How to Prepare Your Business for Tough Times Ahead
Brian Wallace, Founder & President, NowSourcing
There’s ample evidence another recession is on its way. According to the Federal Reserve of Kansas City, delinquent auto loans among subprime borrowers is on the rise, signaling there might be too much unsecured debt in the economy to be sustainable. Recessions come and go, but your business doesn’t have to fall victim. It’s time to start preparing for the coming recession by taking a lesson from recession-proof businesses.
What Signs Point To A Recession?
Outside of subprime auto loans, there are several other signs that point to a coming recession. The economy naturally goes through periods of growth and periods of stagnation, but to many it seems there has been recession after recession as of late. According to Bloomberg, the New York Fed is predicting the highest likelihood of a recession in the next 12 months since 2008. Additionally, both consumer and business sentiments have sunk continually in the last several months, manufacturing surveys are slumping, and global economic growth is slowing. By the time employment and wage numbers start to decline, according to Bloomberg, we will likely already be in a recession.
What Businesses Continue To Do Well Through Recessions?
There are some things people will always have to spend money on — housing, groceries, and gas are the big ones — though most people still cut back in those areas during recessions. There are plenty of things that are needs and not wants that people continue to spend on through recessions, however.
Beverage alcohol is one area that actually grows during a recession — U.S. sales of beverage alcohol products rose $2 billion during the last recession. Cosmetic sales also rose during the last three recessions, and in Europe beauty products consistently outpace the broader economy by double. Candy, tattoos, and tobacco products all continue to do well during economic downturns.
Healthcare is another area that continues to grow in economic downturns since it is such a necessity. While healthcare industry growth fell during the Great Recession, overall healthcare spending still grew and has grown every year since it started being tracked in 1960.
Perhaps surprisingly, global spending on luxury goods grew significantly just two years after the end of the Great Recession, indicating the widening gap between the very rich and the very poor. In 2017, the top 10% of earners in the U.S. took home half of the wages, while the top 1% hold 40% of the nation’s wealth – a disparity that hasn’t existed since the Gilded Age.
What Can Businesses Learn From These Recession-Proof Industries?
Taking notes from businesses that are seemingly recession-proof is a great way to prepare for what’s ahead. If you’re looking to start a business and you don’t know whether to start a bar or a high end restaurant, in many places a bar would be a better bet. But even if you are already in business, there are steps you can take to ensure your business’ survival.
To prepare your business to tighten the belt:
- Monitor spending so you know what’s coming in and what’s going out
- Start budgeting and slow non-payroll spending to 10% less than last year
- Stop carrying unnecessary excess inventory — it’s just unused money sitting around
- Market your business to showcase your company’s strengths
- Cut excess and focus on strengthening your core business
Learn more about the probable coming recession from the infographic below.
Source: Great Business Schools
About the Author: Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency in Louisville, KY and Cincinnati, OH which works with companies ranging from startups to Fortune 500s. Brian runs #LinkedInLocal events, hosts the Next Action Podcast, and has been named a Google Small Business Adviser for 2016-present. Follow Brian Wallace on Linked