A recession is coming! A recession is coming! Many are sounding the alarm about the country’s economic future. Is this based on real data or are the ‘chicken littles’ of the world taking over?
Almost three-quarters of Americans – 70 percent – believe an economic downturn is coming, as per a survey from MagnifyMoney. However, 75 percent of likely votes thinks we are already in a recession, according to a CNN poll. Inflation is the lead cause among survey takers – 88 percent, while housing costs (61 percent) and rising interest rates (56 percent) are some of the most dire warning signs that we’re headed in the wrong direction.
But what exactly makes for a recession?
While many define the term as two consecutive quarters of falling real GDP, that isn’t quite fully accurate. To determine whether we are headed to a recession, one needs to consider a number of factors such as combining data pertaining to the labor market, consumer and business spending, industrial production, and incomes.
According to the National Bureau of Economic Research, considered the “official” recession scorekeeper, a recession is defined as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
The bottom line right now is: we are not in a recession. Yet.
Here’s an interesting fact: our economy has only been in a recession 8 percent of the time over the past 30 years.
“Quite frequently, recessions are self-fulfilling prophecies. If enough people talk about it, people will begin to react as if it is here and move to conserve cash, collect on accounts, reduce trade credit, decrease inventories, and lessen labor,” said Lewis A. Weiss, president, All Metals & Forge Group.
Whether you’re a small business owner, a solopreneur or a Fortune500 executive, you must have an arsenal of tactics and strategies to help minimize the impact a recession can have on your business and therefore, your finances.
Here are 5 things you can do to mitigate the economic impact and thrive during a recession:
Identify the common enemy.
Currently, 36 percent of U.S. employees are engaged at work, according to Gallup. Globally, that number drops to only 20 percent of employees. Let’s add tough economic times to the mix and there’s a good chance some might become even more disengaged.
The moment it is confirmed a recession is inevitable, make sure everyone in the company is well aware of who the common enemy is. Keeping everyone on the same (mental) page is a tough thing to do and opinions can sour quickly.
The key is achieving full alignment with your team. Once you have everyone rowing in the same direction, it’s easier to navigate the rough waters of a challenging economic climate. However, sometimes no matter how hard you try, you will have detractors and naysayers. To those people I say, ‘we love you, but we’ll miss you.’
Every great leader knows that communication is critical to the survival of an organization. At a time where people are being hit with bad economic news, it’s our job to communicate openly and transparently. “Leaders must have practices in place to support wellbeing and commit to exceptional communication. Preparing for retention and resilience is as important as a focus on financials,” commented Terre Short, CEO of Thriving Leader Collaborative.
Remind your team how much you’ve overcome together as an organization and how out of crisis, also comes opportunity. Reassure them that this too shall pass.
Money, money, money.
Have as much cash as possible because there will be plenty of opportunities to capitalize on. In fact, build a 12-to 24-month emergency fund. When the economy is in an upswing, many experts recommend saving for three to six months’ worth of living expenses. In business, double and triple that.
As a business owner one winning strategy is mergers. What other players out there can be leveraged? Who can we bring into our midst with that complements our efforts? Buying market share, finding other experts and bring them together can only benefit all parties involved.
A few other things to do to help your business thrive:
- Trim your sails — freeze travel, freeze expenses, freeze new services
- Go through every credit card statement and see what you can cut, even if it’s $10 per month
- Look for discounts whenever/wherever possible
- Build a moat around your most important customers and protect them
Keep as much soluble cash as possible so it’s there in case of an emergency. At this juncture, my advice is to get as many base hits as possible, rather than swing for the fences. Less risk, high reward.
Loyalty pays.
During an economic downturn, you must take care of those loyal customers who have been with you through thick and thin. Be mindful that not everyone will stay.
Taking care of your existing customers will pay off in the long run. Andrew Taylor, founder & CEO of Edison Loyalty said, “If I could share ONE Silver Bullet to help businesses survive the coming peril, it would be to hunker down, circle the wagons and covey up to your existing loyal database of customers.”
Taylor went on to add that taking care of loyal customers means that you can increase revenue by nearly 50 percent, while retaining just 5 percent of your customers. In fact, 54 percent of consumers would consider increasing their amount of business with a company for a loyalty reward.
Take care of your customers. They’ll take care of you, too.
Opportunity will knock. Answer the door.
Recession is a scary word, but not everything is bleak. Some of today’s most profitable and recognizable companies started during a recession — companies like Airbnb, Microsoft, Square, Uber, General Motors, and so many more.
For every dark (economic) cloud, there’s a sliver of sunshine that comes through and points you in the right direction. As a leader, you need to be in the right frame of mind to see the opportunity staring at you in the face. Blink and you might miss it.
“There’s more opportunity today to not just change, but to truly transform our products, services, processes, and customer experiences than in any other time in human history! We are doing things today that were impossible just a few years ago, and we will be doing things two years from now that are impossible today. Instead of being a crisis manager during a recession, become an opportunity manager taking advantage of disruptive change,” said Daniel Burrus, best-selling author, keynote speaker & futurist, Burrus Research, Inc.
Keep your eyes peeled and ears open. When opportunity knocks, you better be there to answer.
Never retreat. Never surrender.
As General Douglas MacArthur said, “We are not retreating – we are advancing in another direction.”
The same principle applies in war and business. Business is always evolving and not adapting means that you will be left for dead. To survive and win, especially in bad times, you need to learn to roll with the punches and pivot at a moment’s notice. According to a survey from GetApp, 92 percent of U.S. small businesses reinvented themselves during the pandemic. Another survey by Pollfish states that 51 percent of businesses changed their branding. By now, everyone is used to having to change direction if they want to remain in business – and competitive. If you’re savvy enough, you know that when everyone is retreating, that’s when you attack.
Chris Heller, Chief Real Estate Officer at OJO Labs believes, “There’s a natural tendency for business leaders to hunker down, but when you’re doing that, you can’t be head’s up looking for, or taking advantage of opportunities. As a leader, you need to block out the noise — doom and gloom from the media and other business leaders — and focus on finding those opportunities.”
As human beings, it’s tempting to sit back, lick our wounds or wait for the storm to pass. A true business leader resists that temptation. In fact, they forcibly reject that notion. Wasting a good crisis is a fruitless endeavor. Soldiers followed Gen. MacArthur into war. No one will follow you if you just sit back and watch others do what you should be doing. Join the fray!
Forge ahead, fight, battle on…and WIN!
