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Preparing for a Recession? Don't Make These 3 Common Mistakes

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In times of economic crisis, far too many business owners revert to “safe mode” as panic spreads. A "responsible" course of action typically includes one (or more) of the following:

  • Tightening purse strings
  • Laying off key employees
  • Putting growth plans on the backburner

Doing anything different may be seen as “risky”.

But this conventional wisdom couldn't be more wrong.

An old adage states, "Only dead fish swim with the current," and that philosophy applies to your growing business as well.

Here we highlight the three biggest business mistakes made in tough economic times, and the implications of each:


Mistake #1: Shrinking your marketing budget

When there is less money to go around, budgets get cut. But it's a bad idea to take too many of those dollars away from marketing initiatives.  Actually, if you have the resources, now is the appropriate time to continue (or  expand) your marketing.  Why? Most of your competitors will cut their budgets, out of a “knee-jerk” reaction to the economic downturn -- leaving you a greater window of opportunity to get your message across to your market.  Business owners who “stick it out” during tough times will likely enjoy increased market share once the economy rebounds.


Mistake #2: Laying off key employees


Another, often more challenging decision, is whether to cut staff.  Whatever you do, don’t lay off your top talent. Great people are your most valuable resource -- hold onto them.   In fact, if you’re in a position to hire, now is a great time to hire, because so many other businesses will be shedding their top talent.  


Mistake #3: Putting growth plans on the backburner

Possibly the most damaging long-term effect of a troubled economic climate is when a business chooses to put its growth strategy on hold to "weather the storm."  If you cut back on new product development and innovation today, you will have fewer product offerings when the market bounces back.


Warren Buffet’s recent advice to investors is also great advice for entrepreneurs:

Be fearful when others are greedy, and be greedy when others are fearful.


At Growthink, we advise our clients to pursue their growth initiatives despite the downturn. There is no better time to grow than today.

 


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Jeff Otto says

I have been operating my company as a home base business for twenty five years and this is the third recessing that I have gone through I will be spending my way out as the last two.
Posted at 8:20 pm
Paul Anderson says

EXCELLENT article on preparing for a recession. However, I don't agree with your' notion that we are headed for a recession. I would rather think positively about a market adjustment that was overdue from an over-heated real estate market. We built a house of cards that was way too top heavy, and it had to collaps, in time, from it's own weight. Thanks agian for the article. It will be a topic of discussion for our next staff meeting. Paul Anderson Assoc. Broker / Owner Coldwell Banker Anchor Real Estate Pentwater, Mi. 49449
Posted at 9:48 pm
John Hunter says

I agree laying off people is a bad idea. And if you planned and managed your resources well in the good times then maybe you have plenty to spend even while your cash flow situation worsens. However, if you do have some cash flow issues to deal with reducing some spending is perfectly rational I believe. There is a cost, but that cost must be balanced against current risks and some reduction in spending can be sensible. A key is planing for times when the cash flow will be reduced ahead of time so the business has a sensible strategy.
Posted at 3:42 pm
Rajnish Sarna says

I agree witht the views on the article.I feel that this is a great opportunities for new companies. In times like these companies are looking at value services at great pricing,especially in the outsourcing business.As long as you deliver value to your customers,offer great technology and all that at a price he feels will help his company save a few dollars,his business is for the asking.We are a start-up which i have set up a few months back,which almost co-incides with the downturn, I know if i survive this patch, will do extremely well as the market bounce's back in roughly a year or so.One has to be more sharper and put in a little more effort to get the results and our company is just doing that.
Posted at 5:50 am
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We have been operating our company as an online business for quite some time. Your article has been very helpful. One thing I would like to point out, during these tough economic times, many business owners have no other choice than to sell their business. We have help several companies sell their business on the Internet at Biztrader.com. Again, thanks for the informative article.
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jason says

As i read your top three common mistakes made by business owners during economic crisis i couldn't stop myself from thinking how obvious they are, and yet there are so few people who notice them. Most of them can't see beyond their own panic and fear of failure, they forget that this is exactly what made their business running in the first place. They all took chances when they decided to build it, without many resources i am sure and they did their best to improve it... so i really don't understand, why would they stop doing it now ? blair rewards
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Marche says

Très précieux conseils! Mais! La récession est passé. Ca serait mieux si vous avez donné des conseils sur le sujet - en tant que société de gagner des parts de marché. Je suis propriétaire d'un casino en ligne. Quels conseils donneriez-vous à attirer de nouveaux clients?
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