession-proof your life is obtaining an education. Those with a bachelor’s degree or higher have a substantially lower unemployment rate than those with a high school diploma or less during recessions.
“Education is always being emphasized by economists,” Sinclair argues. “Even if you can’t build up a financial cushion, focusing on ensuring that you have some training and abilities that are broadly applicable is quite important.”
How can I keep my company in Covid?
Take advantage of these seven contingency and business planning recommendations to keep your firm healthy throughout the coronavirus outbreak and well-positioned for success once it’s done.
What businesses earn money during a downturn?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
What industries are always in demand?
Tax preparation and bookkeeping services have cheap overhead because they don’t require a fancy location or expensive equipment. In addition, the normal rate for good tax preparers and bookkeepers is a respectable living wage.
However, if you don’t like numbers, preparing people’s taxes and keeping track of their accounts isn’t the business for you.
Catering Business
To manage a catering business, you don’t need pricey, fancy kitchens or skilled chefs. You could also run your business from your house, lowering your overhead. People and businesses are prepared to pay a premium for professional caterers, making this a lucrative business for those who work hard and have a strong desire to succeed.
Website Design
Websites have evolved into the “windows of all successful businesses.” As a result, website designers who are both talented and imaginative are in high demand. Again, cheap costs and high rates make web design one of the most successful enterprises to operate, assuming you have the necessary creative and technical skills.
What are some instances of firms that would be harmed by a downturn in the economy?
The retail, restaurant, and hotel industries aren’t the only ones that suffer during a recession. During periods like these, industries like automotive, oil and gas, sports, real estate, and many more face significant decreases. Although the recession brought on by the coronavirus epidemic is unusual, many of these businesses have had difficulties in the past.
However, as we already stated, not all is doom and gloom. Certain industries have done a good job of riding the wave and adapting.