Recession. More than likely, the mere mention of that word elicits an emotional response. It could bring up feelings of dread and panic, as it does in most people. However, for the savvy business owner, the thought of uncertainty in the economy should signal opportunity. As Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” In today’s episode, I’m going to explore five ways your business can benefit from economic uncertainty.
Follow Along With The Financially Simple Podcast!
This week on The Financially Simple Podcast:
- What is a recession and where does it fit within the economic cycle? (01:30)
- How can business owners take advantage of the next recession? (04:00)
- Affordable advertising. (05:50)
- Search Engine Optimization (SEO). (08:14)
- Market expansion. (09:57)
- Negotiate better vendor pricing. (12:01)
- “Level up” your employees. (13:06)
The Economic Cycle & Recession
We hear a lot about recession these days. Anytime you turn on the news or open the Business & Finance section of the newspaper, there’s bound to be some mention of a coming recession. But what is a recession? Investopedia defines a recession as, “a significant, widespread, and prolonged downturn in economic activity.”
Generally, we say the economy is in recession following two consecutive quarters of decline in Gross Domestic Product (GDP). Although alarming, recessions are a normal part of the economic cycle which describes the natural behavior of an economy. This natural progression can be broken down into four basic stages.
- Expansion. Often referred to as the “growth” stage, this is when the economy is experiencing rapid growth. It is typically marked by low interest rates and increased production.
- Peak. Here, growth has reached its highest potential and is beginning to create some economic imbalances.
- Contraction. This stage is what we know as a recession. During this stage, the economy begins to correct the imbalances caused by peak expansion. Typically, this is when we see slow growth, higher unemployment, and stagnate prices.
- Trough. At this stage, the economy hits its low point and begins to recover.
Each time we complete the cycle, the whole process begins again. While times of uncertainty in the economy are often uncomfortable, there are ways your business can benefit from them. So, how can you take advantage of the next economic crisis?
5 Ways Your Business Can Benefit from Economic Uncertainty
Once again, when faced with fluctuations in the economy, our natural inclination is to “circle the wagons,” and go into self-preservation mode. However, that’s not always the best way for business owners to respond to the onset of a recession.
You see, discomfort is essential for growth. We’ve all experienced “growing pains.” As fluctuations in the economy cause us to be uncomfortable, lean into it as an opportunity for personal and business growth. Now that you’re ready to embrace the discomfort of an economic crisis, let’s look at five ways your business can grow and benefit from them.
1. Affordable Advertising
Marketing is often one of the most expensive expenditures business owners face. In fact, from 2017 to 2022, social media marketers saw a 24.6% average annual growth in spending, according to data from Oberlo. With numbers like that, it’s easy to see why marketing is often the first area business owners look at when cutting costs.
Meanwhile, online marketing services such as Google Ads offer pay-per-click advertising models, meaning you’re only charged when someone clicks on your ad. However, the placement of your ad depends on how much your business bids per click. The more you bid, the more likely it is that your ad will be placed in front of your target audience.
For example, if Company A bids $20 per click, but Company B bids $30 per click, then Company B will receive better ad placement, reaching a greater share of the market. Therefore, when Company A cuts its advertising spending, Company B can take advantage by lowering its bid to $20 per click. When a recession presents you with opportunities to save money AND gain greater exposure over your competitors, you must take advantage.
2. Gain an SEO Advantage Over Competitors
Similarly, you could use the recession to gain an invaluable Search Engine Optimization (SEO) advantage over your competition. Improving SEO takes time and operates on a cumulative effect. This means, if you’re not already investing in your SEO, then you’re already behind your competitors. However, a recession provides an opportunity to gain ground, or even surpass your competition, should they pull back on their marketing and online presence.
According to Ryan Law of the content marketing agency, Animalz, “Any budget invested now, during recession, will yield a much larger return on investment in the months and years postrecession. This is especially true when your competitors have strayed from search content and paused their own marketing efforts: your slight head start can lead to an insurmountable moat of ranking keywords and new backlinks.”
3. Market Expansion Opportunities
During a recession, many companies begin to fold or drawback in an effort to control spending and losses. This presents an opportunity for expansion. Now, it may seem like a bad idea to be so aggressive when dealing with uncertain economic conditions. But keep in mind, that gains and losses during an economic downturn are often lasting changes.
A 2002 report by Bain & Company revealed that Dell Computers grew unit sales by 11% even as industry sales declined 12%, during the 2001 economic downturn. In Q4 of the same year, Dell captured more than 90% of worldwide profits in its industry. On the other hand, the report concluded that more than 70% of the market that lost its share in the 2001 downturn was unable to regain their positions.
However, there are risks associated with entering a new market. Any decision to explore a new market must be based on comprehensive research and data. You might also try beta testing or running a limited release to gather real data on consumer response. Similarly, an economic downturn could be a good time to develop a strategic alliance with other businesses to gain access to new markets. As you look to new markets, be sure to adapt your marketing efforts to accommodate such a move.
4. Better Vendor Pricing Opportunities
As businesses look for ways to entice consumers during a recession, you could find that many of your vendors are willing to negotiate on price. But why? With greater economic uncertainty, consumers (and businesses) often tighten up their purses, leading to decreased demand. This is often a good motivator for companies to offer lower prices on certain items and services. This could be advantageous to you and your business, but you’ll probably need to be proactive in looking for opportunities to spend less on the supplies you need.
5. Greater Access to Great Employees
Recessions often lead to layoffs and high unemployment numbers. In fact, the U.S. Bureau of Labor & Statistics reports that at the onset of The Great Recession, in December of 2007, the national unemployment rate was 5%. It had been at or below that number for the previous 30 months. By the end of the recession (June 2009), it had risen to 9.5%, according to statistics from the U.S. Bureau of Labor & Statistics.
Additionally, employers took 3,059 mass layoff actions during this time, involving 326,392 American workers. With so many skilled and qualified workers suddenly out of work, opportunistic business owners could field a highly-talented and sought-after team with little to no competition.
Economic uncertainty is disruptive. It can be scary. But it doesn’t have to prevent your business from growing or even thriving in its midst. These are just five ways your business could benefit from recessionary trends. However, creative and innovative business minds like yours could probably think of many others. Don’t let fear and uncertainty hold you back.
Life is hard. Owning a business and weathering all of life’s storms is extremely difficult. But the sun will come up tomorrow. Friends, life is good. Fluctuations in the economy can be frustrating, but they don’t have to be. By taking advantage of the opportunities they present, you can make scalable growth during economic downturns at least financially simple. Let’s go out and make it a great day!
Is your business positioned to take advantage of the next economic crisis? If not, reach out to our team. We have advisors and business coaches all over the country who could help you find ways to make the most of economic uncertainty.