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  • Writer's pictureDave Fuller

3 Things to Consider when Buying or Running a Business during a Recession

Updated: Jun 30, 2023

In 1988 I was interested in starting a retail business. My partner, much wiser and

wealthier than I, was someone who had weathered several recessions in his

entrepreneurial quests and shared his insights that have stuck with me over the years. Here is what I learned from watching, listening and actively being involved in business ownership and investing through several recessions.

Recessions are part of the natural business cycles that happen regularly in the

economy and are unavoidable in the course of the life of an entrepreneur. Other parts

of the cycle include the bottom, then recovery from a recession. Market expansion and

then market peak followed by another recession or market contraction. For businesses

to be successful, they need to be able to withstand and even thrive during a recession.

There are however things you should consider when you are buying or running a

business as you head into a recession.

1. Is the business diversified enough to be able to attract enough customers

and cash flow during tough economic times? The key word here is

diversification. When our businesses are too singularly focused on one or few

specific product or service offerings and demand changes as a result of

economic contraction or inflationary pressures, we may be in trouble. A well

diversified business has a variety of offerings that are geared to fill the needs, not

just the wants of our customers. When we give our customers and prospects a

variety of reasons why they should spend their money with us, we create for

ourselves security in the fact that we have continued demand for our existence.

2. Lean means Green! There is a saying that if you are not green you are not

growing. When times are tough your business needs to be lean. If you are

considering buying a business and it's marginally profitable, there could be value

in the business if you can figure out how to cut expenses. Only businesses that

are profitable survive recessions. The typical recession of which there have been

12 since 1945 has averaged 11 months although the 2008 recession was 18

months and 1982, and 1975 recessions were 16 months. Your business will

need to either have enough cash in the bank to withstand the recession when

people spend less money and the following recovery, or you will have to figure

out how to ensure its profitability during tough times. Recently I wrote an article

on 117 places you can reduce your costs in your business. It might be a good

read. Email with the title 117 ways and I will send you a

copy of the article. The bottom line is that you will have to sharpen your pencil

and cut your costs to ensure you are a survivor.

3. Plan don’t Panic: You are going to be faced with a variety of scenarios that

might happen to your business as you head into a recession, plan and don’t

panic! Many of the long standing businesses in your sector understand what it

takes to be successful during recessions. Research what it takes to be

successful in your industry during recessions, talk to old timers, and make friends

with your industry pioneers! They will give you insights that you can incorporate

into your business plans for tougher times. Your job as a business owner or

investor is to make sure that your business survives and thrives during economic

contractions. Without a plan, you are going to be overwhelmed and anxious.

Business owners who have plans sleep better, feel better and are more

successful. Get your team involved in your consideration of possible outcomes

you are facing and come up with a plan. Once you have developed a plan or

several optional plans, keep your team accountable to getting results. Panic

rarely works out well in the long run.

Whether you are a business owner or a business buyer, you will want to have a

business that is successful to protect your investment. Understanding that you need

one, a diversity of reasons for customers to spend money with you, two, clarity about

where you can cut costs and thirdly a plan to overcome challenges will give you an

edge over your competitors. Recessions provide opportunities as well as challenges

and your job as a business leader is to be strong enough to seize those opportunities.

Dave Fuller, MBA is a Licensed REALTOR with Team Powerhouse Realty who specializes in

helping buyers and sellers of businesses and commercial properties in Northern BC. Have a

question about your business or its value, email

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