7 Ways to Make Your Non-Essential Business Recession-Proof Seven entrepreneurs discuss how they managed to stay afloat through the Great Recession of 2020.
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There are many unpleasant scenarios entrepreneurs plan for in advance, in an effort to stay afloat if and when trouble hits. These scenarios include losing major clients, lawsuits, and the aftermath of natural disasters. Recessions, however, are a league of their own. They are difficult to plan for in advance, and damage control efforts are akin to fighting an uphill battle.
In the post-pandemic world, staying afloat has proven to be a greater challenge for businesses in non-essential industries such retail, automotives, and hospitality- which in too many cases ended up putting down the shutters. But is there a way for entrepreneurs behind non-essential businesses to make it out of such mayhem in one piece? In a perfect world, the answer would be "yes." In reality, it all depends on how much the entrepreneur (and their team) is ready, willing, and able to adapt for the sake of company longevity.
I reached out to seven entrepreneurs behind an assortment of industries, to gain a better understanding of how they navigated their way towards making their respective businesses recession-proof. Here's what they had to say.
Make necessary adjustments to position your business for success
As an entrepreneur, you have the choice to make any and all possible adjustments needed to avoid pitfalls and leverage opportunities that are unique to your industry amid a recession. According to Billy Draddy, the CEO of men's apparel company B. Draddy and creative director of Summit Golf Brands, it is ideal for adjustments to be made before the dark cloud casts its shadow. It is also important to remember that the implementation of each change calls for more than just a quick announcement. It is a team effort.
"A week into quarantining during the pandemic it was clear that we were going to need to adapt to the current business environment in order to survive," says Draddy. "We needed to be innovative, and motivate our team to execute on practices that were completely unfamiliar, under the pretense that we would all be better on the other side of this- which we thankfully are."
Experiment with temporary pivots
Depending on the nature of your business, you may have no other choice but to make a slight pivot, even if it's a temporary one.
Despite the implication, such a move is not limited to larger companies, as seen in the case of the popular Tel Aviv-based American restaurant, Bodega. Soon after lockdown restrictions were imposed in the area due to the pandemic, the dine-in/take-out restaurant branched out to offer meal kits for delivery, which tremendously helped the business weather the storm, despite reduced foot traffic. "These kits are the key ingredient to making the lockdown a little more bearable," says co-owner James Oppenheim. "The community can still enjoy decadent comfort food delivered right to their door!"
Related: 7 Reasons Legal Cannabis Is a Recession-Proof Industry
The Chicago-based Milt's Barbecue for the Perplexed chose to take the route of expanding their menu to offer more than just BBQ, and made arrangements to deliver food/catering packages to neighboring cities. They also ran creative promotions selling limited-edition infused bourbon, which quickly sold out despite the recession. Bryan Gryka, the executive chef and general manager of Milt's, also went onto to pay it forward, by collaborating with soup kitchens and helping families in need, all out of goodwill in one of the cities hit hardest by the pandemic.
Consider creative ways to build new streams of income
Creating multiple revenue streams is one of the best ways to recession-proof your business. It's even better to offer packages with a wide range of price points if possible, to at least offer a little something for everyone. Recessions are not the time to hold onto pride, because at the end of the day, some profit is better than no profit, and it collectively makes a huge difference.
Solopreneurs, whether they are freelancers, creators, thought leaders, or agents, have the benefit of instantly implementing any creative new idea that comes to mind for new or additional revenue.
"The event industry is down - but definitely not out," says Adena Mark Kapon, the CEO and founder of A to Z Events Israel. "It's important to devise additional streams of income. For me, that means organizing large-scale projects that utilize my experience on the ground, for online experiences. For others, it can mean consulting or training business within the industry. We all have to use this unique time wisely to ramp up and sharpen our online presence, making virtual appointments, tours, and conversations easy, since this entire situation has made that more critical than ever."
Place great care into customer retention
Finances tend to be more/less tight for entrepreneurs on a normal day, and even more so during a recession. At that point, it becomes difficult to invest large amounts of money to attract new potential clients. That does not mean hope is lost. Instead, they can focus on their existing client base.
Customer retention is highly recommended for B2B companies, as practiced by agricultural technology platform and service, SeeTree. "The tendency of customers and venture capital funds to spend money on innovation is hampered during times of stress and severe uncertainty," says Israel Talpaz, the CEO and co-founder of SeeTree. "In light of the difficulties brought on by the pandemic and global recession, we decided to focus on ensuring the quality of our service and on customer retention. We understood that if we can provide great quality during these difficult times, it will be strongly valued, and word-of-mouth recommendations would be more impactful. We also decided to use the time to conduct major R&D efforts to enable readiness for scale."
Practice great ethics while cutting costs
While most industries suffer major financial blows during recessions, there are some that get hit far worse than others, forcing executive teams to make a series of cost cutting measures. In doing so, it's crucial to be as ethical as possible, without burning bridges.
If you're going to cut ties with agencies and service providers, do so with tact, to make it easier to circle back with them once the smoke clears. If you have to let go of employees, you need to do so with increased sensitivity towards how this would impact them and their livelihoods in the worst of times.
"The travel industry was hit first and worst, and likely will recover last," says Chaikel Kaufman, the founding partner at Chaikel Travel. In an article that addresses the hardships he faced as the pandemic and recession began to unfold, Kaufman stated the difficulty he faced while handling furloughs, which he still carried out in an ethical manner with individual phone calls. "To my surprise, my employees' responses were very positive. They understood the situation. Many went as far as to volunteer their time at no charge. "I'm stuck at home with nothing to do. I'd be happy to help out just to keep my sanity,' one employee told me." As time went on and it became clear that the after-effects of the pandemic was going to last longer than expected, Kaufman reluctantly had to take the next step, but made sure to still do so in an ethical manner. "I made the very difficult decision of who was still needed for us to operate in a limited capacity… and spent two days researching the proper way to let an employee know they were being laid off, and made the calls."
Go digital anywhere and everywhere possible
The rapid digitization of processes turned out to be one of the few good things that came out of the pandemic and recession. While there may be a few costs upfront- the time, resources, and sanity that gets saved from it is priceless.
"The 2020 recession sent many businesses into a scramble," says Elizabeth Sheils, the founder of event payment and contract platform Rock Paper Coin. "It placed event organizers and vendors in the position to figure out how to stay afloat, move to virtual appointments/tours, consults, and digitize their contracts and payments, (with the latter working out for us.) Most industries traditionally thrive on being "in person.' Many businesses that underwent varying levels of digitization ended up experiencing a steep learning curve, the efforts of which were ultimately worth it."
Figure out ways to create value against all odds
One of the simplest-yet-effective ways for entrepreneurs to make their business recession-proof is to focus on ways to enhance core competencies.
"Like many other startups, Obligo was facing both threats and opportunities due to COVID," says Omri Dor, the COO and co-founder of fintech company Obligo. On one hand, as a fintech company, extending credit became riskier. On the other hand, demand for our product skyrocketed. Our first response was to tap the brakes. We increased our underwriting thresholds, dropped our marketing budget and temporarily cut our salaries to maximize runway. To shift gears, we doubled down on our data science and collection automation technology, until we were sure our KPIs allow us to grow safely. After about 14 days of all-hands-on-deck, as we felt more traction on the curve, we started pushing the gas pedal again. It may sound clichè, but the only 'recession proof' strategy is to create real value."
There isn't a single move, or moves, that can guarantee to make any business 100% recession-proof. However, the implementation of the measures mentioned here can help dramatically increase the odds of your business staying afloat during a recession, and possibly even make a sizable profit.