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The term “recession proof” majorly implies to companies or industries that are usually insulated from the negative impacts of an economic downturn. Recessions commonly arise after an economy reaches a peak and subsequently starts to constrict, leading to consecutive quarters of negative GDP growth. Kavan Choksi mentions that for varying reasons, there are certain businesses and sectors do well during a recession. While one can never be too sure about the nature and course of a recession, they must always be aware of the ways to insulate a company in case the economy goes south.
Kavan Choksi discusses the distinctive ways to recession proof a business
Increasing the number of cash holdings in the portfolio of a business is a good way to protect it from a recession. Long investment timeline, asset diversification and rebalancing the investments of a business can go a long way in protecting the company from a recession. It helps the investors to access liquidity in a prompt manner and benefit from a crashing stock market.
Even after increasing the cash holdings, one would have to tie all business expenses to matching sales to recession proof their company. For instance, in case a company needs office supplies, one must focus on paying these expenses from the sales generated within the same span of time. It is better to avoid taking out money from the reserve to fund the operations. In case the company’s sales are not generating adequate money, the entrepreneur must find better ways to connect with and grow the target market. This is where marketing comes in. While investing in marketing is not usually the first thing an entrepreneur thinks about when trying to save money, it is important to understand that promoting a brand is important to overcoming the impact of a recession. By putting their money in strategic promotions, one can acquire new customers that can help to offset lost business.
Entrepreneurs should firstly analyze their current marketing strategy and reevaluate it to meet the ever evolving customer needs and preferences. It is especially vital to keep a close eye on the website and social media pages of a company to make sure that they are delivering results. At times, even simple tweaks to a brand website and social media strategy can lead to better customer reach and returns. After an entrepreneur determines where they want to invest their marketing money, it is vital to refine the voice of the business and develop a better value proposition for the customers. Doing so would be helpful in establishing a proper relationship with potential consumers and build trust with existing ones.
Kavan Choksi mentions that prioritizing customer service is considered to be among the most effective way to guarantee long-term stability for a business, especially in the highly competitive market of today. It is important to make sure that a brand gets repeat sales, which is immensely vital to survive during a recession. It is important to also understand that attracting new customers often costs more than keeping existing customers. As a result, delivering competent customer support and service is immensely important to making a business recession proof.