Almost all jobs lost during the pandemic have been recovered. In June, the United States added 372,000 jobs, exceeded expectations, and the unemployment rate remained at 3.6 percent – the lowest in more than 50 years – according to data released by the Bureau of Labor Statistics today.
Despite the strong labor market, the general economic mood is feeling increasingly pessimistic. No business owner wants to hear the word “r”. But depending on who you ask, the country may be talking itself into a recession, or we may already be in one.
Wells Fargo argues that this latest employment report should stifle the conversation about whether the U.S. economy is in recession – but not everyone shares that confidence. A group of forecasters surveyed by the Wall Street Journal put the likelihood of a drop over the next year to 44 percent, up from 28 percent in April. JPMorgan Chase CEO Jamie Dimon has upgraded his metaphorical concerns from storm clouds to, yes, a full hurricane. Even Federal Reserve Chairman Jerome Powell reiterated the unrest. Speaking to Congress last month, Powell stressed that the central bank “does not try to provoke” a recession with its rate-raising campaign to curb inflation. He then admitted that an unintended recession was “certainly a possibility.” It helps.
If you are a small business owner, it is best to leave the debates in the hands of economists – you must prepare as if slowing down is a certainty. Because, like coastal homeowners who know how to collect plywood for windows and sandbags at the start of hurricane season, you will want to strengthen the company’s chance of survival. by making a recession proof before it hits turbulence. What do you do? At Inc., We believe the best source of advice is the founders who went through it. So we reached out to a number of them, including leaders who run companies that made Inc.’s 2022 Best Jobs list, to learn how they plan to avoid making statistics if the economy slows.
If the economy goes into contraction – to be declared by the National Bureau of Economic Research – many founders will be experiencing a recession for the first time as a business owner. The last official downturn lasted from December 2007 to June 2009, and that financial crisis disproportionately affected small businesses. Suffered by increased credit constraints and sensitivity to consumer demand, small businesses, despite their relatively low wages, accounted for 62 per cent of jobs lost between 2008 and 2009.
It is therefore worth remembering that the survival of your company is crucial not only for your livelihood, employees and customers, but for the economy as a whole. Small businesses account for more than 45 percent of GDP, and as conditions return, small and new businesses provide the primary fuel for recovery with faster growth and job creation. -employment.
To make sure you’re ready for that eventual expansion, we’ve put together a list of seven precautionary measures you can take, based on the experience gained fully from the founders we interviewed. You’ll also hear about their plans to navigate the turmoil if the storm hits land.
1. Listen to employees and customers
1. Listen to employees and customers
You can’t stop the business cycle from moving, but you can give yourself enough time to prepare. This may interest you : Politics wins business in the Social Truth war on Big Tech. American Entertainment CEO and founder Greg Friedlander measures current conditions and future expectations by listening to the most anecdotal data sources: his customers and employees.
“With rare exceptions, a recession is not something that should ever catch a company off guard,” says Friedlander, who started his Durham, North Carolina-based speaker office in 2002 and made the list of Best Places of 2022 of Inc. clients include Fortune 500 companies and universities. “If you are in regular communication with your customers and are asking the right questions about what they are seeing in their business, you get real-time knowledge about where things are going,” he says.
To keep a pulse on local economic conditions, from inflation to the housing market, also helps pay attention to conversations among your own team, says Friedlander.
2. Use the pandemic as a case study
2. Use the pandemic as a case study
Many founders do not have direct experience from the 2008 financial crisis to guide them because they were not operating at the time (the median age of a small business is less than 10 years). But the pandemic should be a good proxy, according to Jennifer Glanville, director of partnerships and collaborations at the Boston Beer Company, the brewery behind Samuel Adams. See the article : Ideas for sharing Netflix passwords aren’t new.
Glanville runs the company’s Brewing the American Dream entrepreneurship program, which offers access to capital, training and networking for small businesses in the food and beverage industry. After two-and-a-half years of Covid-19 closure, supply chain disruptions, and staff shortages, Glanville’s business owners feel ready to face a potential recession. “They were prepared,” she says. “Everything that happened prepared them for the next hurdle.”
Christina Stembel, who in 2010 founded the online flower company Farmgirl Flowers based in Oakland, California, is planning to use the same playbook. When the Covid-19 cases started to rise, she learned that the worst-case scenario was worse than anything she had ever anticipated. Its most important take: embracing conservative accounting and prioritizing profit over growth.
“Before the pandemic, I was focused on the laser to get Farmgirl as fast as I could,” says Stembel, whose company has grown 161 percent over the past two years. “As a bootstrapped company, we don’t have a safety net,” she adds. “While big numbers and big reporting certainly look good, it also means big losses when – not if – things go wrong.”
3. Don’t rush layoffs
Gathering staff, particularly in this job market, won’t be easy, so make layoffs your last choice, says Friedlander. When the events industry stopped during the pandemic, the founder of All American Entertainment saw competitors make big cuts in staff, but decided he had invested too much in building his team to fire someone. See the article : Station Casinos agrees to a $ 80,000 fine for sports betting failures – The Nevada Independent. . “We knew things were going to come back,” he says. “It was just a matter of time.”
When the sector recovered with remote events and eventually personal experiences, Friedlander’s experienced workforce with full staff proved to be a competitive advantage. His team was able to meet the demand and was not forced to leave the money on the table.
“Our competitors have focused on direct events laid off 50 percent of their staff,” says Friedlander. “When they were willing to hire back, a lot of those people had gone to other industries or had better jobs.”
4. Defer funding
“If you don’t need to raise money, don’t raise money,” says Vinicius Vacanti, co-founder and CEO of YipitData, which provides alternative data and analysis for investment funds and large corporations. “This is my No. 1 advice to entrepreneurs right now.”
Vacanti, which started the New York-based data provider in 2014 and completed a series of E funding in December, recommends taking any necessary steps to extend the runway until conditions improve. “This is the absolute worst time to try to come up and raise a round of funding.”
5. Become indispensable
During any downsizing, customers will be looking to cut costs. To avoid becoming another line item that could be deducted from their budget, Vacanti advises founders to find ways to make their product essential. “It can mean adjusting your product based on the changing environment,” he adds.
When the pandemic led to a wave of uncertainty and market volatility, YipitData sped up their research publication schedule from monthly to weekly. When rising prices became the biggest concern, the company developed its own inflation tracker, which came out before official CPI data from the Bureau of Labor Statistics.
Those pins need urgency. “Weeks are important,” says Vacanti, whose company is an honoree of Inc. Best Workplaces 2022. “You need to act very quickly. Your customers will look at who is going to be solving their new problems.”
Another way to become indispensable is to strengthen your existing relationships with customers. Rather than just providing value, Friedlander says it becomes even more important during a crisis to document that value for customers.
“In any kind of uncertainty, you’re going to close your wallet,” he says. “You’re not going to spend money unless it’s clear you’re taking a return and you can justify that cost.”
Friedlander recommends collecting data and compiling case studies. Initially, All American Entertainment faced skepticism about virtual events from customers. Enhancing their pitch with numbers and concrete examples, he says, has made people more comfortable investing in the concept.
6. Maintain perspective
While you must be prepared for potential downsizing, the founders that Inc. spoke to also advise maintaining a sense of perspective.
If the economy contracts in the next 12 months, it may be the most viral recession business owners have ever experienced. In 2008, the Motorola Razr dominated the mobile phone market; MySpace boasts the most users among social media sites; Twitter was only a year old; and Facebook had yet to introduce the Like button. This year, the economy has experienced only a quarter of negative GDP growth, but #recession and #recessionproof have already garnered nearly 250 million views on TikTok.
“It’s hard to see, hear, or open an app and you don’t see at least a little hint of interest rates and indications as to whether or when this [recession] will start,” says Farmgirl Flowers founder Christina Stembel. Who says the potential recession is bigger and worse than the last? “With a lot more communication about it, that could make it more awesome,” Stembel adds. Her advice? Put down your mobile phone.
It keeps decision-making anchored in the long run, Friedlander suggests. “There are cycles, but everything will end,” he says. “If you’re too focused on that short period, it will very well hurt you in the long run when things recover.”
7. Stay entrepreneurial
In the meantime, focus on what you can control. Approach the recession like any disruption. “It’s an opportunity for you to find new ways to provide value, new revenue streams, new lines of business,” says Friedlander.
Despite dark economic forecasts, Brewing the American Dream’s Jennifer Glanville remains optimistic about the overall climate for entrepreneurs. She predicts that the next decline – whenever it comes – will generate many success stories due to one crucial difference from 2008. After the pandemic, customer support is much stronger than it was 14 years ago.
“America as a whole is more hyper-conscious of small businesses and the need to support them,” says Glanville. “That’s very helpful.”
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What assets do well in a crisis?
Gold. If you are looking for the best asset class to hedge your portfolio against a financial crisis, look no further than gold. In the 2008 Dot-Com Crash and the Financial Crisis, gold saw a positive gain. When the S&P 500 dropped -22% in 2001, gold made an impressive 25% rally.
What is the best asset you have in a financial crisis? That said, if you have cash to invest, you may want to consider buying recession-friendly sectors such as consumer commodities, utilities and healthcare. Stocks that have been paying dividends for many years are also a good choice, as they tend to be long-established companies that can withstand a downturn.
What assets go up in a depression?
Gold and cash are two of the most important assets to have in your hand during a market crash or depression. Gold has historically remained constant or only rose in value during depression.
What are recession proof assets?
Key takeaways. Proof of recession refers to assets, companies, industries or other entities that do not depreciate during a recession. Examples of recession-resistant assets include gold, U.S. Treasury bonds, and cash, while examples of recession-resistant industries are alcohol and utilities.
What do people buy in a recession?
Toothpaste, deodorant, shampoo, toilet paper, and other grooming and personal care items are always in demand. Offering these types of items can put your business as a vital resource for consumers in tough times. People want to look good, even when times are tough.
What is cheaper during a recession? Like cars, homes are also cheaper during a recession due to declining demand – more people are afraid to make a big move, so prices fall to entice the few buyers who stay.
What businesses do well in a recession?
Businesses succeeding in recession
- Groceries. No wonder grocery stores are the best business in a low economy. …
- Health care. Like groceries, people need health care to survive. …
- Candy. …
- Beer, wine and liqueur. …
- Discount retailers. …
- Children’s goods. …
- Pet industry. …
- Financial advisers and accountants.
What gets cheaper in a recession?
Like cars, homes are also cheaper during a recession due to declining demand – more people are scared to make a big move, so prices fall to entice the few buyers to stay.
Do things cost more during a recession? Recessions can impose heavy costs on the newly unemployed, limit the long-term growth potential of the economy and disrupt public budgets.
What goes up in value during a recession?
The stock price for countercyclical stocks generally moves in the opposite direction of the prevailing economic trend. During a recession, these stocks increase in value.
What should you buy in a recession?
â € œIn any downturn environment, we often look at consumer staples …. Sectors that tend to work well during recessions
- Communication services.
- Discretionary consumer.
- Consumer staples.
- Energy.
- Financial.
- Health care.
- Industrial.
- Technological information.
What business thrived during the Great Depression?
Like sweets, cigarette sales increased during the Great Depression, and tobacco stocks are still a smart buy in any recession [source: Gibbons].
