Even though it’s impossible to accurately predict future economic conditions, rumors of a global recession have left business leaders all over the world feeling uneasy. Leaders must anticipate shifting market conditions in order to prepare their organizations for the future when making difficult decisions.
In order to create a fully recession-proof your business 2023, you must develop a strategic plan that examines how your organization runs while focusing on your strategy, operations, and overall alignment. You can make your company more resilient, better withstand the effects of constantly fluctuating markets, and better position it for success during an economic recovery by developing a long-term, integrative approach to business agility.
Establishing the square one of your business
An initial business health check is always a good idea in challenging economic times to make sure you are aware of the situation. To better understand how to begin recession-proofing, this entails evaluating crucial business elements such as finances, market positioning, and strategic direction.
Check the health of your company by asking the following questions:
- How should we anticipate our customers will respond in a downturn?
- How will competitors behave?
- Will cash keep flowing into our business?
- Are significant budget cuts required? What steps must we take to create these?
- Is it feasible to maintain heavy R&D investments? If not, why not?
- How can we take advantage of fresh business prospects?
Knowing your current strengths and shortcomings can help you create a personalized outline for recession-proofing your business, allowing you to uncover the most suitable strategies for your business’s future.
Strategies to make your business recession-proof 2023
Gartner’s research shows that less than half of companies (43%) are successful in achieving their desired cost reductions in the first year, and only a small fraction (11%) can maintain this behavior for up to three years. The reason for this failure is attributed to companies losing sight of their long-term goals. Harvard Business Review notes that only 9% of companies have sufficient resources to support future growth and innovation.
Although managing economic uncertainty and planning for future success can be challenging, there are few proven strategies that can help businesses succeed in any conditions.
- Keep and eye on your budget
Your company will be in the best possible position in the event of a recession if you operate within your budget. According to NetSuite, adhering to a budget or operating plan is actually a best practice at all times. There are times when there are no economic early-warning signs, such as when the COVID-19 pandemic began.
- Automation is here to stay
You can save time, money, and valuable resources by incorporating more automation into your business processes by utilizing an ERP platform like NetSuite. According to Capital Numbers, a consulting firm, “Key Ways to Recession-Proof Your Business,” “the futuristic businesses focus on incorporating automation of essential business operations.” It allows businesses to accomplish more with fewer resources while saving countless hours of labor and frustration.
- Customer is king
According to Capital Numbers, it is important to prioritize your customers. Their research shows that 86% of customers are willing to pay more for a better experience, and 93% are more likely to make repeat purchases if they have had a positive experience. Capital Numbers emphasizes that these statistics demonstrate the importance of providing a positive customer experience for increasing revenue. Satisfied customers are more likely to be loyal, spend more money, and even promote your brand.
Top 5 recession-proof business 2023 examples
Businesses that can withstand a recession typically operate in certain sectors that are immune to significant downturns, even when the economy is experiencing difficulties.
Notably, during a recession, not all businesses are immune to financial risk. You will be better prepared for a recession if you run your business effectively and responsibly even during the most favorable economic conditions.
The following is a list of industries that are able to withstand the challenges of a recession; however, businesses in these industries should still be expertly managed to best protect themselves from the effects of a recession.
1. Healthcare
Healthcare requirements do not wait for a recession to end, for better or worse. As a result, the healthcare industry is uniquely suited to withstand economic downturns. For good reason, healthcare is frequently mentioned as one of the first industries that can withstand a recession.
According to recent research, healthcare unemployment only rises by 1.27 percent for every 10 percent increase in overall unemployment. Employment figures are a measure of an industry’s performance. Evidence suggests that the healthcare sector performs better than other industries during economic downturns if it does not have to cut staff at the same rate as other industries.
However, just because healthcare did exceptionally well during the Great Recession does not mean that it will continue to do so in a subsequent economic downturn. In 2007, many patients had full health insurance.
Since the insurance landscape is now very different, many people who have insurance now have high deductibles, which means they have to pay a lot of money. Patients may now think twice before getting medical help.
While cosmetic procedures and other elective treatments, among other medical services, may see a decline during a recession, healthcare has a long history of recession resistance.
2. Finance
Although accounting and finance aren’t immediately thought of as “recession-proof,” most economic downturns still require accounting services, such as tax preparation, estate planning, or bookkeeping. Additionally, numerous businesses and customers require financial assistance.
The need for these financial products, such as credit cards, auto loans, business loans, and other forms of lending, does not go away when there is a recession.
However, during a recession, some finance businesses may be at risk. The pressures of an economic downturn are easily transferred to finance companies that are willing to take significant risks.
For instance, Bear Sterns, one of the most well-known banks in the United States, went bankrupt in 2008 during the Great Recession.
3. Food
People will always need to eat, so the food, grocery, and beverage industries are very resilient to recessions. However, not all businesses in this industry thrive during economic downturns. Restaurants are notorious for losing money when the economy is bad.
During the Great Recession of 2009, restaurant earnings were “dismal” as a whole. During a recession, consumers may choose to eat at home rather than spend a lot of money at restaurants.
Businesses that sell groceries or cheaper food options may benefit from this. During a recession, food-related businesses typically thrive.
4. Academics
Despite its high cost in the United States, there is evidence to suggest that education is a recession-resistant industry. When a portion of the workforce is laid off, which occurs frequently during a recession, many people go back to school to improve their professional skills, resulting in a demand for advanced degrees.
Universities in the United States saw significant enrollment increases during the Great Recession. There was a nearly 16% increase in the number of students enrolling in college between 2007 and 2010. While other industries suffered greatly, academia saw a significant increase in students.
The federal student loan program may be to blame for this industry’s resilience to recessions. Even though the student will have to pay a lot in the long run, this opens up a path to education.
5. The ever-evolving technology domain
During a recession, many businesses discover that their current operational structure cannot support them. Businesses may not place a high priority on making investments in automation and technology when economic conditions are favorable. Then, when the economy slows down, a lot of successful businesses increase their automation and technology capabilities to cut unnecessary costs.
Software and IT companies profit from this trend. By assisting other businesses, that organizations modernize their communication, information storage, and operational practices typically survive recessions.
This does not imply that the technology sector is immune to economic decline. The tech sector is susceptible to bubbles that lead to significant price reductions in assets, as the Dot-Com Bubble demonstrated.
Building a recession-proof business taking the digital turn
Trying to find new and hopefully better ways to run your business is an important part of surviving a recession. Digital transformation is here to stay. While the pandemic gave most businesses a taste of digital transformation, now is the time to fully embrace it to survive and thrive in the workplace of the future. Start by reorganizing your company for digital transformation by:
- Using data to your advantage
- Upgrading your technology stack
- Empowering employees for your digital future
- Upgrading your operating model
The hard truth is that you cannot solve problems of the 21st century using thinking from the 20th century. Additionally, you cannot combine digital transformation with conventional business practices.
