Experts Say a 2020 Recession Is Likely. Here’s How to Prep Your Business
Is a recession coming?
Simple time tracking that syncs with payroll.
The chief strategist for Morgan Stanley thinks so.
In a recent chat with the bank’s clients, Mike Wilson pinned the blame on President Trump’s multi-front trade and tariff war with China, Mexico, and beyond, saying:
There are also other troubling warning signs on the horizon:
- Consumer debt is growing faster than the overall economy; always a bad sign
- Home sales are slowing
- China and Europe are experiencing slower growth
Probably the most accurate, salient (and geeky) sign is something called the “yield curve.” Essentially, this looks at the delta between short term and long-range Treasuries.
Get this: According to Fortune, “The latest reading [of the yield curve] showed the chance of a recession at 23.6 percent for the 12 months through next January, the highest since the reading for the year through July 2008.”
So yes, there are very troubling signs pointing to a possible recession in the next 12 months. And when you add in a divided government and the fact that it’s an election year, the likelihood that something will be done politically to mitigate this is highly unlikely.
That means it’s up to you to ward off the worst effects of a recession on your small business.
The good news is that it actually is not that difficult. Having lived through a few recessions myself—both as a pundit as well as a small business owner—what I can tell you is that the trick to staying successful during lean economic times is to do something new and different. Soon it will be highly unlikely that your same old tricks will produce the same old results.
Here are a few smart ways to stay successful, even in tough times:
1. Start some new partnerships.
There are all sorts of advantages to teaming up with a compatible business in a joint venture:
- Your expenses are cut in half
- New ideas are circulated
- Sharing contacts increases your footprint
- You gain expertise outside of your normal area—at no extra cost
By finding a joint venture partner and a mutually beneficial project, you can expand into new areas while sharing resources and contacts and reducing costs. For example, a restaurant and a local hotel could agree to team up—share marketing, customer lists, and so on.
2. Cut your overhead. Now.
Don’t wait. If you can find cheaper digs that work for your business, consider doing so. Look at vendor contracts. Do an audit of other expenses.
Cutting expenses now will pay big dividends later when business slows.
3. Fire bad customers and hire better ones.
Assuming you have customers who are problematic—that is, they pay slow, cause problems, and so on—then consider doubling your efforts to find better customers.
Also, make sure you go where the customers are.
Here’s an example: Prior to the Great Recession (2008–2010), an accountant I know had built up a substantial real estate clientele. But when real estate tanked, he recalibrated. His new sweet spot for customers? Discount stores and shops.
Other business owners I have spoken with over the years have mentioned that during recessionary eras they focus on selling to customer bases that are recession-proof, such as state, local, and federal government agencies.
4. Do the opposite.
There are opportunities galore during recessions; you just have to look for them. As Warren Buffet says, “Buy when everyone else is selling and sell when everyone else is buying.”
I know of an entrepreneur who sells boxes. During boom times, he has plenty of customers who want branded, logo-ed boxes for all of their sales and shipping. Yet during tough times, that’s an easy expense to cut, so his business could suffer.
But it doesn’t. Why? Because during recessions he buys damaged and used boxes and sells those to his clients for less.
As a SCORE counselor once told me, “Ask them what they want, then give them what they want.”
During recessions, people want to spend less. Offer them that option.
5. Increase your marketing.
The natural instinct of most small business owners during a recession is to retrench, cut back. Avoid that temptation when it comes to selling your brand. Increase your marketing now and stick with it.
And remember, marketing today doesn’t need to be expensive. Pay-per-click, social media marketing, and digital marketing are all fairly inexpensive.
6. Start a recession-proof business.
Whether you are new to business or are an established veteran, what if I told you that there is one industry that has proven to not only be recession-proof, but actually has shown double-digit growth every year for over a decade?
Interested? Of course you are.
It’s called e-commerce.
Everyone is shopping online today and there is no reason they shouldn’t be shopping at your e-store. Amazon is far from the only game in town.
So go ahead, jump on the e-commerce train. It will chug you down past the recession track and onto the arrival platform called small business success.