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How can a business thrive during a recession?
Like earthquakes, floods, tornadoes, and bushfires, a recession is inevitable in businesses. This kind of hump shouldn’t be viewed negatively because it can push business owners to be more innovative and strategic about running their businesses.
In a changing economy, selective outsourcing enables you to develop more adaptable expenses. It allows you to refocus and pay special attention to your business resources. It further helps you to scale your operations and prepare you for what lies ahead, whether it be financial crises or economic downfall.
What is a Recession?
A recession is a period in the business cycle that occurs when there is a significant decline in economic activity.
A nation is in recess when the economy is experiencing:
- Rising levels of unemployment
- Harmful gross domestic product (GDP)
- Multiple business failures
- Declining measures of income
- Crashing stock markets
Nevertheless, a recession is considered normal in the economy and business cycle.
Why are Outsourcing and Recession Related?
Before the COVID-19 Global Pandemic, the world experienced the Global Recession between 2007 and 2009. Some iconic brands like IBM, Apple, and Cisco were impacted, but many startup tech companies closed down. In fact, according to reports, 1.8 million small businesses went under, and about 8.7 million jobs were lost.
With COVID-19’s continuous devastation on the resources and financials of firms, we can safely say that it has impacted more or less 90% of businesses worldwide. Despite all these, business leaders think the future is still bright.
A recession may be terrible, but looking at the big picture, it gives entrepreneurs opportunities to innovate. And outsourcing is one in-demand innovation that businesses of all sizes are jumping into.
Google is continuously scaling effectively, and it is pretty surprising. It has encountered various recessions but is still one of the best companies in the digital age.
Some of its success can be credited to its talented team. Google has been outsourcing Information Technology (IT) services for a long time. Last 2018, the number of contract workers of Google outweighed its direct employees. These outsourced talents help maintain business stability and profitability.
While it is well known that Apple Inc. outsources manufacturing from China, some people are unaware that one out of every three Apple engineers is outsourced. Apple is still outsourcing to date.
According to Tim Cook, Apple’s former Chief Operating Officer (COO) and current Chief Executive Officer (CEO), the company became more resilient during past economic downturns and believed in investing during downturns. Besides, the demand for technology is not going away anytime soon, and they will still support it long-term.
If the founders of Skype had not outsourced with Estonian app developers to handle the back-end development of the application, Skype would not have been a part of our lives right now.
The business initially outsourced the developers on board as partners. Skype arguably would not be what it is now if the company had been unwilling to outsource work to suitable engineers in Estonia.
During the 2008 Global Recession, Cisco managed to stay afloat during the economic downturn by downsizing through outsourcing.
Cisco has effectively utilized partnership and outsourcing strategies to establish market leadership and expand into new markets.
Microsoft’s massive workers are composed of outsourced employees. It was noted by Michael Simms, Microsoft’s Chief Procurement Officer, that these workers are experts in providing their services to the company.
Despite the crisis, Netflix was able to capitalize on its creativity and innovation to establish itself as a pioneer in streaming on-demand consumer video.
Outsourcing was critical to their success– it increased the company’s agility, and they could focus on boosting their competitive advantage in the marketplace.
IBM has created the most significant long-term impact in the tech industry. The business offers outsourcing for various tasks, but it also outsources its needs from other countries and partnerships. During the 2008 Global Recession, IBM signed several outsourcing contracts.
13 Proven Business Strategies to Help Businesses Stay Afloat During an Economic Recession
In economic recessions, consumers prioritize their finances and reduce their spending. Businesses often lower prices cut costs, and postpone new investments as sales decline. The cost-cutting for marketing is repeatedly slashed, and this is where companies are making a mistake.
Businesses that focus on the demands of their customers, handle their marketing budgets the right way and swiftly alter their strategy, methods, and product offers in response to the changing market are more likely to prosper than others both during and after an economic recession.
Do not panic, as there are business strategies that you can adapt to dance with the waves of an economic recession. So now let us give you some ways to respond in times of economic downfall.
Focus on core competencies and current customers.
Businesses need to concentrate on products and services they know will sell the best. It would be best if you focused most of your attention on marketing those best products and services to past and existing customers and potential prospects.
Understand your customer’s current needs.
Listening to your customer’s needs is most important at this moment. It’s also crucial to empathize with their struggles at this time because you’re not the only one affected during an economic recession.
Don’t stop marketing.
Businesses that continue investing in marketing in times of downturn bounce back faster. This is the best time to focus on your branding and marketing strategies like search engine optimization (SEO) and promotion of your products and services.
You could send emails to your current customers, follow up with other prospects that did not respond to you, check in on past customers hoping to win them back, post ads that can draw customers in, and post on your social media accounts.
Task prioritization and delegation
Leaders should maximize their time as it is one of the business’s most valuable resources during a recession. It would be best to be assured that the little time you have saved for tasks will significantly benefit your business.
Keep in touch with your employees.
You must also check in on your employees as they are also feeling stressed and uncertain about what the future holds. It is also problematic for them to think they might lose their jobs.
Don’t give up.
A recession isn’t the end for everyone’s business, but making the right decisions and being strategic to succeed in the downturn is essential. This is the chance for entrepreneurs to be more flexible and agile to adapt to changes arising.
Rethink your product and audience.
Now is the time to realign your products or services with your customers’ current needs. It would be best if you rethought your selling and marketing strategies and who you are targeting.
You might need to change how you manage your operations before and focus on outcome-based selling, prioritizing customers’ desired outcomes.
Know your business’ finances.
You need to know the financial status of your business. Preparing in advance for measures to protect your cash flow is crucial. This is when you should monitor your business’ financial reports and operations.
Diversify your revenue streams.
You can increase the chances of your company’s financial survival if you create new means of generating income.
The goal is to develop new income streams for your company to have backups in case the Recession destroys one of your revenue streams. It’s a common tactic to reduce risk, and you should have several options considered.
Make smart cuts
Businesses tend to cut costs on sales or marketing budgets, making their financial situations even worse. It is essential to make the right cuts to stay afloat.
Embrace the constant change.
We know that the only thing that is constant in life is change. The key to surviving an economic recession is being agile and flexible. This includes restructuring your system, realigning your employees, evaluating your products and services, and reviewing your targets and goals.
Beat the competition
It would be best to use this to win more customers from others as your competition becomes more unstable during a recession.
You must stand out more than your competitors by providing better quality products, giving discounts, delivering excellent customer service, and the like.
Make long-term plans
In times of economic hardships, entrepreneurs tend to focus on short-term plans. But it is also essential to make long-term plans to help you build a runway for yourself so that even the direst financial troubles may be overcome.
4 Benefits of Outsourcing in an Economic Recession
Outsourcing during an economic downturn can be a skeptical move for some. However, it could help the company be more prepared for economic recessions. Recession requires the company to implement change within the business.
Outsourcing allows you to gain flexibility and efficiency, and you will not have to shoulder the burden of hiring talents ever since more companies have been using outsourcing services.
Let’s take a look at the benefits of outsourcing:
Less stress for current employees
It is typical for layoffs to result in more work for the remaining staff during a recession. A great strategy to reduce additional stress and work is to outsource.
You can save money by outsourcing tasks that do not require a full-time team. Due to the lowered costs, you cane staff who are crucial to the ongoyour company’s ongoing operationsved economic efficiency
Higher-level employees may waste time on low-value tasks when work responsibilities get shifted among a pool of employees that has decreased due to a recession. This dilemma can be resolved through outsourcing before it affects small-to-medium-sized businesses.
Better benefits for current employees
Benefits for employees may be lost due to cost-cutting measures during a recession. However, if you outsource specific departments such as Human Resources, Accounting, IT, or Marketing, you will not have to worry about paying their benefits. As a result, you can continue offering benefits to your current workers.
To sum it up, it is difficult, but not impossible, to help your company survive a recession. So the next time the economy falters, equip yourself with the correct principles! Devise several backup strategies, and be prepared for the future based on the changing landscape that may arise.
Magellan Solutions Can Help Your Business Survive the Effects of Recession
Now is the best time to make the most significant investment for your company!
Get a trustworthy and reasonably priced outsourcing provider to help you achieve your business objectives.
At Magellan Solutions, we take pride in being one of the best business service providers. We have more than 18 years in the industry, and we are an ISO-certified and HIPAA-compliant outsourcing provider. We offer various outsourced business solutions, from customer service to lead generation.
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