Is Your Business Prepared for a Recession?
According to the National Bureau of Economic Research, a recession is defined as the fall of GDP for two consecutive quarters. While it’s impossible to predict exactly when a recession will hit, there are a number of indicators you can look for. Here are the four main categories whose decline will trigger a recession:
A fall in the manufacturing sector is actually the best predictor a recession is on the horizon because this industry receives orders months in advance.
With talks of a recession looming in the near future, now is the time to take action and prepare your business to ride an economic downturn. The type of business you have will determine how severe a recession will affect it – if at all. For example, industries such as discount retail or temporary staffing tend to thrive when the economy takes a hit.
If you’re worried that a recession will have a negative impact on your business, here are five things you can do now to prepare.
Be proactive about cutting costs rather than make them out of necessity or despair. Massive layoffs are common during a recession and businesses lose top talent because they have no other option. Look for processes that can be automated or technologies that can vastly improve productivity. This could also be a good time to restructure your business to make sure you’re leveraging your employees as best as possible.
A recession is not the time to test new products or services in the market. Get back to the basics and don’t distract yourself from what made your business thrive in the first place.
Just like you can’t predict when a recession will hit, you also won’t know how hard it will hit or how long it will last for. It’s helpful to envision multiple scenarios when mapping out how your business will navigate through a recession. For example, if sales decrease 20% YOY, then you’ll need to implement cost-cutting plan A, whereas if sales only decrease 5%, then you can implement cost-cutting plan B.
Marketing can be costly. When budgets are tight, you need to know what’s working and what’s not. If you can’t directly attribute ROI to your marketing campaigns, now is the time to invest in an individual or team experienced in marketing operations. Once you have quantitative insight into your marketing efforts, you’ll know what to cut back on and what to double down on in order to generate new business.
Client retention is key in weathering the recession storm. If it’s not possible to grow your business during this time, you should at least focus on maintaining it. Make sure you’re delivering value to your current client base and really go the extra mile to make sure they view you as a necessary component to the success of their business.
The Bottom Line
Preparing for an upcoming recession seems like a daunting task after almost a decade of economic growth. Being prepared, however, is what will allow your business to make it out on the other side unscathed. Start preparing now by identifying opportunities to cut costs, focusing on your core services, planning for multiple outcomes, measuring marketing ROI, and showcasing your value to clients.