More than a decade ago, the U.S. economy was hit by the biggest economic downturn since the Great Depression. In the early months of the recession, American businesses lost an average 800,000 jobs per month as the economic growth declined at more than 8% during the 4th quarter of 2009 and the 1st quarter of 2009.
Although all sectors of the economy were negatively impacted by the downturn, it was America's small businesses that took the brunt of the recession. As Fundera notes:
"There is no question that both large and small businesses felt the wrath of the financial crisis. But, looking closer one sees that the recession's effect was not uniform across business size. In fact, America's small businesses were hit harder, took longer to recover, and may still be reeling from the economic fallout of the financial crisis. In particular, access to credit for small businesses was severely constrained during the crisis, with small business loans falling more sharply relative to the peak—both in absolute and proportional terms—than large business loans, and access has remained relatively constrained during the recovery."
It's a Question of When - Not If - The Next Recession Hits
Economic forecasters tend to avoid making commitments in their predictions about the U.S. economy, and there are as many opinions on the subject as there are prognosticators making them. But there is one thing about which they all agree: the question about the next recession isn't if it will happen, but when.
Most also agree that the next recession won't be in the distant future—in fact, it will happen much sooner than that. For example, more than 70% of economists in a recent survey from the National Association for Business Economics (NABE) are predicting that the next recession will hit before the end of 2021.
The last recession resulted in almost 2 million small business closures in its first two years. That of course begs the question -- what, if anything, can a small business like yours do to prepare for and survive the next recession?
The Ant and the Grasshopper
You know the fable. Winter is coming. The grasshopper spends the summer singing. The ant gets prepared. Not hard to figure out how this one will turn out, or who the hero of the story is.
Well, winter is coming—maybe this year, maybe next or the following year. But whenever the next recession occurs, your business needs to be prepared. Certainly, that means sound financial management, including cutting costs where possible, identifying new revenue streams and fine tuning your strategic plan and marketing program.
That said, there are also several specific strategies that will help recession-proof your business, including the following 4:
1. Automation to the Rescue
According to WorkMarket's 2020 In(Sight) Report, a majority of U.S. employees say automating key tasks could save them on average 2 hours of work a day. That's 25% of the typical 8-hour workday, and that's from the horse's mouth.
Let's crunch the numbers. The average salary of an American worker in 2015 was $56,516, 25% of which is $14,129. If you have 20 employees, that's an annual savings of $282,580. Of course, that potential savings is based on a subjective assessment by employees, and it doesn't account for the fact that shifting from humans to automation wouldn't be a perfect exchange with zero loss of productivity.
Nevertheless, it's clear that there are many tasks—in everything from marketing to data transfer to cyber security—that can be automated, and that automating those tasks saves businesses money. This is an area in which outsourcing to experienced consultants represents a prudent investment for your business, and potentially a powerful hedge against recession.
2. Remote Workers: More Engaged and Less Likely to Leave
As reported in All Business, hiring a single remote worker in exchange for one on-site saves businesses on average $6,500 a year. The principal reason is that remote workers tend to be more satisfied and engaged, and that cuts down on employee attrition. With the cost to replace an employee who leaves at something like 33% of that worker's annual salary, anything businesses can do to encourage employee longevity helps the bottom line, and that could help weather a recession.
Of course, increasing your pool of remote workers requires some upfront costs (for example, the cost for internet bandwidth), and you'll need to take prudent steps to ensure they can access your system remotely, and that your data remains secure. That said, if effectively leveraged, offering employees the opportunity to work from home could be a smart financial move for your business.
3. Addressing Security Issues
While leveraging a remote workforce can save your business money, it also creates a security risk because of issues like unsecured Wi-Fi and workers taking confidential documents to public locations.
In other words, as part of your remote work strategy, you need a security plan that includes (at minimum) the following three strategies:
- Create a cyber security policy: that means both a formal document, signed by each worker, that details the reasons security is important and outlines key security protocols.
- Make sure connections remain secure: working from the local Starbucks can be an attractive option, but it could also mean a major security breach. Create protocols to ensure secure connections, perhaps by requiring that remote workers use a virtual private network (VPN).
- Promote password safety: chances are at least some of your remote workers won't take password security seriously. This puts the onus on you as employer to educate them and require they follow protocols to ensure password safety.
4. Providing Stellar Customer Service
You can't afford to lose customers to one of your competitors in the best of economic circumstances. But if, as top economists insist, a recession is in the offing, now is not the time to cut back on customer service.
Here's the thing—automating key tasks can actually boost the quality of customer service. For example, most consumers like the help they get from chatbots and live chat automation. According to Learning Hub, more than 70% of consumers report high satisfaction with live chat services, more than 60% like the 24/7 service chatbots enable, and more than 40% of Millennials say they interact with chatbots every day.
The point is, however achieved, outstanding customer service is the best way to increase loyalty and retention. And that can help your business keep the doors open through a recession.
No one wants a recession—certainly not the small businesses who tend to be in disproportionate numbers its principal victims. Creating business strategies that will help your business survive a recession is smart, but it can also be both complicated and confusing. Fortunately, there are businesses that can help, giving you the advice and guidance you need to succeed.
To learn more about the ways our backup and disaster recovery, consulting and advisory and cybersecurity and compliance services can help your business—or to request our free IT assessment—contact us today.
