Worried About a Recession? Do This to Prepare Your Company. As the economy shifts, ask yourself these four questions.
Q: I'm afraid a recession is coming. How much should I change how I run my business? — Artie, Long Island, New York
In the old fairy tale, she breaks into the three bears' house and tries all the porridge — one is too hot, one is too cold, and one is just right.
As we enter this time of uncertainty, your job is to be like Goldilocks. Don't come in too hot or too cold — which is to say, don't conduct mass layoffs, but don't continue business as usual, either. Instead, you'll want to anticipate what's most likely to occur, moderate your extreme instincts, and land on a strategy that's just right. How? Start by asking these four questions.
1. What is your nightmare scenario?
I ran marketing for Tim Ferriss for four years, and his practice of "fear-setting" really stuck with me. As Tim explains it, this is an exercise designed to help you avoid worst-case scenarios by envisioning and planning for them.
Fear-setting starts by outlining the worst thing that could happen. You want these scenarios to be bad, but also realistic. Now ask yourself: If the worst happened, what would the permanent impact really be? Once we lay out our fears and hash out the impact, it's surprising how much more manageable the "worst-case situation" can start to feel. And on the off chance they do happen, you'll have a plan.
2. Who are your customers?
At my consultancy, we create something we call "customer oracles" for clients. These go far beyond outlining customer demographics (which don't tell you much). They instead include information like who customers see as your competition, and what they expect from your business in different situations.
If you don't have this sort of information about your customers, you can get started by emailing them a couple of questions now. Ask how they're feeling about the current economic conditions and how you can help. This will give you a baseline understanding of what they value, and allow you to communicate and build community.
3. What are your essentials?
When recessions hit, people don't stop spending entirely. They cut back, reassess, reallocate, and prioritize essentials. You should do the same. Adjust your offerings by focusing on how they help your customer, rather than by making broad, generalized changes. You should achieve three things when positioning and marketing your business: highlighting what is essential, identifying what could be essential, and downplaying or pivoting away from what is expendable.
Every business is built around core items that fit a specific need. You should know how you'll be most valuable to customers during a recession, and then tell a story that makes that value clear. If you have items that could be essential, craft that narrative as well. You can still sell everything else, but don't prioritize things that will gain less traction.
4. What is the domino effect?
When times get hard, people adjust their spending. But that's not always bad for your business. If you're selling a lower-cost product or service, consumers who typically buy the higher-end product might downshift and look for a more cost-friendly option. This is your opportunity. You might access an entirely new set of clients who have the same problems as your current customers, if you can reach them.
Economic shifts are hard on everyone. But history also shows that if you can anticipate what could sink your business — and plan in ways that make your business part of the solution — you'll have what it takes to survive tough times.