In 2010, Harvard Business Review looked at which businesses weathered the 2007 recession, and which crumbled and were left behind. The results were stunning.
Seventeen percent of companies in the study didn't survive the recession at all and went bankrupt, were acquired, or went private. Meanwhile, 80% were slow to recover, and half of those still had not returned to pre-recession sales or profits during the time period studied. And 9% of the sample actually flourished and outperformed their rivals.
The reasons for the success of some of the companies varied but included factors such as being prevention-focused, promotion-focused, pragmatic, and progressive. At the end of the day, they all had the ability to react and adjust their business model, no matter their financial hardships.
You can take the same proactive and flexible approach with your own business, and not just survive, but thrive. Here are 8 reasons why a bad economy might just be the best thing for your own business.
1. It's Easier to Retain Talent
Retaining top talent is tougher in a thriving economy where employees can cherry-pick their top choices. In a bad economy, more employees will stick with the status quo, or will consider staying for other career incentives besides just a healthy salary.
For example, offering employees flexible work options like telecommuting can go a long way towards retaining talent that doesn't want to grapple with a long commute. Assigning coveted projects, giving special consideration to employees' career goals, and offering to serve as a mentor can incentivize top talent to take a more active role in your business.
2. Freelancing is in Demand
When job growth slows, it doesn't mean the workload slows down too. Companies are more apt to hire freelancers and contractors when the economy is doing poorly. Position yourself as a consultant or freelancer who is ready to do the work of a seasoned expert.
Freelancers can charge a premium for their expertise, and companies benefit by stabilizing their overhead. Freelancing can also serve as a positive game-changer for women who are traditionally underpaid in the workforce, especially in hard economic times.
3. Customers are Craving Value
Two things happen when the economy is struggling: companies either raise their rates and lose loyal customers who can no longer afford their services, or they try to slash their rates to entice new customers. But neither scenario is very effective. Companies are either left with added marketing costs to attract and retain higher-paying customers, or they must lay off employees and reduce overhead to accommodate for the cut in prices.
This is your opportunity to change the game and offer added value instead. Focus on improving your customer service game. Offer clients more value, like on-site consulting for your software or access to premium training videos, and offer more one-on-one attention. The more value you offer your customers, the more likely they are to stick with you despite their own financial woes.
4. Micro Niches Stand Out
There's really no choice but to carve a niche for yourself in an incredibly specific service or product offering when the economy goes south. Otherwise, you'll be forced into a game of cutting your prices. Getting ultra-specific can also improve your marketing efforts by effortlessly attracting a refined target market that naturally gravitates to your business.
For example, a real estate agent can stand out by diving into a niche of premium condos and townhouses. Or they can get even more specific with a micro niche and focus on short sales of townhouses, or even high-end tiny houses that clock in at under 300 square feet.
5. It's Time to Get Creative with Income Streams
You could wait around forever for the economy to improve to regain your financial footing. Or you could roll up your sleeves and get creative with multiple income streams. Diversifying your income can also keep your finances from taking a hit during turbulent times.
Start by looking at low-hanging fruit opportunities in your own business. SaaS marketing companies can offer comprehensive training and email database management options for their clients. Meanwhile, real estate agents can invest in raw land or build up their commercial real estate portfolios. Realty Mogul offers investors the chance to crowdfund projects with as little as $5,000.
6. There's Motivation to Strategically Downsize
At some point, your business may be faced with tough choices that require downsizing. But that doesn't mean admitting defeat. Downsizing can be done strategically to refocus or pivot your company away from unnecessary money-wasters.
Start by looking at your overhead. Companies spending a small fortune on office space can ditch their lease, let employees work from home, and hold weekly office hours or meetings at a coworking space. Meanwhile, businesses who overspend on client meetings can get set up with video conferencing and project management software like Slack, and work with clients remotely.
7. Clients Need Solutions to Survive
Remember, your clients are also likely in survival mode, and looking for opportunities to thrive. Give them the solutions they need to get ahead by consulting them through the process. For example, consult one-on-one with clients who need help figuring out their social media campaigns or content marketing needs.
Consulting can also take the form of a silent partnership in a company to earn additional income on the side. I've served in these roles to advise companies on growth hacking and marketing, and had the chance to flex my consulting muscles without the stress of running a day-to-day business. It also turned into a monthly income stream for my own business needs.
8. It's Cheaper to Market and Advertise Yourself
When the economy tanks, newspapers, websites and magazines alike all struggle as once-eager advertisers cut back their budgets. This is your chance to negotiate new deals and look for inexpensive options.
And don't dismiss free relationship-building marketing opportunities that you may bypass when money is flowing freely. Offer to meet potential clients for coffee and give free advice, speak at mastermind MeetUp Groups, or volunteer to be a podcast guest to spread the word about your business without spending a dime.
A bad economy doesn't have to mark the beginning of the end for your business. Instead, look at lean financial times as an opportunity to reinvent your business, from the services you offer, to how you run your company.
How have you seen your business improve during a bad economy? What do you attribute your success to? Let me know by leaving a comment below: