When companies spot signs that the economy is slowing, they reflexively buckle down, put off new projects and look for opportunities to cut overhead. By reacting conservatively, finance leaders conserve cash to tide the business over and ensure it doesn’t have to make deep cuts or worse, close the doors altogether.
Some industries, called counter-cyclical or recession-proof, are typically either unaffected by recessions or thrive during downturns. However, most companies must find the best ways to weather the storm and, hopefully, come out stronger.
While recessions bring challenges, the resulting economic and business changes can open opportunities for agile companies. The key is to seize opportunities.
What Are Recession Opportunities?
Recession opportunities are benefits that come from economic changes that occur during a downturn. Savvy leaders can take advantage of these opportunities to grow their businesses, keep profits up, even expand their market share during a time when other companies are stagnant or contracting.
Recession opportunities are different from recession-proof businesses. To weather an economic dip, the latter do not need to change anything about their business models, products or services.
- Fewer businesses spending on customer acquisition provides openings for marketing teams that can harness less-expensive pay-per-click or digital advertising.
- Suppliers of everything from raw materials to technology may extend discounts or lower their prices to keep cash flowing.
- Financial management software keeps your numbers up-to-date so you always know what’s going on in your business.
- Investing savings from improving operational efficiencies in automation, advertising and diversification can pay off for years to come.
7 Recession Opportunities
Finding opportunity during a recession is possible. Business shifts and new economic realities offer a chance for businesses to reduce costs, improve the metrics that matter and enhance employee and supplier relationships. The key to success is agility, reworking your strategy to seize the day when others are just hunkering down.
1. Take advantage of less expensive advertising, gain new customers
B2B companies have found that online paid advertising, while effective, can be one of the highest variable costs they incur when spending on customer acquisition. And businesses must spend more and more each year just to keep up with the competition.
Take social media spending. In the United States, marketers saw a 24.6% average annual growth in spending from 2017 to 2022, according to data from Oberlo, a drop-shipping app for ecommerce retailers. That correlates in growth in the number of users of social media platforms.
10 Dos and Don’ts of Cost Cutting
|Address operational inefficiency. There may be redundant positions or processes that can be eliminated or restructured for significant cost savings.||Cut strong talent. Good, committed staff are hard to find, and even harder to train.|
|Consider cutting initiatives that are not a core function of your business or are underperforming. Profitability comes to the front of the queue.||Cut marketing completely. Consider guerilla social marketing and other inexpensive brand-awareness drivers popular with startups.|
|Consider taking payments off autopay to better control payment timing. Cancel underutilized subscriptions.||Cut technology that helps your team work remotely. Again, there are very affordable collaboration tool options.|
|Think about the future. Will you need as much real estate? Will some systems be rendered unnecessary?||Overlook the small stuff: office supplies, snacks, furniture and that fancy coffee machine stack up in cost.|
|Be transparent with employees if pay or benefits need to be temporarily cut.||Cut areas generating positive cash flow, like sales, SEO or digital ad spend.|
Most ad systems, like Google Ads and Microsoft Advertising, work on a pay-per-click system, which means that you pay for your ad only when someone in your target market clicks on it. However, your ad's placement depends on how much your business bids for each of those clicks in the ad marketplace.
Say Joe’s Pet Food bids $1 for a click on its dog food ad while Dog Feasts by Flavio bids $2. Flavio’s business will have better ad placement and likely more views from searchers, translating into higher sales.
When a recession begins, the first thing to go for many businesses is discretionary ad spend. To conserve cash, they either stop experimenting with new campaigns and stick to what they know works or stop paid advertising altogether. This means fewer businesses are bidding in the marketplace and, therefore, lower prices. If Joe’s Pet Food drops out of the advertising marketplace, then Dog Feasts by Flavio can reduce its ad spend to $1 and save money on crucial, conversion-driving online advertising.
Tip: Find an experienced online advertising consultant in your industry. Many times, advertising platforms offer help from internal experts, but businesses often find their recommendations typically boil down to “spend more and try experimental media.” That may not be a right fit for your business. A third-party point of view can lower your costs-per-click and improve the conversions that matter to your company.
2. Seek out operational efficiencies
Operational efficiency is about using data to make process improvements that increase efficiency, productivity or quality.
In good times, the focus can shift from efficiency and cost controls to spending a bit more to increase production or improve quality. When a recession hits, many businesses change course and rebalance, looking to decrease losses in time, money, materials and effort. That can free up cash to keep a company in business or help them pivot and try new things as their markets and the economy change.
Look to your data. A variety of metrics are involved in tracking and informing operational efficiency improvements.
Take as an example retailers, which usually watch their sales, inventory, pricing and profitability. A seller of a luxury good, like expensive chocolate, might begin to closely track its sell-through rate, a metric that shows how much revenue has come in or how much inventory has sold as a percentage of the amount bought from suppliers in a month.
Sell-through rate = (Sales in month or Month beginning inventory) × 100
As the economy slows and people spend less on nonessentials, it might find its inventory levels ticking up and be able to buy less stock and redirect some funds to advertising, with a message that a good piece of chocolate is an affordable treat when a fancy dinner out may be off the table.
Business owners can use this opportunity to streamline operations for the long term by adding automation instead of hiring or finding better-priced providers. In addition, slowdowns in orders or bookings mean more time to train employees to reduce overproduction and defective products, improve customer satisfaction and impart new skills to benefit the business.
Tip: Find ways to remove barriers to success for your employees. Business is still a people-first operation. Don’t improve efficiencies at the expense of keeping workers happy and helping them achieve their career goals. As a result, they'll stay with you longer, continually improve at their jobs, and recruit like-minded people to join your team.
3. Explore a reduced workweek
You may have heard about Treehouse, an online education provider based in Portland, Ore. that recently went from a 40- to a 32-hour four-day workweek and garnered national media attention. In Treehouse’s case, employees are paid the same. But in a recession, companies may consider offering workers a shorter workweek, if necessary for a small reduction in salary, but with no loss of benefits.
The concept of a four-day workweek has been gaining steam for some time and has been shown to offer a number of upsides, including increased efficiency, higher job satisfaction, a better work/life balance and lower turnover. In fact, a bill filed earlier this year, the Thirty-Two Hour Workweek Act, would reduce the federal definition of the standard workweek from 40 to 32 hours per week by kicking in overtime pay under federal law at the 33rd hour rather than the 41st.
If business activity is slowed, allowing employees to work fewer hours for near or the same pay may make sense — and could increase loyalty so that, when the economy bounces back, you’re not facing an expensive hiring effort.
Tip: A shorter workweek isn’t radical – besides Treehouse, Kickstarter, Unilever and other big-name companies have piloted the program. A nonprofit organization called 4 Day Week Global offers data and resources on how to test a 32 hour schedule in your company. Finding new employees is expensive, even if unemployment ticks up.
4. Take advantage of changing consumer behavior
COVID-19 caused most consumers to reassess their buying habits. We quickly went from in-store purchases and indoor dining to online shopping and carry-out meals. Many believed these would be short-lived changes, with consumers reverting to old patterns once pandemic restrictions abated. But thus far, anyway, these trends have stuck with us.
Microsoft Advertising identified four new consumer types that have evolved out of the latest recession: digital nomads, empowered activists, luxury shoppers and self-care enthusiasts. The pandemic brought out what matters most to these archetypes:
- Digital nomads value flexibility and minimalism to travel more and trade material things for experiences.
- Empowered activists spend money on brands that align with their values. So they're looking for companies that tout inclusivity, ethical standards or privacy.
- Luxury shoppers prefer to spend more money on finer things but do so online, frequently eschewing the in-store experience.
- Self-care enthusiasts spend their time and money with brands that support mental health, fitness and family.
Businesses that went digital before or at the beginning of the pandemic took advantage of behaviors like those mentioned in the Microsoft data to continue doing business as consumers’ needs changed. A recession presents a similar opportunity to think about how your market will adjust and react. Some smart moves now can be the difference between surviving and thriving during an economic squeeze.
Tip: Figure out the best ways to bucket your target market or existing customers and find what they need to become repeat clientele or tell their friends about your products and services. The easiest way to do this is to talk to recently converted customers about why they chose your product or service. Don't forget to ask them what almost kept them from becoming a customer, too. Then use those insights to tailor your offerings and marketing.
5. Expand into new markets, then find your customers
Along with continuing to serve your existing audiences as their needs shift, an economic downturn presents the opportunity to expand to new markets that may not have known about or needed your products or services before. Of course, this is largely dependent on industry, but most businesses that have followed the previous tips and now have newly energized employees, expanded ad reach and more efficient operations can pick up new customers as competitors falter. There’s also potential for alliances or even acquisitions that can bring you a whole new audience.
As they’re researching the changing needs of their existing customers, business owners can also investigate parallel markets to determine how to improve existing products or create new ones that serve a different target audience. Most recently, for example, we saw hotels offering day rates for employees looking to work from somewhere other than home, grocery stores turning into “dark store” fulfillment centers to package online grocery orders, restaurants renting out their kitchens during off hours and fitness brands moving to online exercise classes.
Tip: Support any proposed new products or services with research and data. Making an impulsive move to find a new target market based on a hunch could land your business in even more hot water if it doesn’t work out as planned. Test a small “beta” with a limited release, or offer a finite number of new services to see how audiences react. Actively solicit feedback so you can improve as you go.
And as you explore new markets, remember to also adapt and expand your customer acquisition efforts.
In an increasingly digital world, not only is it critical for companies to have a website, but online brand awareness must become a top marketing activity. Investing in digital marketing, content, SEO and PPC as you expand gets your brand in front of consumers where they’re spending money. Many brands have gotten creative with their online content, too, investing in video, webinars, online events, podcasts, social media live streams and display ads alongside traditional written content.
Tip: Invest in the platforms where you know your newly targeted customers spend a lot of their time — and remember, it may not be traditional online destinations. For example, franchises with multiple locations may experiment with ads on Nextdoor, while businesses with an older target market could see how their content performs on YouTube.
6. Get employees involved in business brainstorming
An engaged employee is an employee who will stick around. Not only that, but these invested workers bring an in-the-weeds point of view of the goings-on of a business. Solicit their feedback about more than just job satisfaction and manager performance.
Ask your employees what they see in their everyday work, what processes they think could be improved and how they would improve them. What do customers ask for, and what do they complain about? Present them with the specific problems or opportunities a recession poses for your business, and give them the agency to solve them beyond their job titles.
Get them brainstorming beyond their roles by asking what they’d do if they weren’t limited by budgets or departmental siloes. Your business will benefit from these diverse perspectives and might even come up with some money-saving or revenue-boosting action items.
Tip: Remember that brainstorming is about collecting all ideas – no matter how out there or impossible. The team can sort through suggestions later. Don’t squash creativity or even say “no” in the initial session. Often one idea will inspire another, and participants will riff off each other to get to an even better final thought. If you stomp that out early with a “we can’t do that” or “it’ll never happen,” you may not get to that big idea.
7. Invest in helping new customers find you online
As we discussed earlier, online marketing should be an always-on effort. Google coined the term “micro-moments,” to describe the way consumers turn to search engines anytime they want to go somewhere, know something, do something or buy something. This means that if you're not showing up near the top of search results anytime someone searches for terms related to your business, you're missing out.
Anecdotally, many digital marketing, SEO and pay-per-click providers saw an increase in interest from businesses wanting to invest in search marketing during the pandemic. However, because efforts like search engine optimization take time and are cumulative, you're already behind your competitors if you're not investing now.
“Any budget invested … during recession will yield a much larger return on investment in the months and years post-recession,” said Ryan Law for Animalz, a content marketing agency. “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.”
Because most PPC platforms use automation to help improve ad performance, the sooner you start using this marketing method, the sooner the algorithms can begin collecting data on your bidding, campaigns and content to optimize ad performance and improve your conversion, thus giving you more return on your spending.
Tip: If you haven't started yet, do basic research on your business by searching what you do and your generic product and service names. Look at the related searches, People Also Ask questions, top-ranking content, and the ads in the search results. Analyze what the search engines think is similar and make sure your website has content on those subjects that searchers will find helpful. If you’re further along, always consult analytics data to ensure that the ROI is worth the efforts your search marketers are putting in.
Keep your business financials streamlined even during a recession with NetSuite Financial Management
NetSuite Financial Management helps businesses manage financial processes efficiently, which is critical during an economic downturn. Financial data automation ensures that you can access real-time data to catch any inefficiencies before they become detrimental to your business. This means you can close quickly and confidently, report accurately and keep your company on the right track.
While you may not be able to pivot your company to be recession-proof, there are opportunities during an economic downturn to save money, keep employees engaged and take advantage of changing consumer behavior to add new customers affordably.
The keys to seizing these and the other opportunities are remaining flexible and open to different ways of doing things and keeping your internal relationships strong.
Recession Opportunity FAQs
How can we benefit from a recession?
While recessions affect some industries more severely than others, there are opportunities for all businesses to adapt to the changes that normally happen during an economic downturn. For example, asset prices can decrease, suppliers may offer discounts for necessary equipment and technology and some competitors may clear out of the market.
How do you prepare for a potential recession?
Businesses can prepare for a recession by improving their supplier and client relationships, reducing debt, trimming expenses, continuing marketing efforts to current and potential customers, creating a business emergency fund, diversifying revenue sources and keeping inventory levels low.
How do you protect yourself from a recession?
The best way to protect yourself from a recession as a business owner or individual is to ensure that you have a cash reserve. Long-term investing is also vital as short-term markets will be volatile as a recession approaches. Very small firms need to be realistic about their risk tolerance — an owner who is looking to retire soon will have a much lower risk tolerance than one whose business is relatively recession-proof.