When business owners worry about an impending recession, how to prepare for it is a top-of-mind concern. If times are good, entrepreneurs may fall into a false sense of security. Then, when a recession gets underway, they feel caught off-guard and start to panic.
It’s understandable to feel uneasy about a potential recession and wonder how to prepare for a financial crisis. However, the good news is that there are often telltale signs of this kind of economic downturn. Spotting some of them can make recession preparation easier.
The warning signs include:
Preparing for recession means being as proactive as possible to reduce the overall impacts on a business. It’s unrealistic to expect a company to get through the period with no adverse effects. However, savvy business people can often mitigate unwanted outcomes.
It’s also true that recessions don’t affect all businesses equally. That’s because certain things remain in demand even if people change their buying habits or face high levels of debt.
Examples of businesses that do well in a recession
When analysts give their opinions about recession-proof businesses in 2022, they often point out that people tend to prioritize spending money on things they deem essential or that will help them manage the recession more competently. Some examples include:
People with their eye on the future who’re curious about recession-proof businesses in 2023 will probably see much of the same in the year to come. The main thing to remember is that, even as consumers make changes to cope with the changed economy, they still understand there are some things they can’t go without. That’s why there are certain businesses that do well in a recession while others struggle or close.
Source: Unsplash
Investing in a recession can change as a result. More specifically, investors keep a close eye on the companies experiencing the most success during recessions. They may also make predictions about which lines of business will be most profitable during downturns.
Some people may feel surprised to see IT solutions on the list above. Is the technology industry worst-affected by recessions? Not if the companies within it can figure out effective ways to remain relevant as economic conditions change. That doesn’t mean an information technology recession is out of the question. However, many tech companies are well-positioned to weather the economic storms while helping their customers use technology in new, profitable ways.
Consider how an August 2022 survey of tech companies found that 52% will focus on customer retention to survive a recession. That may mean reducing software subscription rates for long-term clients, updating website copy to show a clear understanding of customers’ pain points, or offering data science solutions that let business owners have more visibility into what’s happening in their companies.
What should I do to prepare for a recession?
It’s a daunting question, but not one without solutions. Business people should start with the fundamental steps, such as assessing the company’s cash flow and seeing whether they find any worrisome characteristics.
It’s also a good time to take a serious look at staffing. Some companies plan to significantly raise their employee numbers before a recession hits. They might change their minds after the fact. For example, automated tools can often help teams get more done with the same number of people.
Another forward-thinking strategy is for a business person to secure a financing option even before they think they’ll need it. Doing that could make it easier to afford computers or other technological equipment that helps a company remain resilient and competitive throughout the recession.
Source: Unsplash
Another essential tip is to maintain good communication with workers and customers during the recession. Many are probably feeling uncertain and even fearful. If they see business people as stable resources during an unsettled time, they may be more likely to stay loyal.
Business people should also keep an eye on interest rates and lines of credit. It’s ideal for them to make any adjustments to those as required before a recession arrives or worsens.
Are we still in a recession?
The Great Recession will always be a part of history books, but many individuals wonder if history could repeat itself. Indeed, people have various opinions about whether the economy is still recovering from a previous recession or a new one is about to start.
A September 2022 study of C-suite members by IDC found that 59% of people expect a recession to begin in the coming year. Interestingly, nearly 30% of people who anticipate a recession say the economy is still in one.
How to use technology to protect a business in a recession
Some people say there’s no single best way to prepare for a recession. Perhaps that’s true, especially since it will affect each business, household, and person differently. However, an excellent starting point is to expand how the company uses technology before, during, and after the recessionary period.
Conduct a tech-needs assessment
The steps involved in how to get ready for a recession by using technology vary depending on the company’s needs. Those will differ for small businesses versus large ones and those that have been using technology for a while or are new to it.
Prepare your business for a recession by identifying any gaps in the company’s technology usage. It’s also wise to evaluate how the organization’s current technology strategy works well and whether it stacks up adequately with what competitors have.
Source: Unsplash
Use Big data for better business monitoring
Big data platforms support a business in a recession by providing its leaders with insights they’d otherwise overlook. These tools can process gigantic amounts of data much faster than humans could without help. Thus, they can enable people to get more informed and act with increased confidence.
Company leaders are most likely to see the benefits of Big data when they have well-defined strategies. Such planning extends to the type of information handled and how the organization processes it.
Getting assistance from a company that specializes in helping clients use Big data more effectively is also advisable. Some service providers offer Big data software analysis, assisting clients in making the most of the information they have and getting the most helpful takeaways.
Earn a business degree online
Business planning encompasses many factors. One of them involves company leaders ensuring they have the knowledge needed to steer the organization through the recession and beyond. Business school programs typically cover numerous topics to help people navigate recessions. For example, they may learn about creating a cash reserve or get financial planning tips that help in virtually all situations.
Source: Unsplash
When people opt to earn their MBAs online, it can take at least two years to complete the program. However, the ability to take classes over the internet is arguably one of the best outcomes of technology over the past couple of decades. It breaks down geographical barriers and lets people become more educated while continuing to work.
Investigate how artificial intelligence could help
Preparing for recession challenges often means being willing to consider emerging technologies. Artificial intelligence (AI) is one that’s getting a lot of attention lately. It can also take many forms.
Some executives use AI meeting schedulers that allow them to spend less time finding times to meet that suit all attendees. Others rely on AI-powered voice recognition software to streamline many of their administrative tasks.
Prediction of trends and customer churn, customer sentiment analysis, revenue forecasting, anomalous transactions detection, recommendation of marketing budget allocation, and content/products recommendation for better personalization and enhanced customer experience – are just a few more examples of how AI-based technologies support businesses in becoming resistant to recessions.
The AI implementation strategy will vary depending on things like the company’s budget, requirements, and time available to install the chosen technology.
Source: Unsplash
Companies may also use an artificial intelligence solution that’s specific to their industry to get ready for a recession. Sectors ranging from marketing to agriculture increasingly use AI to improve their operations. That might mean letting robots handle some repetitive tasks or using an AI inbox management tool.
Let technology improve the user experience
As mentioned earlier, many companies plan to focus on customer retention to remain resilient through a recession. An excellent way to follow their lead is to explore how technology might enhance people’s interactions with a business.
In one recent example, a heavy equipment rental company added an E-commerce angle to its website. Now, instead of just looking at the available machines, users can book and pay for them online. If a business website is not currently optimized for mobile, changing it to support those devices is an excellent upgrade to consider.
Another possibility is to serve site visitors customized content based on actions they previously took. Using technology in the background like that can keep people on websites longer and increase conversion rates.
Big data developers can help company leaders analyze information to determine the most customer-friendly upgrades, justifying the recession technology expenses.
Source: Unsplash
Maintaining the right perspective when setting a recession tech budget
Recession preparation doesn’t suit a one-size-fits-all approach. People will typically get the best outcomes by analyzing the current situation and acting accordingly.
Perhaps a team prepares a spending and economy report showing that people’s interest in a company’s products or services has recently decreased by a significant amount. In such cases, it can feel harder to justify spending money, even if the outcomes will help the company make preparations for a recession. However, there are practical ways to reduce the risks of technology-related investing in a recession.
Another best practice is to compare the costs and benefits of the chosen technology. Calculate one month’s worth of expenses associated with using it. Then, add up all the associated benefits directly or indirectly linked to the tech-related upgrade.
Perhaps a company paid for an AI consulting strategy session to uncover optimal ways to use the technology. That’s an expense. However, people at the business may realize that how they used the AI led to a 25% increase in business in the few months since the company implemented it.
Anticipate a recession while staying calm and adaptable
Running a business requires a person to keep a cool head while juggling numerous responsibilities and making critical decisions. A recession can make it more challenging to do those things. However, company leaders have little to gain by panicking or fearing the worst-case scenarios.
Source: Unsplash
Some people say the best way to prepare for a recession is to remain flexible. Even the most experienced analysts can’t know how everything will turn out. Having a responsive and level-headed mindset can help people when times are good, as well as in recessionary periods.
It’s natural to want to panic at some points. However, that tendency should become less severe when people invest sufficient time and energy into expecting the recession and getting the business ready for it as much as possible. Having a calm attitude will also help business people think things through without making rash decisions they’ll eventually regret.
Being adaptable extends beyond technology adoption but certainly includes it. All changes can cause anxiety. However, the people leading a business must realize that their usage of technology and other targeted upgrades could be vital for helping the company survive the recession.
Preparatory measures boost recession resilience
There’s no magic formula that determines how a business will fare during a recession. However, as this guide highlights, taking the right steps in advance can make a tremendous difference.
That means assessing how technology could help but also taking non-tech-related measures to make the business stronger before, during, and after the economic crisis. Business people will undoubtedly learn valuable lessons, and then they can share them with other entrepreneurs.
Author bio
April Miller is a senior writer with more than 3 years of experience writing on AI and ML topics.
Harness AI to strengthen your business
Need help with AI solution development? Shedule a call, and our specialists will consult you on your project.
