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Can a Recession Be Good For Business?

Headlines for the past year have been sounding the call: recession is on the horizon for America.

In response to the onset of the Coronavirus pandemic, interest rates had been held at 0% since March 2020. But, at the beginning of 2022, the U.S. Federal Reserve began raising interest rates to combat inflation. While inflation definitely needs to be addressed, this method will come with downsides. Higher interest rates mean that sourcing capital is more difficult for businesses. So the U.S. economy is likely to contract in 2023.

A recent study by KPMG, one of the world's leading professional services firms, captured insights from more than 1,300 CEOs at large companies globally, including 400 in the United States. The study found that 91% of CEOs believe that there will be a recession in the next twelve (12) months, and only about a third of them believe it will be mild and short.

But even if opportunities for growth will be in shorter supply, some agile and clever businesses will still be able to find them. According to Forbes, many of the world’s greatest companies were built during recessionary times. Experts say that while some businesses retreat during an economic downturn, others can find the perfect time to make a game-changing move. In all rain clouds, a silver lining!

Here are two recession opportunities that can actually be good for business:

  1. Digital Marketing

When the economy contracts, one of the first things that businesses cut is “discretionary spending.” Discretionary spending basically refers to any expenses that aren’t necessary to keep a business running. And that very often means that marketing budgets get cut back, if not eliminated entirely as companies begin focusing more on customer retention than customer acquisition.

But the realm of digital marketing is dictated by competition. The smartest business leaders know a recession isn’t the time to drop out of the online advertising space but to maximize every dollar spent there instead. While others cut back or stop digital marketing tactics, your company can work to optimize or even increase its online presence for a substantial boost in visibility. Imagine showing up to an auction and finding that you’re the only bidder– the lack of competition will give you an amazing chance to get high-value items at rock-bottom prices. During a recession, the internet presents the same opportunity.

Use this time to make sure your website is up-to-date and using the latest technology to attract and convert leads. Take initiative in your social media marketing strategy with clever campaigns and a regular posting schedule. While others fall out of the internet marketing race, you can surge ahead.

  1. Expanding Into New Markets

You might remember that back in 2000, there was a recession when the dot com bubble burst. While this didn’t have the same intensity compared to the devastating Great Recession in 2008, it still put more than half of all digital startups out of business. But one of the companies that managed to survive would turn out to be pretty significant: Amazon.

At the start of 2000, Amazon was a five-year-old online bookselling business that had recently had to shore up its financials to stay afloat. But by the end of 2000, the company had launched its third-party seller platform, Amazon Marketplace, which would go on to be fabulously successful. It further expanded during and after the recession into new segments, like kitchens, travel, and apparel.

While other companies were reacting defensively to the downturn, making severe cuts to their staff to save money, Amazon was smart enough to recognize a perfect opportunity to move into new markets, ultimately disrupting the entire retail industry. Amazon acted with bold vision, presenting an alternative way for consumers to shop for goods, enabling the company to grow its customer base while larger retailer competitors faltered. That’s exactly how a small e-commerce upstart came to be one of the largest and most successful companies on the planet.

While large companies couldn’t adapt fast enough to the changing business landscape, Amazon was able to take decisive action at exactly the right time. How different might our world look today if Amazon had decided to play it safe and stick to selling books?

To great minds, bleak times are only a test of fortitude and flexibility.

But if you need a little guidance to weather the storm, we at Visa Business Plans are ready to help. Our clients benefit from our one-on-one coaching services that provide the tools business owners and entrepreneurs need to succeed, even when economic conditions are not ideal. Call us today to see how we can help you!

Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.

Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.

At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.

[1] https://www.forbes.com/advisor/investing/fed-funds-rate-history/

[2] https://info.kpmg.us/news-perspectives/industry-insights-research/kpmg-ceo-outlook-2022.html

[3] https://www.forbes.com/sites/serenitygibbons/2022/07/07/a-recession-provides-opportunity-for-growing-a-business/

[4] https://www.investopedia.com/terms/d/discretionary-expense.asp

[5] https://hbr.org/2019/05/how-to-survive-a-recession-and-thrive-afterward

[6] https://hbr.org/2019/05/how-to-survive-a-recession-and-thrive-afterward