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Several technology executives contributed to this article and shared their thoughts, practices, and technologies that can help you recession-proof your digital transition.
CNBC's survey suggests that this consensus is at least the tentative consensus among top U.S. chief finance officers. Nearly 70% of respondents to the survey expected a recession in the first half of 2023. They cited inflation and Federal Reserve Policy as potential catalysts.
If it does come, the next recession will likely last longer and feel more severe than the recent pandemic-induced one. Thanks to federal stimulus funds totaling hundreds of billions, the coronavirus recession was short-lived but sharp. This time, no such assistance is available. To stay afloat, it will be up to business leaders to make tough and sometimes painful decisions.
The sky isn't falling. You can prepare now for the recession that is (likely) just around the corner to make you more prepared and prevent you from having to take drastic, reactive steps.
Business owners have many options to stay out of recession, grow their business, and remain profitable during difficult times. You don't need to panic, but you should change your business to weather the storm.
Tips to Build a Recession-Proof Company
1. Prepare Early to Avoid an Economic Recession
You know that the economy is moving in waves. You know that the economy moves in waves. The question is, what can you do to stop it? First, prepare for a recession. This means that you will need to spend less and save more. You should increase your cash reserves, especially emergency savings, and eliminate debt.
Economic research can help you determine the best time for inventory purchases and when you should make strategic moves to benefit your business. This will help you keep up with the times and position your company for growth. Because they sell products at lower prices, discount retailers such as Walmart do well in recessions. Similar strategies can be used, provided they align with your overall goals.
You should ensure that you have sufficient insurance and a backup plan if you have to cut costs. As a small business owner, you have many options to prepare for an economic downturn. You can, for example, change your business model and increase your prices.
Even industries that are usually immune to recessions, such as the advertising and construction industry, might be affected by the effects of a downturn. Clients may not be financially able to pay for their services in such unstable times. Or they might decide to reduce spending.
Prepare for the worst when times are good. This is how you can maintain financial stability in the face of unexpected events.
2. Keep your eyes open for opportunities
It's crucial to think for the long-term in today's economic climate and make wise decisions. Getting caught up in the moment and making poor decisions later is easy. Keep your eyes on the future when making business decisions. Sometimes, you may need to adjust your course quickly and think quickly.
Now is the right time to conduct a competitor analysis. Because everyone wants a share of the shrinking consumer spending, competition can be fierce in a recession. However, just because someone else does something doesn't necessarily mean it's right for you. Do your research before you jump into new marketing strategies or partnerships.
Do not overspend because the stock market is so strong. You never know when the next economic cycle will come, so save money during good times. It's impossible to predict when you will need it.
Find out what your customers need and want from you in a recession. Asking your customers is the best way to find out. You may be surprised at how much customers will pay to have a product or service that helps them survive a severe economic downturn.
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3. Diversify: Cash Flowing
Small businesses will face cash flow problems in a recession. Companies will need to save cash as the economy slows. Diversifying your income streams is one of the best ways to do so.
This can be done by offering services and products that are not directly related to your business. If you have a retail shop, it might be worth adding an online shopping section on your website to allow customers to order items through the internet. Consider adding another service to your existing service-based business, such as accounting and law.
It is possible to invest in commercial real estate during a recession. Real estate will retain its value and possibly increase as long as the market grows or stays stable. You can grow your revenue by becoming a real estate investor before a recession.
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Take a look at your employees
Few jobs are recession-proof, so businesses have another option: diversifying their employment portfolio in the early stages. Part-time employees or freelancers are a good option for businesses that rely heavily on their staff. This will free up resources and allow you to concentrate on other aspects of your business.
According to the National Bureau of Economic Research, more than 30 million people lost their jobs in the 2008 recession. Recessions are a big worry for workers. Your workers will want to be able to accept new responsibilities and projects in return for their secure wages.
You might offer incentives like flexible hours or bonuses to help you complete specific tasks. This will keep morale high and allow you to do more with fewer resources.
4. Protect your existing customer base
It's tempting to offer discounts or special offers to customers in a recession to increase your customer base. This is not always the best strategy to use in a downturn.
Instead, you should focus on your existing customers and ensure they are satisfied with the services or products you offer. This will ensure loyal customers and encourage them to recommend your company to others.
Here are some ways to do it:
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Existing customers eligible for discounts
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Organize events and promotions for current customers (e.g. birthday parties).
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Reward repeat business with loyalty programs
Your existing customers are an essential part of your business. They should be your top priority and your priority.
5. Quality over Quantity
It is easy to emphasize productivity during times of economic uncertainty. It can lead to disastrous results if productivity is sacrificed for quality. If you are on a budget and can only hire one worker, finding someone who will give the best service is advisable. It could cost more to hire an experienced professional than someone less experienced who will need training.
Quality control is another crucial aspect. This is the right time to put your company's reputation on the line and ensure that your product is top-notch. Although you may need to spend more on quality control than if you had a lower workforce, it can help increase sales and save money by avoiding costly errors and product recalls.
6. Innovate and adapt
Innovation is an excellent way for you to remain relevant during an economic crisis. You can also avoid rapid decline when customers lose faith in you or your competitors offer better products and services at lower prices.
Recessions tend to lead to an increase in unemployment. You don't have to cut corners when it comes to your employees. Instead, use a recession to help you find new talent and build a better workforce. This is forward-thinking because you are already preparing for the recession's end, even though you don't know when it will be.
Create new products, services, or ways to do business that will help your business stand out. Now is the time to launch a new product or expand into new markets.
At this stage, flexibility is essential. Do not let your daily survival concerns stop you from seeing growth opportunities.
7. Accent on company culture
It's easy to put all your attention on the bottom line and save money, but your most valuable resource is your employees. They won't be happy if you don't make them happy. And if they aren't doing their best, neither will you.
The "Occupational Outlook Handbook" provides valuable information about the skills and qualities that employers seek in employees. This information can help you determine which skills your company should focus on and which ones it can afford.
Instead of cutting corners wherever possible, keep your team happy. While it may be more costly in the short term, it will pay off long-term when you have a loyal workforce that will stay with you through all of life's challenges -- even during an economic crash.
Companies with solid reputations and good benefits are attractive to many job seekers. You'll attract more talent and retain your staff if you offer these benefits. This will prevent turnover costs and make retaining employees easier, even in a down economy.
8. Find Partners
Many small businesses will seek partners to grow their business in tough and good times. While it can be challenging to invest in the future when a business wants to lower its customer acquisition costs, hiring an expert to help them with marketing and operations will save them money. Here are some ways that partners can assist you.
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Marketing services:
External companies can help you increase lead flow and save money by marketing that doesn't get the attention it deserves. You have many options for SEO, website management, and social media.
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Business Management:
Owners don't like managing the day-to-day payroll, scheduling, or other operations. Employing staff or a partner can help increase efficiency and speed up business, allowing for more appointments and quicker follow-up.
9. Technology
Many technologies are now available that were previously only accessible to large corporations. These technologies can further automate your business, allowing time to schedule more appointments and follow up with leads faster. Many great companies like Hubspot and Salesforce have created technologies for small businesses. These remarkable technologies are often available as part of the services you pay for. If you're looking for a service partner, ensure they offer the most advanced technologies to improve your scheduling, billing, SEO, and other operations.
10 . Automate and simplify time-consuming business processes
To keep your business running smoothly, you must do repetitive, low-value work in the back office. Automate everything you can
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Onboarding and Hiring Employees:
Automated solutions distribute the same job posting on multiple highly-visited platforms, such as LinkedIn, Indeed, and industry-specific job boards. A talent acquisition solution allows you to track individual applicants regardless of their volume easily.
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Employees that Pay:
Payroll software automates filing tax returns, calculations, and payroll runs. Stop using paper checks and ask your employees to accept direct deposits.
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Managing Employees:
A self-service HR platform automates processing paid time-off requests, plan changes, benefits administration, and other previously time-consuming processes.
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Managing IT:
You can also create a self-service portal to manage essential IT services, freeing up your IT staff.
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Financial Reporting and Bookkeeping:
An enterprise-grade accounting platform helps you to track revenue, expenses, and liabilities at scale and makes tax time less stressful.
These solutions have one thing in common: They are cheaper than the manual, man-driven processes they replace. This means that there is less overhead during a recession.
11. Reassess your Hiring Plans
Although you might feel sure that a recession is imminent, it would be difficult to tell if the U.S. job market has changed. The average number of jobless claims fell in September and August 2022 as firms continued to hire at an alarming pace.
You will need to spend significant resources on your recruitment and onboarding efforts to gain an advantage in the talent market. This is not wise as you face a possible recession.
Instead, reduce or reassess your hiring plans. Ask the following questions about each hire:
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Is it necessary to hire a full-time employee, or can we fill in the gaps among our existing employees?
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How will the department or function look in six to twelve months if this person is not added?
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Is technology, automation, or better process management able to replace or augment this function?
You can use the same tests for every planned and unexpected departure. You might be able to find replacements in your existing workforce, at least temporarily, chances are.
12. Bulk-Up your Contract Workforce
Contractors are the best option for replacing departing or planned employees and capacity. It is much easier to build and scale up contract teams and hire contract workers.
Skilled workforce staffing agencies can provide onsite and remote talent for high-value, core functions such as IT system management.
Global talent platforms allow you to access a lower-cost labor pool abroad for peripheral or auxiliary functions such as website development. You can do the same with non-core support functions like phone support or live chat.
13. Create a Multi-Scenario "Downturn Plan"
As part of your pre-recession strategic planning, create multiple "downturn scenarios".
These scenarios should be more detailed and tactical than traditional business plan scenarios. They must anticipate "micro" and "macro" situations, such as "a severe 18-month recession which reduces revenue by 40%" or "a mild six-month recession which reduces revenue by 10%."
The downturn plan must also include what's next. How will your industry, customers, and software development company look five years from now? What steps can you take to regain lost ground if conditions improve?
14. Prioritize your digital transformation roadmap
Do you have the same strategies and roadmap you used earlier this year to guide you into 2023? It might be worth rethinking. I was offered two points of view on where to focus.
Rajeev Kumar (CRO, SirionLabs) says that business leaders should prioritize digital transformation initiatives to help save cash, reduce uncertainty and accelerate sales.
The CFO is the best person to partner with. They should be more open than ever to new workflow technologies. Kumar says, "For CFOs who are focused on the bottom line during downturns," contract management (CLM), the system provides a single source for truth on both outgoing and inbound revenue.
15. Focus on the customer and your value proposition
David Robinson, Heap's Director of Data Science, offers the second perspective. He says, "Demonstrate true value." "Customers must understand your value to protect your product in a world of tight budget management."
Robinson suggests that customers should be allowed to test out new products. Robinson suggests that customers should "lean into self-serve." "More customers prefer to research and test a product before engaging in lengthy sales cycles."
16. Boost experimentation and analysis on customer-facing projects
Don't stop investing in customer-facing growth initiatives. Instead, increase data-driven experiments.
Che Sharma, CEO, and co-founder of Eppo recommends that you implement high-quality A/B experiments as part of your feature software product development process. Using experimentation to link feature releases to business metrics such as revenue and retention is essential.
Speeding up doesn't mean losing control. Experimentation is crucial during volatile market conditions when predicting customer buying behavior is complex.
17. Optimize multi-cloud architectures for a lower cost
Moving to IT, I sought insights from IT leaders on the cloud, infrastructure, and hybrid work tech strategies. These are my two suggestions.
Quali's SVP of Market Strategy, David Williams, says that while it is difficult for businesses to manage the complexity of cloud infrastructure during recessions, it is crucial.
Williams suggests that even if there isn't a recession, trying to understand the business context and infrastructure costs before a recession doesn't hurt.
Arthur Lozinski is co-founder and CEO at Oomnitza. He adds, "Effective enterprise tech management (ETM) is crucial to the well-being of firms' IT infrastructure as we move towards economic uncertainty while dealing in a hybrid or remote working environment."
Your IT financial management practices should be rated. It's easier to expand infrastructure during growth periods with less financial scrutiny. You can also reduce costs by looking for ways to improve financial and cost management practices in cloud, hybrid working, and DevOps technologies.
Read More: Web Growth Tips for Business Owners
18. Consolidate with standard DevOps tools & amp; practices
What about DevOps? Is it possible to support DevOps teams with significant autonomy in selecting their tools? This is an excellent opportunity to reflect, regroup and identify opportunities for standards-setting.
Williams explains that developers are freer to choose the tools they use during times of prosperity. This creates more complexity in their toolchains, and thus, Williams says, Businesses feel more pressure to control costs and metrics. It makes it difficult for them to manage their costs. They can't prioritize which projects or tools are most important.
What's William's recommendation? He suggests that you standardize your tools and processes to understand better the business value they bring.
Setting standards for your team is the best way to work agilely, whether in recession or growth. Choosing tools that look like candy canes often leads to technical debt.
19. Enhance employee experience and productivity
What about employee experiences when shifting gears? While the first perspective only applies to Industrial 4.0/manufacturing, the second can be used for almost all organizations.
IndustrialML CEO Arjun Chandar says that tools that aren't dependent on any worker or machine are a vital strategy to help you recession-proof your digital transformation program. You can make flexible tools, whether you downsize, bring in temporary workers, or use backup equipment.
Mihir Shukla is the CEO of Automation Anywhere. He says, "We're experiencing things we never thought would happen in our lifetime" and that "Organizations are dramatically increasing their budgets to support new initiatives in automation."
A way to increase productivity during recessions is to invest in citizen data science programs and low-code/no-code platforms. Combined with a citizen governance model, these approaches can energize and empower employees, even during a downturn.
20. Your digital transformation leaders
A final tip. One final recommendation. While focusing on the economy and how it impacts your digital transformation strategy, roadmap, and plan is essential, you should not lose sight of the leaders, teams, or people who drive transformation. In times of uncertainty, digital trailblazers can be a great resource to help accelerate your digital transformation efforts. It is essential to develop custom software development them early to retain critical employees who support the company's vision and mission.
Thriving in a Recession
A business proverb states that you should not follow the lead of others. You can be ahead of the curve and find new opportunities even though everyone worries about a recession.
It takes careful planning and finding ways to beat your competition during difficult times. Your position in an economic storm will be determined by the positioning you have achieved during solid times.
Where should I invest if there is a 2023 Recession?
Many people worry about losing their jobs as the threat of a recession looms large over the economy. Due to lower consumer spending, unemployment tends to rise during a recession. Shares tend to fall when a company makes less money. Investors and employees are left wondering if there is a recession-resistant industry.
Although many experts agree that there is a chance of a recession in 2023, they aren't sure when. The National Bureau of Economic Research calls when we are officially in a recession. This is defined as a decrease in GDP for at least two consecutive quarters. The official recession is often felt before it's announced because GDP is a slow indicator.
Because many industries cannot weather economic downturns, investors are becoming more concerned about where they should hold their assets. We'll be looking at industries considered recession-proof to help you assess the best way to adjust your portfolio to avoid a recession.
What industries are considered to be recession-proof?
1. Healthcare
Because we cannot ignore the reality of becoming ill, healthcare will always be a priority. We'll always need to care for ourselves and those we love. You can still visit your doctor and buy essential medication in a recession. Healthcare includes everything from medical services to essential over-the-counter products you can pick up at your local pharmacist.
2. Basic consumer goods
Due to their survival necessity, certain products are in high demand. Because our basic consumer needs will not disappear in a recession, they will continue to be essential. No matter what the economy does, you will still need to shave and maintain basic hygiene.
3. Utilities
No matter how the economy does, utilities will always be needed. We will continue to pay for electricity, gas, and water. No matter how bad the economy is, you'll still be able to keep the heat on and the lights on.
4. Discount retailers
A good deal is always a great deal, especially in a recession. Companies that provide cost-conscious retail are more successful in difficult economic times. Discount retailers will see their sales rise as shoppers are more likely to be able to afford necessities.
5. Services for maintenance and repairs
Although this general category covers a wide range of services, any service that deals with maintenance or repairs will still be profitable in a recession. You can find anything here, from an HVAC company to an automotive shop. It's still necessary to get an oil change for your car. If your heating or cooling needs to be maintained, you must act. Consumers can't save money if they need to hire repair professionals to do tasks they cannot do.
6. Services in Accounting/Payroll
In a recession, you still need to pay taxes and make payments to your employees. As people continue to manage their finances, any accounting or payroll service can still bring in money.
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7. Transport services
Two types of transportation services will be required: transporting consumer goods and moving people about their day. Even though people might have less money to travel for luxury, they will still need to get to work. Any activity that involves moving people or trucks must remain stable.
