Quality control should not be compromised during a recession.
Recession is an important topic that people need to address because time and time again the lives of people have been influenced by it. As a most recent example, we can discuss the Great Recession of 2008. It is a ground reality that a lot of people including the owner of businesses and companies in the United States were literally overwhelmed, discouraged and enraged by the same.
However, it is equally important for us to understand and reflect on our business operations and think about changing our overall business strategy during recession. We need to make sure that our business planning becomes recession-proof so that we can tackle the economic downturn. You also need to understand that not every company can withstand a downturn in the economy. For example, if smaller businesses and companies utilize less funds for advertising their products, it can have a bigger impact on tech conglomerates such as Google.
To counter growing inflation, the Federal Reserve is gradually raising interest rates. However, this is not a piece of good news for business owners because if they required funds to run their company, they won’t be able to easily avail of loans from the banks. More importantly, life for the average person will also become difficult because prices of necessary items like food will increase equivocally.
Nevertheless, a recession does not necessarily indicate that your business will go through a tough time or will not thrive anymore. According to Harvard Business Review research, although over three-quarters of US companies with $50 million or more in annual sales saw decreased revenue growth during the previous four recessions, 14% of companies have experienced faster revenue growth and higher profitability during the same period.
If you recession proof your business, then chances are that you can grow your business and even thrive during these tough times. Therefore, you don’t need to panic and simply follow the strategies discussed below in order to take care of your business during a recession.
Source: Appinventiv
Strategies to follow for operating recession proof business
Check out the following strategies if you want to learn how to recession proof your business:
Begin your preparation as soon as possible
As an owner of a company or business, you should be aware of the fact that the economy fluctuates in cycles. Therefore, the very first step in order to tackle a recession is early preparation. In this case, you will need to cut back your company expenditure and focus more on savings. More importantly, you will have to increase your emergency savings and other financial reserves while reducing your overall debts.
You should conduct your very own economic analysis in order to find what would be the best time for your business to take necessary actions which will ultimately become beneficial for your company. This might assist you in staying abreast of developments and positioning your company for expansion.
You should look at the business strategy of Walmart as an example. Walmart can offer its customers reduced rates and that is why these discount stores have the ability to thrive even during the recession. You can take advantage of a similar business strategy to recession proof your business.
Having a backup plan is also important if you are running a business. With the help of insurance coverage, you will be able to make proper financial adjustments because unlike others you will definitely have more options to choose from during a recession period. If you are facing a tough time then you will have the freedom to implement an alternative business strategy or raise the cost of your products and services.
Previously some industries may have escaped the downturn of recession such as advertising, construction, etc. but in modern times they won’t be completely immune. The clients of the individuals who are associated with these businesses may find it difficult to continue their payments which may result in opting out or making significant budget cuts.
Always remember that when things are running smoothly you also need to be prepared for the worst case scenario because they will inevitably arrive and by properly securing your business you will be able to conduct business smoothly.
Diversify your cash flow
During a recession, cash flow problem is faced by a lot of businesses and companies. Therefore, as the economy takes a downturn it is important to reserve cash beforehand if you want to survive in this market. One of the finest business strategy during recession is to diversify your sources of income.
To implement this strategy you can certainly introduce a new product or service that is not entirely related to your company or business. For example, if you are an owner of a retail store then you can introduce an online service through your store’s official website where customers can receive goods and services by ordering them online. Consider adding a service that relates to what you're already doing if your company provides services like accountancy or legal.
Focus on quality over quantity
During times of economic downturn, people may put more emphasis on production. However, when the quality is compromised while putting more emphasis on productivity then everything will be up for nought.
For instance, we can take a look at the hiring process. If a company is on an extremely tight budget and needs one employee for a particular job then it should hire the person with the highest expertise, not a newbie who needs proper training before he can actually do the job. In this regard, the company will have to spend more money if they end up hiring a novice employee.
Henceforth, you should make any compromise on quality control because during a recession it is extremely important to pay attention to your company's reputation and ensure that you are delivering the finest quality product possible. Although quality control may occupy a significant part of your budget, it will benefit your company in the long run.
Focus on retaining your existing customers
Although you may think that the recession is a good time to increase your overall customer base, honestly it is not a good time to do so. You may think that by providing specialized offers and attractive discounts you will be able to attract more customers but according to financial experts, it is not the wisest course of action. A recent survey found that 86% of consumers are willing to pay more money for a quality experience and that 93% of people are more inclined to purchase from the company after a positive encounter.
However, financial experts do suggest putting more emphasis on the current clientele the company has and ensuring their satisfaction with the goods or services the company offers them. This will make it more likely that they will keep using your services and more importantly their word of mouth will also work as a referral and benefit your business.
Instead, concentrate on your current clientele and ensure that they are satisfied with the goods or services you offer them. This will make it more likely that they will keep using your services and spread the word about you to their friends and family. Therefore, instead of focusing on attracting new customers you should take care of your existing customers and provide them with excellent service, exceptional offers and discounts, promotional events, etc.
Take care of your employees
We already know for a fact that most of the jobs are not recession proof which gives companies and businesses the opportunity to diversify when it comes to employment. If you are running a company or business that is heavily reliant upon employees then you should think about recruiting freelancers or part-timers that can significantly reduce the company’s burden and at the same time, you will be able to free some of your company’s resources.
You should never forget how valuable your employees are.
According to the National Bureau of Economic Research's labor data, during the recession of 2008 more than 30 million employees lost their employment. With this, you can understand that most of the employees will be concerned about unemployment and that is why they will be eager to take in more responsibilities and tasks in return for stable payment.
Moreover, you can certainly offer your employees rewards and other privileges, such as flexible scheduling or prizes for accomplishing specific tasks. This will inevitably help your company retain a more positive work environment while enabling you to do more with the same quantity of resources.
Final words
Time and time again recession has always proved how bad it is for the future of companies and businesses and how badly it affects the economy. However, after researching about the market conditions of multiple industries and the overall economy during recessions financial experts have been able to find out some solutions or to be more precise top business strategy during recession which can help company owners grow or even thrive during these tough economic conditions. The strategies discussed in this article are the same and this information can help your business if you apply the same efficiently.
FAQ
How do I make my business recession proof?
Here are some suggestions you can follow to make your business recession proof:
Always make sure you are providing quality customer service.
Pay wherever and whenever it is necessary.
Put money into marketing strategically.
Closely follow other businesses that are thriving during the recession.
Enhance the Portfolio of Your Company. In order to protect your company from a recession, you should increase the percentage of cash in your portfolio.
What is the most recession proof industry?
Mostly, the industries that offer the most necessary products that people cannot live without perform well during the recession period. These industries may include healthcare, food, utilities and other necessary items. Some experts also opine that technology is also one of the industries that fall into this section.
How to prepare for a recession in 2022?
Check the following strategies to prepare for a recession (recommended by financial experts):
Build an emergency fund for your company.
Always pay off loans with high interest rates.
Be creative when it comes to saving money.
What do businesses do during a recession?
For starters, companies can reduce marketing and capital expenditures, as well as scale back research and development. Furthermore, they can also hold back product launches. If things are not working in their favor, companies can decrease hiring, halt salary rises and implement a hiring freeze. If all of these tactics do not perform well then the companies may resort to layoffs to minimize expenses.
