Nothing lasts forever, including recessions, depressions and other crises. To maximise your return you need to change your thinking from how much I can make right now to how I can make the most over the next 5 years. That may even mean starting in a recession.
You need to plan long term and that means, for after the crash. Yes, some money can be made in some way during every crisis. If your business can easily pivot at a low cost to produce something that will be needed just for the crises then don’t leave that money on the table.
Things change slowly and obviously
You’ll hear that the world will never be the same after this crises but after every so-called world-changing event, things have largely returned to normal. Humans are creatures of habit and it takes generations to change behaviour.
Trends that were already in motion may be accelerated. Online shopping in the States has been growing consistently over the last ten years to reach 15% at the beginning of 2020. This shift will be accelerated by a crisis such as Covid19 that forces us indoors but the trend will remain the same.
We need to adjust in the long term for a larger percentage of sales to be online. Though we’ve known this for a long time. After all, this is 26 years after Amazon was launched. Significant, yes, overnight, certainly not.
We tend to think that technology will propel us into the future overnight but it never does. We just see the result twenty years later and assume it happened overnight. Smartphones were invented in the 90s and the internet in the 80s yet these things only became a requirement for everyday life two decades later.
Some money can be made overnight
During the Covid19 crises, the economy may fall 10% but it’s not equal across the board for everyone. Everyone and every business won’t get a 10% reduction in income. Travel and tourism may fall 80% but fast food deliveries may grow 70% and the net effect is a 10% drop. One industry will go bankrupt and another will thrive.
It may happen in many and unexpected ways. People who managed to keep their jobs will not be going on their annual holiday they have been saving for all year long. They may now choose to spend it differently. Perhaps higher a professional landscaper to redo the garden or remodel the kitchen.
If you can adjust your business to take advantage of the temporary change in the market then that could be your best strategy for now. Don’t forget that your long term strategy must still centre around a post-recession business.
Adjust in the short term
If you can adjust your bespoke suit & dressmaking business into one that sews face masks than go ahead and don’t leave that cash on the table.
You need to adapt your sit-in only restaurant to offer takeaways and you need to put as much of your retail pet store online as possible.
For businesses that can pivot or adjust in some way, this will help them survive the crises and come out stronger. The restaurant that pivoted to take-out may find that they keep the takeaway business running after the crises and are in stronger position long term. Your pet store may have added an online channel that now gives you an edge over your competitors who didn’t.
Though shutting your doors so that you are only online or takeout only will not serve you best in the long term. When people start returning to normal you will miss out on the return and someone else will take your place.
Outlast your competitors in the long term
The end goal is to be in the strongest positions post the crises. This doesn’t mean stronger than you went in but stronger relative to your competitors. In a war, no side leaves unscathed but whoever comes out the other end with the fewest losses is considered the winner.
If you own a car dealership and people aren’t buying cars during the crises. Let’s say there are 4 dealerships in your area. If two of them go out of business than you and the other one who managed to survive will certainly do better than they did before the crises even if the economy doesn’t return to full capacity.
Gain the competitive advantage
During a recession, prices fall. The value of your business and your assets fall but so has your competitors.
If you are in a strong enough position going in then there will be plenty of assets to pick up. If you never had the time to upgrade your restaurants, you will find that both the price of new equipment has fallen and you will be in a better position to negotiate with contractors.
Now is the time to get an edge over your competitors at a fraction of the cost. You may even be able to buy out your competitor who thinks this is the end of the world.
On the other hand, you may not be in a position to make any improvements and not sure if you will even survive. You will then have to make hard choices and the sooner you make them the better.
You may realise that you have to let go of most of your staff. This means your business can survive, allowing you to rehire them once the tide turns and keep them for several years. Keeping them for just one more month won’t do anyone any favours. You will be out of business and those jobs will be permanently destroyed.
It is also a time to renegotiate terms from all of your suppliers including your landlord who previously held all the cards. With vacancies piling up he will be ready for a negotiation and you can lock in a long term reduction.
Negotiate prices with all your suppliers who are worried about losing customers permanently.
All this will put you in a stronger position coming out. If you exit the recession with lower costs and a streamlined business you will have a significant advantage over your competitors.
If half of them go out of business, you will be making higher margins and more sales. For now, do everything in your power to survive. Once the economy turns around you will be way ahead and able to capitalise on the opportunity far better than anyone else.
It may be a great time to start
If you’ve been saving and looking for the perfect opportunity to start your business then you may find that the manufacturing equipment you needed can be bought at half the price from someone going out of business.
You will have the opportunity to build a new streamlined business without all the cost that crept into those old businesses. You will be able to negotiate a lease at a price you never thought possible and your suppliers may be willing to give you much lower prices to get rid of the excess stock that they can’t move.
The money you have been saving for the last 5 years to start will go so much further when prices have fallen. There will be incentives and payment holidays from banks, the government and suppliers. Starting at the bottom will give you the longest upward ride until the next crash.
If you weren’t in the best position to capitalise from the opportunities then don’t despair. You will pass through multiple recessions over your lifetime. Since the 80s there has been a recession in most countries every 5 to 10 years.
Some bigger than others, but never the less it is common enough that you have to plan your long term thinking around how you will come out stronger from the next one, even if you barely survived this one.