A recession spells terrible news for families, individuals, and businesses, alike. It creates a vicious cycle in which decreased spending leads to lower revenues, potential layoffs, and, overall, lower growth in the economy.
The 2008 Financial Crisis comes to mind for most people when the word recession pops up. It was brought about by financial deregulations, high-risk taking by banks, and one burst of the housing bubble. All this caused millions of job losses and over 170,000 small business closers in the USA.
While such a scenario is a grim experience overall, it also offers opportunities for individuals and businesses to bounce back.
In this article, we discuss a few such opportunities that are hiding in a recession.
1. Start a business
This may not be the most realistic option for everyone unless you have the means, time, market knowledge, and an idea. Many startups were founded during and in the aftermath of the Great Recession. These include WhatsApp, Venmo, and Uber, just to name a few.
A clear advantage of creating a startup during and right after a recession is the lack of competition. A downturned economy will dissuade all but the most entrepreneurial. This can give your business the first-mover advantage.
Furthermore, since the government promotes spending (thereby decreasing borrowing interest rates), there is no better time to borrow and begin your startup journey.
Therefore, this is the time to put your head down and start working on that business idea. For example, do you have a way to source groceries? Then build an online store on an eCommerce platform and register a domain name such as www.yourgroceries.store and start selling!
2. Buy land
If you can, try and purchase land for a long term project. You can do it for a house you’ve always wanted, a new office space, or maybe a new warehouse space on rent.
Land prices are low during a recession, but eventually, pick up when the economy picks up. So it is a great investment for both personal and professional reasons.
3. Create an investment portfolio
Low trust in the market and a downturn in business means a reduction of stock market prices. However, it’s this exact reason why you should invest.
An important thing to remember when investing is to not look for short-term gains. Unless you know the trough/ dip is happening in the market, you’re most probably going to make losses in the short term.
However, you can thrive if you make long term investment plans during a recession. According to Investopedia, you should look for businesses with good cash flow and less debt during a recession.
If it makes sense, do your research and put your capital in a business that can weather the storm and the rewards will be massive when the market picks up again.
4. Enter into a new contract & refinance your debt
Refinancing debt is more likely to happen during the recession because people are more likely to default on loans. Ironically enough, that’s when banks need liquid capital the most.
It makes sense to enter into a new contract with a bank and refinance your debt to decrease the interest you’re paying over and above the principal amount. This will save you some much-needed cash.
A penny saved is a penny earned which can be turned into a dollar profit with the right investments.
5. Restructure your organizational processes and structures
A recession is an opportunity for you to look at your business and see what’s efficient and what’s not. You can cut out inefficient workflows, lean down processes, and restructure the hierarchy.
If there is a way for mid-level employees to make decisions faster, give them that power. If you can cut out meetings or make some conversations digital, do that.
Every step you take to make processes and actions faster will lead to quicker and potentially higher quality output.
6. Rethink your product-market mix
Being a small business doesn’t just limit you to your customer base to being local or even nationwide. If your products aren’t selling where you are currently at, they may sell elsewhere.
While the recession can have a global impact, not all countries experience the full brunt of it. In 2008, countries such as India and China were not severely affected. In India’s case, it was because exports only accounted for 15% of its overall GDP.
This means that you may need to export your products to a new market (also known as market development) or come up with a new product strategy altogether .
7. Research about consumer needs in this new scenario
Consumer needs do not stay the same every year, let alone during a drastic economic shift such as a recession. The lowest hanging fruit is offering a cheaper alternative to what’s currently available.
Given that people are more cautious about spending money during a recession, they are more likely to penny-pinch than not. Starbucks felt that when they had to shut a lot of their stores during the 2008 recession.
Cheaper alternatives to current products, creating smaller variations, or extremely large ones that offer more savings, or simply offering discounts are some things that your small business can opt for.
It can also be a completely new idea that can change people’s lives such as a smarter job-research tool, a better way to conduct business meetings, etc.
As long as there’s a new need, there will be a lurking solution and these can potentially have long term rewards.
8. Shop Smartly
Due to lowered prices, shopping on a bargain is likely to happen. This is both in the case of personal shopping and also shopping for your business.
Vendors will likely decrease prices and if a raw material for your product is such that it does not perish easily (or at all), then you’re in luck. You can potentially buy for better times and reap the rewards when regular consumer behavior resumes.
9. Take the time to study
Your business and job have taken a hit, but that doesn’t have to be permanent. More than anything, a recession offers time to its recipients. Those who weather the storm and better themselves often come out stronger.
There’s no better way to come into a recently recovered economy with a new skill or knowledge about the market.
You can study the market and learn to make wiser investments, in case you lack the capital to do that during the recession. Additionally, you can also study to become better at your current skill, so that you and your business can be more competitive.
It’s all about perspective.
A recession acts as a very tough challenge for those who experience it. However, as history has shown, it is wholly temporary. A responsible and smart government will take measures to recover the economy.
Nevertheless, like its arrival, recovering from it also takes time and work behind the scenes. In this time, there are plenty of personal and professional growth opportunities hiding in plain sight.