Confessions of an Entrepreneur: What Happens If We Have A Recession?
November 13, 2019 | By Mark Zweig
The threat of recession looms. Whether or not we actually need one isn’t the question. All that matters is that if enough people think it is time, it will happen. Exactly when it is going to occur is a question I would pass to my economist friends to answer. But odds are, it will happen in the next year or two.
What is important to remember — especially if and when a recession is underway — is that it doesn’t necessarily mean that your business will decline. How you respond to the threats and the opportunities a recession presents will determine how well you weather it and how strong your business will be when it’s over.
Here are some thoughts to consider:
- If you don’t want to see a decline in revenues, you may need to redouble your marketing and promotion. Spending more on marketing is the opposite of what most companies do when faced with a downturn. Instead trying to make a profit by retrenching and cost cutting, “shooting your way” out of the downturn may be better. What better time to turn up the volume than when your competitors are doing just the opposite? That makes it easier for your message to be heard. Here in Northwest Arkansas, we had the example of Sam’s Furniture that did exactly this and emerged from our last recession as the largest furniture store in our region.
- It can be an opportunity to hire great people. When the economy turns down, it’s inevitable that good people lose jobs. But beyond that, even more good people are still working at their jobs but working for companies that aren’t growing and profitable. These people may feel their opportunities being diminished and their efforts not being rewarded, and may be more receptive to your recruiting efforts. All of this means that a recession could be a good chance for you to add really talented people to your team.
- It can be an opportunity to buy great assets. Long-time real estate investors know you buy when prices are low and sell when prices are high. Certainly the most profitable projects ever done by our firm, Mark Zweig, Inc., started with the acquisition of bank-owned properties during the last recession. Even if you don’t want or need real estate, a recession can be a great time to buy tools and equipment for a manufacturing business or buy kitchen equipment for a restaurant or buy anything you need that can help the performance or value of your business.
- It can be a great time to acquire a competitor’s business. This is something that is rarely considered but other businesses that are not responding to the recession as they should may be available to buy cheap. They could have good people, clients or customers, and valuable locations, and the sellers may be so anxious to get out that they will finance the entire thing to a qualified buyer with a successful track record and proven knowledge of their industry (That’s you).
- A recession can be a good time to do some housekeeping. If business activity dies down and the pressure of daily performance declines, it could prove to be a great time to replace the POS system, or change processes that improve quality or customer service, or fix things in the business that need fixing. These opportunities may not be there when the system is stretched trying to meet demand during a boom time.
The overarching message is that a recession doesn’t have to be bad for you and your business. How well you get through it and come out the other side lies entirely in how you approach it!