Reading the daily headlines about the economy made one thing become very clear — the so-called “experts” can’t agree on anything. They don’t know whether a recession may or may not happen or if, indeed, we are already in one. The media loves bad news (because that’s what we pay attention to), so they will keep selling economic uncertainty until a recession becomes a self-fulfilling prophecy.
Inevitably, all the speculative talk affected the mindset of global business leaders, the financial markets, personal investors, and our day-to-day lives.
The recent pandemic-induced recession was, hopefully, a once-in-a-lifetime occurrence. Fortunately, it was short-lived. The economy bounced back strongly in a V-shaped recovery which, in turn, led to the current high level of inflation.
What happens next? I’m no economist, but, having run a business through five recessions, I know one thing for certain: This, too, shall pass.
What can we learn from history?
In many ways, recessions could be seen as a necessary evil of the capitalist system in that they help to weed out the weak and reward the strong. There have been 13 since World War II and they lasted an average of 11 months. If recent headlines are to be believed, they suggest an even shorter recession is likely to be the case this time, if one happens at all.
With this in mind, when is the right time to invest in the future?
Historically, the best time is when the NBER (National Bureau of Economic Research) announces the start of a recession, as it takes at least six months (often much longer) to determine if a recession has officially begun. Often, by the time of the announcement, the recession is close to the end.
For example, the NBER called the end of the “pandemic recession” in July 2021, which was 15 months after it officially ended. During that time, the S&P 500 rose 50% and many businesses thrived. Those that waited too long, were left behind.
I’ve always preferred betting on something I can control rather than things beyond my control. For me, that means investing in my business, its people, and our brand.
Here are seven investment strategies to consider:
- Access opportunities: Use research to evaluate shifting perspectives and motivations, and assess future demand. A deeper understanding of your target audience’s needs and how they view your brand (and that of your competitors) will enable you to position your business to take advantage of the economic recovery.
- Concentrate to dominate: With the right insights and vision, you can make calculated bets to get the greatest returns. Likewise, when it comes to branding, expertise will always be in high demand when buyers can’t afford to be wrong.
- Be consistent: As with dollar-cost averaging when purchasing stocks, there is a significant benefit to maintaining consistent messaging and visuals across all communication channels to reinforce your brand identity and ensure recognition.
- Foster customer loyalty: Businesses that typically deliver the greatest financial returns are those with steady revenue streams achieved through a loyal customer base. Maintaining strong relationships with outstanding customer service is essential during a recession.
- Focus on value: In investment terms, value stocks remain relatively steady throughout market fluctuations, whereas growth stocks tend to be more volatile. The same holds true for branding — focus on and highlight the value that your brand offers to customers, including quality and reliability.
- Increase share of voice: Far too often have I heard clients say, “We are the industry’s best-kept secret.” In a downturn, use thought leadership in your communications mix. If people haven’t heard of you, they are unlikely to buy from you.
- Smart acquisitions or investments: As Warren Buffett famously said, “Be fearful when others are greedy, and greedy when others are fearful.” Market downturns are often the ideal time to invest as the number of buyers has been reduced. The same can be said when it comes to marketing. If your competition pulls back, it opens up an opportunity for your brand to stand out. If you wait for the recovery, you will be left behind by savvy competitors.
In addition to these market-facing concepts, don’t overlook the needs of your most important business asset: your people. They look to leadership for guidance on future direction. Adversity brings people together. Sharing your company’s purpose, vision and mission is an incredibly powerful way of creating confidence, alignment, and adoption across your team.
A final thought to leave you with. When asked his opinion about the negative effects of a pending recession, Sam Walton, the founder of Walmart and Sam’s Club, replied: “I’ve thought about it, and decided not to participate.”
I’m with Sam. What about you?