Is a recession actually a good time to expand your business?


    Opinions expressed by contributors are their own.

    Entrepreneurs typically respond to recessions in two ways. The natural tendency is to wait for expansion plans or even scale down current efforts. But then there are those courageous entrepreneurs who take the reins and keep pushing their business forward. They know that the time to go big is when others cut corners because their efforts will stand out.

    It’s smart to keep busy while your competitors are quiet, so a recession could be the perfect time to expand your small business. This is why.

    Related: Making Your Business Recession Proof

    Less competition

    As mentioned above, an uncertain economy leads many entrepreneurs to adopt a wait-and-see attitude. They can cancel previously planned product launches, put hiring plans on hold, or significantly reduce their marketing efforts — that just means more opportunities for daring entrepreneurs to step into the limelight.

    However, this does not mean that you should blindly continue with your growth strategies. Instead, rethink your plans, see what still makes sense, and prioritize. Some regions may be hit harder by a recession than others, so you may need to rethink your expansion into specific markets. But your research can uncover other areas that would welcome your business and even provide you with incentives to enter their market.

    One of the first things companies often reduce in a recession is their marketing spend. do not. Your marketing dollars will likely go further and your efforts will have a greater chance of standing out while other companies have gone quiet.

    The same goes for attracting investment dollars. According to crunch baseseed funding boomed last May, with $3.1 billion invested in seed stage companies, 11% more than the average $2.8 billion invested monthly in 2021.

    Related: It’s easy to cut your marketing budget in a rocky economy — but that’s a bad idea. Here’s how to save money on your PR strategy.

    Top talent emerges

    The big layoff saw 47.8 million employees quit their jobs last year and the trend continues. According to a recent report by McKinsey, the “competition for talent remains fierce,” with 40% of employees planning to leave their current jobs in the next three to six months. That’s good news for companies looking to hire top talent, if you understand what employees want from their employers.

    According to the McKinsey report, employees are leaving their jobs because they want better career development and advancement opportunities and earn more money. They also face uninspired leadership and a lack of meaningful work. Many want flexibility from their employers and prefer to work remotely, at least some of the time.

    Fortunately, as many companies are laying off employees or putting in place layoffs during a recession, it can be an excellent time to hire a skilled workforce and bolster your future position.

    Let’s make a deal

    While inflation has pushed prices up in recent months, there are signs that those inflationary pressures could ease, and the threat of a recession could push them down even faster. Be wary of sales and promotions for essential equipment, technology, inventory from your supply chain, or even real estate costs. With the recent reduction of gas pricesmost experts believe that high prices in general be lower in 2023.

    Related: Don’t Let a Recession Ruin You. Here’s How Your Business Can Thrive in Tough Times

    Expand your business

    If your plans include expanding your business into other states, keep in mind that most states have specific filing requirements to operate legally, and these rules vary by state. In most cases, entrepreneurs don’t have to start all over again. Instead, they can apply for a “foreign qualification,” which allows a company incorporated in one state to register their business with the Secretary of State in the states where they intend to do business, including:

    • Have a physical presence (e.g. office space, warehouse, or retail store) in the state
    • Store inventory in a state, such as goods stored by Fulfillment by Amazon (FBA)
    • Hold face-to-face meetings with clients or clients in the state
    • Have employees who live or work in the state
    • Reaching the Economic Nexus

    Each state has its own economic nexus threshold, which typically means a company in that state achieves a specific level of sales. Once a company has an economic nexus, it must collect and file sales tax with that state.

    Companies structured as limited liability companies (LLCs), C Corporations, S Corporations, or limited partnerships (LP) must register for foreign qualification. Because the process varies by state, many business owners usually hire an independent “founder” to handle registration in the states they want to do business in so they can focus on other essential aspects of growing their business.

    Related: Doing Business in Multiple States May Have More Taxes Than You Think

    Prepare now

    Recessions are, of course, nothing new to the US economy. According to data collected from studying past recessions, reported in Harvard Business Reviewis key to thriving during a downturn, preparing for it before it hits.

    Research on companies that prospered during the Great Recession shows that companies that made contingency plans before they started were able to grow, while companies that didn’t go into “survival mode went through deep budget cuts and reacted defensively.”

    Although these surveys mainly focused on large companies, the information is useful for small business owners. Two critical steps to take now:

    1. Reduce debt. Examine your cash flow, make sure your receivables are up to date, and collect those that aren’t. Look at your debts. Are you paying for things you don’t use?
    2. Digitize. Small businesses that have digitized their operations are more flexible, productive and cost efficient.

    If you currently outsource things like payroll or managing your receivables and debts, don’t think you’re saving money by taking those tasks in-house. It may cost less in actual dollars, but the time lost isn’t worth it.

    It may sound counterintuitive, but recessions are often good times to invest in your business and expend your energies on sales, marketing and developing ideas.


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