When done correctly, business executives understand that marketing and advertising bring in more customers. They also realize that during a recession, the majority of other firms, including many of their competitors, will cut marketing and advertising budgets.
As a result, astute, proactive business owners and/or management teams ramp up their marketing and advertising campaigns. That’s correct. Rather than contracting, marketing should be enhanced during a recession. Implementing a marketing plan that is more aggressive than competitors’ provides a compound positive effect and concrete outcomes. During a recession, companies that slash their marketing and advertising spending would lose even more revenue, producing a self-fulfilling prophecy of failure.
When it comes to which businesses do well during a recession, it’s those that promote themselves aggressively and engage in advertising and other forms of digital marketing.
Cut the Bottom 20% of their Worst-Performing Customer Base
While it may appear paradoxical, significant organizations use this strategy to prosper. We’ve all had clients or customers who are late to pay, difficult to deal with, or take a disproportionate amount of your staff’s time in relation to the revenue they bring in. Now is the time to eliminate these customers.
Increased marketing efforts will attract new business, which will necessitate increased internal personnel. Cutting the bottom 20% of your client base frees up resources and capabilities of your existing labor force, allowing you to avoid adding new staff to your payroll.
Improve Operating Processes and Deliver Better Services and Customer Experience
This is the ideal moment to examine your processes from a quality control perspective, brainstorm with your employees, and figure out how you can better serve your clients. You must stand out from the crowd, and if you provide subpar service, potential clients will look elsewhere. At this vital juncture, this should not even be a possibility. You’ll get even more consumer loyalty if you provide better customer service.
Look for ways to optimize and streamline your business operations so that your staff can work more efficiently. This will assure your success in the following crucial step:
Service More Customers with the Same or Even Fewer Resources than You Are Allocating Now
You will now have the resources needed to support the increased number of consumers achieved by following the preceding steps, thanks to the enhancement and improvement of your operating procedures.
Fire Your Worst Employees, while Assuring the Rest of Your Staff that You Are Committed to them and their Well-Being.
We’ve all had employees that didn’t deliver what was expected of them. Perhaps they only put in 50% of their effort, or they are a toxic person that destroys your team’s unity. We do not always fire these employees because they perform a critical service for the organization, and we believe that keeping them on staff, even at a cost, is easier than training a new employee or eliminating the position entirely.
Whatever the situation may be, now is the moment to act. It’s essential for your company’s success. It’s crucial for your team. It is required by your customers and clients. During a recession, there is no tolerance for self-defeating behavior. Consider the larger talent pool that a recession affords if you are able to fill the position with someone new. You don’t have to be stuck.
Good employees, on the other hand, are priceless, which is why you should reassure your core team that you will support them during the crisis. That the company can go into the red this year if necessary to keep the team together (and preferably every corporation has reserves or a line of credit to do so).
If you fire a good employee, your entire team’s morale will suffer because each employee would wonder, “Am I next?” Fear, understandably, lowers productivity. Assure your team’s good people that you’ve got their backs. They will have yours if you do so.
- To strengthen brand loyalty and expand the client base, improve the customer experience.
- Improve your operations processes to increase efficiency, which will allow your staff to better serve the needs of your growing customer base.
- Remove underperforming employees to free up cash for high-performing staff and the resources needed to meet rising demand. Also, reassure your core team that you’ve got their backs. This assures that they will put in the same amount of effort for you and the company.
Did we ever imagine that the globe would be hit by a global epidemic like the one we’re seeing today at the start of 2020? No. However, recessions and severe economic downturns have occurred in the past, and some enterprises have thrived in the face of adversity.
It does not require inexhaustible financial resources. All it takes is the right plan, an offensive posture, and a growth attitude.
Remember that throughout this recession, people all over the world, including your consumer or client base, rely on you to provide them with the goods and services they require. Make yourself available to them. Let them know you’re still around, and that you’ve improved your products, services, and customer service. In the same way, we are here for our clients and team members.
Can firms succeed during a downturn?
- During economic downturns, not all firms and industries suffer equally.
- Consumers are cutting back on substitute items and other competitive options, which benefits certain businesses.
- Many of the firms that do well during recessions either supply goods and services that grow in demand directly as a result of the recession, provide cheaper alternatives to luxury or big-ticket expenditures, or have relatively inflexible demand in response to fluctuations in earnings.
What should businesses do in a downturn?
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.
How can you make money during a downturn?
During a recession, you might be tempted to sell all of your investments, but experts advise against doing so. When the rest of the economy is fragile, there are usually a few sectors that continue to grow and provide investors with consistent returns.
Consider investing in the healthcare, utilities, and consumer goods sectors if you wish to protect yourself in part with equities during a recession. Regardless of the health of the economy, people will continue to spend money on medical care, household items, electricity, and food. As a result, during busts, these stocks tend to fare well (and underperform during booms).
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 fast development 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.
Which industry is immune to the downturn?
A recession-proof business can be extremely profitable for people in both good and bad times. Whatever the state of the economy or the stock market, certain company concepts, such as those listed below, have a good possibility of succeeding despite the rest of the financial doom and gloom.
Many well-known or historically successful enterprises were founded during economic downturns. The Walt Disney Company was created in the late 1920s, at the commencement of the Great Depression, and the Hewlett and Packard electronics company was founded in the late 1930s, during the second recession.
Rising interest rates and shifting GDP pose far less of a threat to the finest recession-proof enterprises mentioned below than they do to most other businesses, with many of them having the ability to do even more business than usual.
Food and Beverage Business
Because everyone still needs food and drinks to live, the food and beverage business is one of the most recession-proof industries. Because it is not a luxury that can be put aside in difficult times, enterprises in this area can thrive even in a downturn.
What should I buy to combat depression?
Government and corporate bonds, certificates of deposit (CDs), savings, and money market accounts are some additional relatively safe assets. Bonds work like this: you pay a set amount of money, say $50, and you can cash it in for $100 after 10 years, resulting in a guaranteed interest rate. However, you won’t be able to access the money until the bond matures. The only risk you face is if the company or government goes bankrupt and is unable to make good on its obligations. Although government bonds are meant to be safe because they can be paid back with tax revenue, there have been cases of governments defaulting on their local currency debt, such as Russia. CDs function similarly to bonds, except that they are issued by banks and credit unions. In addition to interest, savings and money market accounts provide a return on investment in the form of dividends. Instead of having to wait for your money, you may access it whenever you choose. However, you often get a lower rate of return than you would with bonds or CDs, so you must consider how soon you will need the money before deciding which option is best for you.
Do items become less expensive during a recession?
Lower aggregate demand during a recession means that businesses reduce production and sell fewer units. Prices do eventually decline, but the process can take a long time, resulting in a long-term recession as a result of the negative demand shock.
How can tiny businesses weather the storm?
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.