How to Be Recession Proof
The idea of being recession proof typically applies to companies or industries as a whole. It typically means that the company or industry won’t feel the effects of an economic downturn no matter what the real cause. Understanding how to be recession proof, though, isn’t always an easy task, and while you might work within a recession proof industry, your company may still be unprepared for the next economic downturn. Worse still, you may be personally unprepared for a recession, which can be personally frustrating and lead to poor decision making and productivity as you try to understand the best next move for your company. So, wondering how to be recession proof? Let’s find out.
How to Be Recession Proof With Your Company
No matter what industry umbrella your company fits under, knowing how to insulate when things aren’t quite as rosy as they once were is absolutely essential. It begins when you take a hard look at your business’s portfolio. You’ll want strong cash holdings at all times. You’ll also want to ensure your assets are fairly diverse and you have a long investment timeline. All of these tools mean your investors can access liquidity quickly if the stock market becomes problematic.
Additionally, you’ll want to make certain that you can tie every single expense to sales figures that match. Make certain your business can pay expenses from sales generated within the same time frame. If you can avoid pulling reserves to pay for day-to-day operations, your company will remain healthy no matter what the economy is currently doing. If you find you simply aren’t generating enough cash, consider better ways to reach your target market.
Don’t avoid marketing during a recession. Instead, you should have long-term marketing strategies in place that continue no matter what the economy looks like. Constantly promoting your business is crucial to your ongoing growth and success. That said, you shouldn’t simply invest in just ANY marketing efforts. Instead, you should continually reevaluate your efforts so you know that you’re hitting your KPIs and experiencing the returns you expect.
Above all, don’t forget that your customers are at the core of what you do. Prioritize customer service to build stability within your company. Better customer service means repeat sales, which is essential whether you’re in a recession or in a fairly strong market. Remember that new customers cost more than existing customers, so listen to concerns and prioritize resolving any problems your customers are experiencing.
How to Recession Proof Your Life
Recession-proofing your business, though, is just the first part of the equation. Recession-proofing your own finances has to be a step you take, too. Recessions are natural. The United States experiences one about every six years, and being in the right state personally will help your business better weather the problems involved.
Begin by taking a close look at your emergency fund. Most experts suggest having at least three months of living expenses stored away. Six months, though, is best. If you don’t currently have anything stored away, consider putting away at least a month’s worth, building it up in small increments.
Once you have an emergency fund, you’ll want to begin paying down your high-interest debt, like credit cards. Some debt, like mortgages, shouldn’t be harmful to carry during economic downturns, but credit card rates can go up dramatically, so paying off the debt is absolutely essential.
Make certain you have a solid budget in place, too. In fact, you may actually want two budgets. Have a standard budget and then a budget for a recession that helps you understand what must be paid so you can survive. Leave out the extras like gym memberships, eating out, and streaming services.
The next step you’ll want to take is to diversify your investments. Deploy a 60-40 strategy. At least 60% of your money should be in stocks so you’ll continue to earn money. In fact, a recession is a great time to pick up low stocks that will only increase in value. The other 40% of your money, though, should be in incredibly safe options that are easy to cash out like money market accounts, CDs, or short-term bonds. Finally, keep your retirement plan on course, even if you’re nearing retirement. You don’t want to stop contributing to what’s going to keep you afloat just because the market isn’t what it once was.
Recession-proofing both your business and your life is essential. It’s hard to tell when the next downturn will appear, but you want to be ready on all fronts. To learn more about how to be recession proof, and how to ensure your company is performing well ahead of any forthcoming economic downturn, consider a free business health check today. And if you have more questions, contact us!