Preparing Your Business For The Next Recession
The economy is cyclical which means we can’t sustain growth indefinitely. When growth occurs too rapidly, it can lead to a bubble and a subsequent collapse. We saw this with the housing bubble a decade ago and even though economists were sounding the alarms for years, warnings went unheeded and the country ended up in a deep financial crisis.
That’s why managing economic growth is so important.
Gradual gains lead to gradual retractions which distributes economic struggles much more gently over a longer period of time. This is a recession which many economic indicators are pointing to currently.
If you woke up tomorrow and realized we were in a recession, would you be prepared?
Table of Contents
All Signs Point To Recession
Last year, more than one in seven Americans was three or more months behind on car payments. It’s a potential signal of a coming recession.
According to Bloomberg, there are more recession signs to notice: both consumer and small business confidence fell as did manufacturing surveys and global growth. On top of all that, the trade war and tariffs have investors feeling skittish. The stock market has been reacting wildly, showing record one-day losses on top of scant rebounds.
See Also: Best Tips For Young Entrepreneurs
What Sectors Continue To Do Well In A Recession?
We’ve all heard of the lipstick effect in which sales of lipstick often jump in times of economic downturn. While lipstick, in particular, may not be the indicator anymore, global cosmetics sales still tend to do very well during economic downturns. In fact, during the Great Recession, cosmetics outperformed the greater economy by 45%.
There are other sectors that continue to experience growth during economic downturns. One of the most notable ones is beverage alcohol. In the United States, sales of beverage alcohol actually rose an astonishing $2 billion during the last recession. Other so-called vice industries such as candy and tattoos also tend to do well in times of recession.
Since death and taxes are the only constants in our lives, it should surprise no one that both funerary services and accounting services tend to hold their own during tough economic times, though sometimes people will cut back on overall spending in those areas. Medical spending also continues to experience growth no matter what the greater economy looks like.
Surprisingly, luxury goods are another area that has experienced a boom shortly after the last recession — while Wal-Mart’s sales jumped 5% during the recession, global sales of luxury items rose an astounding 10% just two years later while the rest of the economy was still recovering.
How Can You Prepare Your Business To Weather The Next Recession?
No matter what sector you are in, you can take steps today to help recession-proof your business. Getting all your ducks in a row ahead of time will save you from struggling or even going under when times get tough.
After taking note of what makes businesses recession-proof, it’s time to start applying those lessons to your own business. Some of the actions you can put into place today include:
- Monitor spending closely and pull back on unnecessary purchases
- Enforce a budget for all employees – 10% less than last year on everything that isn’t related to payroll
- Manage inventory more closely and don’t keep excess inventory on hand
- Market your company’s strengths to set yourself apart from the competition
- Shed extraneous projects and focus on being the best at your company’s core competencies
An Ounce Of Prevention
No one knows when a serious recession will strike. Usually, by the time we do know, we are already right in the middle of it. Preparing your business for a recession is a great thing to do even if you aren’t convinced one will come any time soon. Waiting around for a recession to come without preparing yourself is likely to yield a poor end result.
We can all take a lesson from recession-proof businesses and make all of our businesses stronger in the process. Learn all about recession indicators and how to prepare your business to weather the next recession from the infographic below.
Is your business ready to become a recession proof business?
Source: Great Business Schools
Like this Article? Subscribe to Our Feed!
Author: Brian Wallace
Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency based in Louisville, KY and Cincinnati, OH which works with companies that range from startups to Fortune 500s. Brian also runs #LinkedInLocal events nationwide, and hosts the Next Action Podcast. Brian has been named a Google Small Business Advisor for 2016-present and joined the SXSW Advisory Board in 2019.
- Web |
- More Posts(211)