Also, how can we forget to reference the end of Covid-19 and the resulting economic impact? A lot has already occurred in the first half of 2022, and we cannot ignore it. Financial markets have changed rapidly, a war has triggered massive inflation, and the global stock market has plummeted. That’s all we hear on the news today.
Keeping your business afloat during a recession or economic downturn is not easy, especially if this is your first time. Although no one can control or predict when a recession hits, you can control what you do to prepare.
Let’s start then! This article will look at the key strategies that have helped protect many businesses across various industries during past downturns. These recession-proof business ideas will help your company weather a recession and emerge stronger.
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What is a recession-proof company?
The National Agency of Economic Research (NBER) describes a recession as a significant economic activity lasting more than a few months, characteristically reflected in declines in the gross domestic product (GDP), employment, industrial production, and income.
Recessions have lasted anywhere from two to 18 months since 1950, which can be stressful for business owners unsure how long such situations will prevail. A business can crash with no end in sight if it isn’t ready.
However, not all companies are affected in the same way or to the same extent by an economic downturn. Rendering to a study by Harvard Business Review, nearly three-quarters of publicly traded US companies with annual sales of $50 million or more experienced declining sales growth during the last four economic crises, while 14% accelerated sales growth and increased profitability.
This difference in results can be credited to the type of product or service being sold and meeting customer needs. Also, certain services such as health care, education, and auto repairs remain in high demand during a recession.
Companies that do not belong to recession-proof industries can use the following strategies listed below to avoid or reduce the impact of a financial downturn on their operations.
How do you make your company recession-proof?
This section discusses the top routes to recession-proof online business when the economy falters. These strategies may not be suitable for any given company, but picking the right one from this list can help any business protect itself from the recession.
Prepare financially for a recession before it hits
Don’t wait for the first cyphers of a downturn before taking action. By then, it might be too late. So if you don’t have a strategic monetary plan, now is the time!
A planned financial plan is countless ways to comprehend the financial strength of your business today. This, in turn, will help you save for an economic downturn. If you already have a financial plan, it’s time to build a cash reserve, and this may be the most crucial step you take.
Build a cash reserve sufficient to cover essential business expenses for at least six months. This will help sustain your business, and the longer you can carry it through the recession, the additionally likely it is to survive in the long run.
Create multiple revenue streams
One of the most important ways to protect your business from the recession is to have multiple revenue streams. To sustain your income regardless of an economic downturn, you must have various income-generating opportunities at different price points.
Incorporating ad revenue, affiliate marketing, and backed content can improve your bottom line when the economy takes a downturn.
You don’t want to get stuck in a situation where you can’t switch or rotate. Multiple revenue streams help your organization remains flexible and assertive.
Deal with debt wisely
Many small business owners see huge companies taking on massive debt and assume those companies are struggling to survive.
However, the datum of the matter is that they usually use this amount to scale their operations. The trick to financing is maintaining healthy corporate debt, which many small businesses find difficult. Smaller companies don’t eat the same level of support as their larger peers, so they need to be more careful when dealing with debt.
Invest in marketing
While you might not consider it the first step when trying to save money, boosting your business is essential to weathering a recession. Investing in strategic promotions will help you attract new customers, which can help make up for lost commercials.
Look at your current recession-proof promotion strategy and reconsider your marketing process in today’s environment. Double-check your business website and keep a close eye on the analytics to ensure you generate revenue for your business. Sometimes, minor changes to your website and social media strategy can make a big difference to your business.
Develop employee skills
You must rely on your squad to help your business remain flexible, pivot, and think outside the box during a downturn. Therefore, employees must be in top form to meet these challenges.
Cross-employee training and skills development can help achieve this goal. Investing in staff would help them feel more connected to the company and willing to go the extra mile when asked.
Prioritize customer service
Considering all major business downturn strategies, prioritizing customer service is an effective way to ensure the long-term stability of a business. Customer service is vital to drive repeat purchases, which is essential for a company to survive a recession.
While this depends on your industry, acquiring new customers is usually more expensive than retaining existing customers. By recognizing this, you can recession-proof your business by focusing on the wants and needs of existing customers.
Be aware of your concern and take steps to resolve it. You can improve customer satisfaction by ensuring your employees are fully trained on your products or services and customer support.
Expand your product offering
Find innovative and sole ways to reach your target spectators. The hospitality industry has dramatically changed its customer group perspective during the Covid-19 pandemic, shifting its focus to delivery efforts. Businesses that previously didn’t focus on delivery have found new revenue streams by partnering with food delivery apps and expanding their services to reach customers.
Over time, these customers became loyal and continued ordering from their favourite restaurants long after restrictions were lifted.
Airbnb, for example, took a similar approach, shifting its focus from short-term rentals to long-term rentals. His clients included affluent, high-earning professionals who could find relief from house arrest assignments through a long-term change of scenery. When restrictions were lifted, but artistic work continued, Airbnb could retain these customers while refocusing on short-term travel.
Note, however, that recessions do not last forever. If your core offering remains customer needs during a downturn, your payment will stagnate or decline significantly once the market stabilizes. Tunnelblick Marketing can drastically impact future revenue if you stop providing a needed service outside of a recession.
Invest in adaptive skill
The right technology can help businesses stay flooded throughout tough times while saving cash. It’s best to have the skill installed and tested to avoid costly or embarrassing mistakes during a crisis.
For example, using technology to change distribution methods, such as B. switching to virtual delivery, generate revenue when physical or in-person delivery is not an option, e.g., B. Mentoring.
Similarly, contactless payment technologies and online ordering can help customers continue buying products from retailers and restaurants. Such technologies can be an enduring addition and provide another way for customers to interact with a business.
Protecting a company from a recession can begin well before an economic downturn. When business leaders know they’re in a recession, many may feel it’s too late to do anything worthwhile other than cut costs. It’s best to approach recession protection in a measured and considered manner to avoid potential mistakes that are more likely to occur once managers are unprepared for a crisis.
It requires a balance between intelligent customer marketing, cost reduction, and strategic investments. Follow the tips above to protect your business from a recession and thrive during an economic downturn. If you need more aid, check out the best app development companies for startups to prepare for an economic downturn.