Winter is Coming: 3 Strategies to Protect Your Business in a Recession
Recession is inevitable. It is part of the business cycle as businesses grow and market share solidifies, the market becomes brittle. Then, one small shift in the buyer market or a simple financial miscalculation by a Fortune 500 can cause an avalanche of problems. In the 2008 recession, over 200,000 businesses closed their doors because subprime mortgages caused a global bank credit deficit. Some of those businesses failed because they were linked directly to the crisis, but many shut down simply to poor strategy in a tumultuous market. They did not prepare to operate in a slump. Not every factor can be controlled, but by entering the downturn with eyes wide open and game plan in place, you can expect to, not just survive, but excel in the economic winter. Armed with this knowledge, you can protect your business in a recession.
Focus on Brand Quality
In the recent recessions, a unique trend has emerged. Counter to the rest of the market, some luxury brands have managed to maintain or even improve profits throughout the recession. “Alphabrands”, a term coined by the Brand Finance Global 500 report, are companies and products that consumers turn to for continued quality when the rest of the market looks to cutting corners and costs. These “Alphabrands” look to leverage their reputations and household status for excellence as the platform for recession-proof sales.
The three areas that we have identified as effective marketing tools are the pedigree of the company, embracing the digital marketplace, and constant innovation. Disney Resorts is an excellent example, as they continue to double down on guest experience by implementing the magic band all-in-one system for payments, resort wide drink vending machines, and expansive dining packages. By relying on their history of quality, constantly innovating new user experience opportunities, and utilizing the power of digital and local travel agencies, they continue to produce revenue year after year. So, when creating your recession strategy, include campaigns now that build your reputation for customer success. That way, when the recession strikes, you have a market looking to you for continued stability.
Improve Process Efficiency
A “lean” operation is a term that has grown in popularity of the last several years, and with good reason. “Lean” is simply a term used to describe a business process or organization that is producing the maximum yield for the customer at the least possible overhead. This is the model upon which all great business is built and (almost) every entrepreneur knows this. Then why is it so hard to implement? The reason is that it is very hard to identify and can be time consuming to discover and remedy. Half of all businesses lack a business plan, let alone an accurate budget or financial plan. Finding the resources to improve your processes and make your business “lean” would require you to have a “lean” business already!
Unfortunately, the only way to correct this process is to buckle down and experience the growing pains. However, this is a much easier process when you are in a bull market, than one where customer capital is thin. By creating the team to evaluate your business practices and policies, you begin to discover the lost capital within your own business. This also enables your valuable human capital to maximize their production with less headaches and more consistently than before. Then, when disaster finally strikes, your team is insulated from the pressures of a weak market and more focused on building marketshare.
Acquire Your Competition
This is a hard pill to swallow for most business owners. You worked very hard to build your business. Blood, sweat, tears, and years went into creating your organization and you know that your competition did the same. Who are you to take that from them? However, in order to protect your business in a recession, this can be a highly profitable method of survival. The best business owners are motivated to keep their families eating and their employees paid or employed. When the capital is stretched thin, they can be persuaded to relinquish the reigns. This strategy gives you two benefits that most others do not: Experienced Human Capital and Customers.
But, this strategy can be hard to implement. It demands that you keep a finger on the industry pulse as well as an eye on your competition’s market share. It also requires you to plan the capital necessary to invest in acquisition. When considering this strategy, you need to be prepared to do your homework and spend time investigating the purchase. Although the most lucrative method listed in this article, it is also the riskiest and time consuming. Remember your business objectives and plan accordingly.
Summer, Winter, and Recession: An Endless Cycle
Just like in Game of Thrones, surviving bad times comes down to two things: Planning and Hard Work. Each of the strategies outlined here required effort prior to recession to be effective. The way each of these strategies unfolds in your business may look radically different. But, without an eye for the future, any venture will fail. In addition, each of these tactics is also effective for any business, any time. By including them in your daily activities, you begin to build a bastion of competence and financial defense to the looming, immanent threat of market crash. And once that storm is weathered, your company is a stronger team on the other side.
If you want to learn more about how to create your own “Alphabrand”, evaluate how to make your business more “lean”, or discover your competition’s market habits, contact Dorian Solutions today.