What Entrepreneurs Can Learn About Riding Out Recessions

As of this writing, in January 2021, we are looking ahead to what we hope will be an end to the physical effects of the Covid-19 pandemic. We’re looking at the light at the end of the tunnel when it comes to stopping the spread of the disease in its tracks, but as an entrepreneur, it’s important to know how to help your business thrive during COVID-19.

While the vaccine gives hope to many that their health will soon no longer be in danger, the economic repercussions of the pandemic will be felt for many years to come. During the crisis, many businesses have been irrevocably lost. By the end of September 2020, nearly 100,000 businesses in the US had closed their doors due to the financial repercussions of the Covid-19 crisis with perhaps more than 60% of those businesses to be permanently closed.

This level of devastation across every sector will likely lead to an even more bleak economic outlook for the days and weeks to come. Post-pandemic, if we enter into a U shaped recovery (similar to how the economy slowly rebounded after the 2007 recession) it may take several years to return to pre-Covid-19 numbers. With this in mind, even if you were able to survive the pandemic economically, you will need continued vigilance to stay open during the resultant downturn.


So what can you do to protect your business from drowning during these difficult times?

While the scope of the economic troubles that is currently being faced is massive, it is not, altogether, unprecedented. A great deal can be learned from the ways in which other companies survived previous recessions and were able to remain afloat even in the most uncertain of times.

Nearly everyone feels the pinch during a recession but the lessons of these businesses can teach corporations of any size how to survive a financial crisis. In the infographic below you can see some of the very overarching ideas that were bulwarks for these recession-proof businesses and allowed them to continue while competitors went under. Some important takeaways include:

  • Diversify Your Investments — this tried and true business adage is doubly true during a recession. By diversifying your portfolio, you are able to make sure that if one revenue stream is no longer viable you have another in place to take advantage of.
  • Look Beyond Layoffs to Cut Costs — this bit of advice pertains to doing everything possible to retain the employees that are already devoted to your company. If the recession means furloughs or part-time work, this is far preferable to layoffs which can be both a detriment to morale and may mean going through the expensive and time consuming proposition of hiring those positions back when your business is trying to be in recovery mode.
  • Invest in Marketing and Advertising — while a recession will ask you to trim the fat from every facet of your business, marketing is not a place you want to reduce. In fact, it is at this point that intelligent moves in advertising may give you advantages over competitors.
  • Preserve Cash and Reduce Debt — While many companies take on debt for future investment, during recession it is imperative to do everything possible to retain capital while keeping debt to a minimum. A drop in cash flow under these conditions can lead to closure.

The infographic below reflects how the policies of specific companies like Delta Airlines and Kellogg’s were able to use the kinds of principles mentioned above to ride out previous recessions of the 20th and 21st centuries.

Even though your company may be quite a bit smaller than Starbucks, there is a great deal to learn from how these behemoths took on the storm of recession and made it through unscathed. Whether you’re a retailer looking to keep sales up or an entrepreneur trying to start a company during the crisis, check out the infographic below to learn how to ride out a recession.

This infographic was created by Thimble.


Michaela Wong is a content specialist who is passionate about all things digital marketing. She is a graduate of San Diego State University. In her free time, she enjoys reading and exploring her home state of California with her corgi, Emma Bean.

Leave a Reply

Your email address will not be published.