- In business, the major effect of a recession is a drop in sales and demand. Fewer consumers will be buying and those who do will not spend as much money.
- To make matters worse, some businesses (those who directly rely on fuel for instance) have to increase their prices to keep up with their expenses.
- Sales do not drop to 0 so there’s still activity going on. If a company is still profitable when sales drop, it’s in a better shape than the one losing money before an economic crisis obviously.
- Depending on the industry and current shape of a company’s finances, the recession may have different outcomes for each entrepreneur.
- Those in the red are in survival mode while those in the black may actually profit from a recession.
- Competition usually decreases. It’s unfortunate but true. Some businesses just can’t stand the losses and go under. This can turn out to be an opportunity to increase market share for some entrepreneurs. But! The remaining parties fight to death for the limited customers.
- Customers will flock to the business that will offer them the best prices and/or the best value. While slashing prices is usually, the first reaction of retailers or service providers, it may not be the smartest and can actually turn out to be a fatal move.
- Desperate entrepreneurs compromise their brands by trying to save the company. In the short-term, the changes bear fruit but in the long-term (whether the economy turns around or not), they damage the brand for good ultimately harming the company.
- Some operating costs may decrease as suppliers offer better prices or incentives to stay afloat. This may be the best time to stock up or pay for future delivery (avoiding inventory costs). The airlines figured out this secret long ago (fuel hedging).
- A recession is a change from normal business activities. Every company should have a strategy on how to react to change without compromising its brand(s).
- Marketing savvy entrepreneurs actually profit during a recession. They take advantage of the lower marketing costs and go on to increase their market share and build powerful brands that become the most recognized names in the categories they compete in.
In future posts, I will discuss specific details and give practical tips, step-by-step tactics, real life examples that you can see in action, and concrete ideas on what do to not only survive the recession but also thrive.
This may sound like a televangelist’s sales pitch but it’s the information that I give to consulting clients and that I personally use to stay afloat in my entrepreneurial ventures as we’re all affected by the same economic slump!
