Recession is one of the most feared terms for startups founders and businesses alike. The massive dip in business driven by many factors isn’t something you want if you’re running a startup. But with the right steps taken prudently, you can run your startup smoothly even during recession.
This guide will help you prepare your startup for recession by sharing a few actionable strategies that actually work.
Let’s get started.
- Doing research prior to the downturn can give you recession proof ideas.
- A strategic business approach can help you reach the right customers.
- Diversifying the revenue can boost your business during times of crisis.
What is recession?
The term ‘recession’ is assumed as a serious economic downturn that results in rising unemployment and business failure, but the fact is that it is a period that deflects the economic escalation.
Can economists predict recession?
The longest economic downturn, Great Recession, happened in 1929 and lasted till 1939 turning several million Americans unemployed and thousands bankrupt.
Recession is quite a natural phenomenon that is unavoidable, where it has occurred off and on.
The good news is that modern economists have learned to foresee recessions with great precision, as well as the risk of their existence in the economy.
Though the likelihood of a slowdown is predictable, its duration and consequences are uncertain. So, it is highly recommended that you have a recession plan for your business.
Is there a plan B?
Recessions occur unexpectedly. So plan and keep aside recession-proof business ideas to save you from hard times.
Having a secondary source of income can help you get through the recession.
During the recession, some products/goods or services may be worth thriving. Assess the risks, conduct extensive research, and select the best recession-proof idea.
What is Recession Planning?
In order to overcome the economic uncertainty that occurs during a recession, majority of businesses commonly employ different strategies.
Recession planning is the process of preparing for a downturn by establishing strategies for your company's survival, such as keeping cash, hiring less employees, and more.
How recession affects startup businesses
Recession has a great impact on startups and other small businesses than on established businesses.
For example, investors will be reluctant to invest in startups during recession since there will be increased risk and less cash flow.
Startup businesses often create single items/services and rely on a single revenue stream. They suffer when their product fails to capture the market's interest.
Take a sneak peek at the Ideas to make your startup business successful and develop a recession-proof business plan.
How to financially plan for a recession
To keep your firm afloat during recession, you must arrange your finances beforehand. Here are some suggestions to help your business thrive even during a downturn.
- Evaluate your monthly expenses
- Focus on maintaining an emergency fund
- Create an alternate revenue plan
- Analyse your investment and cash flow
- Pay off your highest debt at the earliest
How to survive recession - 8 proven ways
When you are a startup in the midst of a serious economic crisis, you are at a crossroads in terms of saving your company and money.
If you are a business planning for a recession, then a strategic plan is required to mitigate the effects of recession on your business. Here are eight proven strategies to make your business recession-proof.
1. Diversify revenue
Diversifying your revenue will give you multiple revenue streams and keep your cash flow stable. It would be beneficial to have a recession-proof product or service on hand during difficult times. This would give you a steady income with an increasing user base.
2. Reduce your expenses
Reduce expenses that you believe are unnecessary for the organisation. Avoid activities that do not contribute significantly to the company's growth.
Keep an eye on your purchasing and selling ranges and the profit scale. Cut the expenses that are chewing up much of your capital.
Instead of recruiting additional staff, consider outsourcing your services.
Take a quick look at the different sources of funding to grow your startup if you are looking for cool ways to raise capital for your business firm.
3. Save some money
Keep some money in your account to avoid becoming cash-strapped. In an emergency, this would come in handy.
Make a cash reserve to keep your business intact. This would allow you to meet your company's purchasing needs while also consistently paying your employees.
4. Keep debts low
Maintaining debts is not a risky activity when the economy is doing well, but it can be difficult during a crisis.
Keeping track of your bills can save you a lot of headaches in the long run. Inadequate cash flow management can have a negative impact on your company's growth. You can start by paying off your high-interest loans and keeping your expenses low, or even reducing your credit card purchases.
Suggested read: How to Optimise Your Team for Business Growth
5. Implement a different business approach
Continue to try out fresh business approaches. Talk to your employees and focus on exploring innovative business strategies that bring in more revenue faster. You can think of ways and means to leverage your team's skills to launch new services/ products.
For example, education institutes across the globe launched online classes to their students by leveraging their existing resources during the covid pandemic. This approach to business drastically improved their bottom line.
6. Balance the employee base
Your employees are the backbone and soul of your company. Deal with the recession wisely and choose not to lose them. Your employees will rely on the income you provide, so set aside funds to pay them even in times of crisis. It will be a good idea to keep a cash reserve for at least six months to run your business hassle-free during recession.
7. Stay active in business
You will need a solid consumer base prior to the downturn. Connect with your customers to keep your business alive. You can reach out to your existing customers for additional services or hit up your former customers. Either way, it's important to be on your customer's radar.
8. Focus on marketing
A common mistake startups make during recession is drastically reducing their marketing activities. Stopping your marketing efforts can put your business on hold and slow down your progress, taking you off your customer’s radar.
Instead, you can design growth-driven and strategic campaigns to attract new clients and retain existing ones. A good example is offering your services at a discounted rate and marketing it among your prospective customers.
Learn how your business can acquire your first 20 customers here.
Preparing for the recession helps protect your tech startup from potential threats and failures. Planning is crucial for your company's survival during recession. By applying these proven strategies, you can make your business recession-proof and increase your revenue.
Want to boost your team’s productivity and efficiency during recession with customised tech solutions? Get in touch with our experts now.
1. Which industry is recession-proof?
Here are few top industries that are recession-proof:
- Healthcare industry
- Consumer essentials
- Technology and IT
- Accounting and tax service
2. What is a recession plan?
These are some steps you can consider before a recession:
- Keep your costs down
- Create an emergency fund
- Pay off your debts
- Make smart investments
3. What do businesses do best in a recession?
During recession it is natural that customers cut their expenditure. When sales begin to decline, firms frequently cut costs, drop prices, and postpone new investment in order to survive the crisis and preserve stability throughout the economic slump.