Ways To Overcome Recession
The global recession that occurred between 2008 and 2010 was hard on businesses. Small, independent companies suffered the most because they lacked resources. Some businesses, however, continued to thrive and maintained profitability. Their business models and revenue streams were flexible enough to weather the storm. Here are some ideas that can help your company survive the next business downturn.
1: Starting a Successful Business During a Recession
1.Offer a less expensive alternative.
Businesses that remain competitive during a recession offer less-expensive alternatives in goods and services. During a recession, customers are looking for ways to stretch their money. If you can provide a product or service at a lower price than your competitors offer, customers are likely to give you their business. After the recession you can expand your business because of your strong customer base.
2.Identify a need in the market.
Make plans to satisfy that need. Even during a recession the market has room for new business ideas, especially if the service or product offered meets a real need in the market.
- For example, during the most recent recession one pawn-shop owner observed that people were having a hard time getting credit. He created a service that allowed people to post items in an online pawn shop and receive short-term, collateral-based loans.
3.Offer better solutions to problems.
Start a service or offer a product that allows customers to meet their needs more effectively. In addition to offering a lower price point, create services or products that let customers get results more quickly. People are always willing to pay for value.
- For example, one company started offering outsourced accounting services. That allowed a number of other companies to save money by using the outsourced services instead of in-house employees.
2: Developing a New Business Model
1.Embrace new technology.
A rigid and outdated business model can spell disaster, especially during a recession. An economic downturn is the perfect time to find out how new technology can make your product or service less expensive or more efficient. Updating practices, services and products can bring you a new customer base even during a recession.
- For example, in the publishing industry the trend is away from print in favor of online publications. Traditional newspaper and magazine franchises have had to embrace digital media subscriptions and online advertising in order to continue to attract customers.
2.Create an online presence.
In recessionary times some businesses have learned to remain profitable by creating new revenue streams online. The process of creating and optimizing a website is not as time-consuming and costly as it once was. Making the financial commitment to an online storefront can connect you to a whole new customer base. If you are not doing this, you could be leaving money on the table.
3.Develop passive income streams.
Owning and operating a small business typically requires a large investment of money and time. However, a passive income stream can bring in money even while you’re not directly working on it.
- For example, look into dividend investment. This means taking investment dividends you earn and re-investing them to grow your investments even further. This practice can boost personal wealth and commercial endeavors at the same time.
3: Responding to a Slowdown in the Economy
1.Reduce expenses.
Implement policies that diminish operating costs. Shrink discretionary spending. Lower payroll expenses by reducing staff. Postpone making investments in research and development. Hold off on capital purchases. These practices can help your company avoid going under during an economic downturn.
2.Focus on innovation.
Some companies see a recession as an opportunity for innovation and restructuring. Business models can often be fine-tuned to be more profitable. For example, you can take advantage of the downturn to acquire employees, assets or even other businesses that may make yours stronger. Organizations often thrive on a culture of optimism tempered with common sense.
- When it comes to managing payroll expenses, companies that focus on creating operational efficiency instead of merely reducing workforce tend to remain profitable. This is not only because of the improved morale of the staff at these businesses but also because staffing levels have been optimized to efficiently produce goods or services.
3.Balance cost cutting with new investments.
Progressive companies survive a recession by balancing cost-cutting measures with acquiring new investments. They take advantage of depressed prices to acquire property, plants, and equipment. Because they acquire assets at lower prices, their profitability increases. Those assets can continue to help them when the recession ends as they respond to increased demand. Also, instead of cutting them all together, these companies make modest reductions to research-and-development activities. The payoff for this investment comes after a recession ends, as R&D activities add to sales and profitability.
