Revised; Originally published January 2023
There have been 12 recessions since 1945. The average length of each was 11-months. Three lasted a little longer, the recessions of 1975, 1982, last 16-months and the recession of 2008 was 18-months long. Recessions are a component of the natural business cycle that happens regularly in the economy, and they are unavoidable in the life of an entrepreneur. An economy in a prolonged recession will descend into a depression before bottoming out, recovering, and expanding.
Early in my career, in 1988, I started a retail business with the support of a business partner who was much older, wiser, and wealthier than I. It was a relationship that lasted for nearly 30-years, and I benefited greatly from his experience. He had weathered several recessions in his career and willingly shared insights that have stayed with me over the years. Here is what I learned from watching, listening, and being actively involved as a business owner and investor through last several recessions:
Diversify your business? If your business is based on a limited number of products or services, it will be a challenge to withstand economic contraction or the pressure of rising inflation.
A well-diversified business has a variety of offerings that are geared to fill the needs - not just the wants - of our customers. By giving customers more reasons to shop with you, you help create security for your business.
Lean means (more) Green! If you are thinking of buying a business that is marginally profitable, look closer. Look for ways cut expenses. Only profitable businesses survive recessions! So, when times are tough your business needs to be lean. If you’re not lean, there’s no green. You’re not growing.
Plan don’t Panic: As a business owner you’ll be faced with a variety of new scenarios as you head into a recession. Have a plan and don’t panic! Research what it takes to be successful in your industry. Talk to the old-timers in your sector and make friends with your industry pioneers! These tough people will give you valuable insights that you can incorporate into your business plan for tough times. Without a plan, you’ll feel overwhelmed and anxious. With a plan you’ll sleep better, and feel better, and because of this you’ll make better decisions and be more successful. Panic rarely works out well in the long run.
Don’t go it alone! You have a team, so get your team involved when analyzing your business! Sometimes business owners are too close to a problem to see a solution and it’s the team that provides much needed perspective. Everyone wins when employees feel more engaged. As a business owner you might find that you have some very keen employees who just needed an opportunity to shine! Let them help you with a plan, or with several optional plans, check-in and keep them accountable.
Remember, at the end of the day, it’s your business practices that will protect your investment and expose opportunities. Boiled down: Your customers need multiple reasons to spend money with you; you need clarity about how you can manage costs; and you need an edge over your competitors.
Dave Fuller, MBA is an Award-Winning Business Coach, a PBCA Member, and the author of the book “Profit Yourself Healthy”. He also enjoys a successful career as a commercial real estate professional. Dave can be reached directly at firstname.lastname@example.org.