When it comes to business, it pays to hope for the best and prepare for the worst. Although the world has largely recovered from the Great Recession of the late 2000s, it’s not inconceivable for the end of the 2010s to experience a similar decline. The fact is, the economy is cyclical in nature so a period of remarkable growth will inevitably be followed by an interval of sharp contraction. As such, it behooves today’s burgeoning entrepreneurs to write recession preparation into their business plans.
Diversify your offerings
The narrower your company’s offerings are, the harder you’ll be hit by a recession. However, if you take steps to diversify your range of products once you’ve established your sales channel, the impact of the recession will be blunted. To ensure optimal returns, take advantage of downstream and parallel market opportunities. For instance, a third wave coffee shop could have success offering catering services to local businesses, and can add a line of kombucha tea for their existing customers. However, do not waste time and money trying to break into a market that is inconsistent with your core offerings, as it will leave your business more vulnerable to the effects of the recession.
Don’t skimp on advertising
In the event of a recession, you may feel compelled to cut costs in every area in order to keep your company afloat. While this impulse is understandable, reducing expenditures in key areas can have the effect of exacerbating the impact of an economic downturn. As this Entrepreneur piece notes, founders shouldn’t cut their advertising spending in the midst of a recession. The reason being, a lack of visibility in the market will signal to consumers that your brand is in trouble, and that they should do business with a more stable company. Consequently, consistent ad spending should be a fixed point in your long-term planning.READ MORE: Coronavirus In Massachusetts: Today's Developments
Regularly reassess your assets and liabilities
To ride out a recession, your company will need to be as lean and liquid as possible. However, as it’s impossible to predict precisely when a recession will hit, it’s important to bake in regular reassessments of your company’s assets and liabilities into your business plan. As explained in this Forbes piece, the ability to quickly fractionalize your corporate officers, liquefy fixed assets like equipment and property, and outsource certain human resources functions will help you establish the capital needed to get through a rough patch.
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This article was written by Mario McKellop for CBS Small Business Pulse.