How to help recession-proof your small business

Is Australia in a recession? 

Experts say the cost-of-living crisis, interest rate rises, and geo-political instability are just some factors that have created a perfect storm for a recession.

And understandably, the prospect has got business owners worried.

Compared to the rest of the world, Australia fared better than most economies in the last two global recessions: The 2008 global financial crisis and the technical recession caused by the COVID-19 pandemic. A combination of government fiscal policies, a strong mining sector and a little luck helped Australia avoid a recession in 2008. Australia couldn't avoid recession in 2020 as public health took precedence over economic activity. But due to financial stimulus policies, businesses had some reprieve.

In Australia, as it is across the globe, recession warnings dominate media reports and economic outlooks. And without the caveat of an unprecedented once-in-a-lifetime event, the next recession will be a lot more impactful than anything we've seen since 1991's "recession we had to have".

Will Australia enter a recession in 2023? No. At the time of publishing, we’re not in a recession. And we won’t know for sure until we’re already in it. 

What is a recession?

In economic terms, a recession is two consecutive quarters of negative growth in a country's Gross Domestic Product (GDP), accompanied by a rise in unemployment. So by definition, a recession means there's less money out there, so people are more cautious about where to spend it.

The typical recession indicators: inflation, property values, employment, and mineral prices, aren't pointing one way or the other, leaving economic experts divided on whether a recession is coming.

But as a small business owner, you can't afford to wait and see. Because small businesses are the most impacted by economic slowdowns. Consumers have less money to spend, and finance will be even harder to get - even compared to today’s high interest rates. 

Understanding recessions and their impact on businesses

There's no getting around that recessions and economic downturns can have catastrophic impacts on businesses of all sizes. 

It's important to remember that a recession will affect all businesses differently. And, of course, some businesses are better placed to weather the storm than others. It's, therefore, important to understand how a recession will impact your business and industry.

But most importantly, remember a recession is not all doom and gloom. While it might be tempting to press the panic button, the best way to navigate a recession is to keep a cool head and a long-term vision. Within recessions lies a wealth of opportunity as societies re-evaluate how they live and spend their money. Tough economic times create strong businesses, and many of the world's biggest companies, such as Microsoft, Apple, Whatsapp and Uber, were founded during recessions.

So, now is the time to prepare your business for a recession. Whether or not it comes to pass, your business will be better off for "recession-proofing".

Here are five strategies to help you to recession-proof your business and continue thriving in an uncertain economy.

5 tips to help recession-proof your business

1. Invest in cyber security:

A single cyber attack costs small businesses an average of $39,555. For medium businesses, it’s $88,407. What's more, 43% of Australians never return to a business after it falls victim to a cyber attack, and 65% of the customers left lose trust in the business forever. Put simply, the fallout from a cyber attack threatens businesses in any economy. But more conservative attitudes to spending and risk during a recession will mean the flow-on effect from a cyber attack could be even worse.

John Wilson, senior fellow for threat research at Fortra’s Agari, notes that "the sad reality is new cybercriminals are minted every day simply because they need to put food on the table.” And set to enable a swathe of non-technical cyber criminals is cyber crime's newest frontier: Crime as a Service (CaaS). A business model intertwined with organised crime, CaaS involves experienced cyber criminals selling or leasing their methods, expertise and services to others.

Small businesses without robust security are easy targets for cyber criminals. So, taking steps to mitigate your risk of a cyber-attack is an essential business consideration, especially in tough economic times.

When securing your business, a little can go a long way. Backing up your data and protecting your business accounts with strong passwords are a few “quick wins” that will help to secure your business.   

For more actions you can take to bolster cyber security in your business, check out 7 essential cyber security tips for small businesses.

For network security hardware that will work around the clock to protect your business's network from cyber threats, explore Fortinet's network security solutions, managed by Aussie Broadband's security experts.

2. Build a flexible team

 Hiring agile employees will be invaluable to your business. These are employees who can quickly adapt to changing business requirements. They may play a specific role today, but as your business changes, you can count on their ability and willingness to adjust their role to meet changing business needs.

To keep your business even more flexible, consider hiring external contractors to fill skills gaps in your business. These are specialists engaged to complete a specific project or task. Having a contractor can also give you extra hands on deck to complete work during busy periods without the cost of employing them when work isn't as plentiful.

Some functions businesses can benefit from outsourcing are: 

• Marketing

• Accounting and Bookkeeping

• IT

Outsourcing works for any function requiring a team of experts with varied specialisations, rather than one employee or small team, to effectively add value to your business. By outsourcing to external contractors or agencies, you’re also expanding your business’s talent pool.

If your business prioritises agility in recruitment and resourcing, you’ll be better off for it. 

3. Leverage modern tech for efficiencies

From automation to AI, innovations are taking the business world by storm.

And it's only a matter of time before these new technologies and the efficiencies they enable will become the standard across your industry. If you embrace forward-thinking new technologies in your business today, you'll be ready for tomorrow's business world. 

What technologies will small businesses use in 2030? Find out here.

AI tools and automation can perform essential tasks in minutes that would have otherwise taken you hours, even days, to complete.

Ready to get smart about AI? Here are 12 AI tools that will boost your business's productivity.

There's also the adoption of new digital technologies such as the cloud. If your business has yet to migrate to the cloud fully, you're missing its productivity benefits.

The latest tech will also ensure your remote workforce has the tools to be as productive as they are in the office. Over the last few years, Remote work has become a non-negotiable for many employees. So if you want to attract the best talent in the current climate, you'll need to set your business up for remote work.

Recession or not, future-proofing your business will keep you well ahead of your competition. So, look at how you can implement new technologies in your business to make it more efficient.

4. Look for ways to diversify your revenue stream

It's easier said than done and won't apply to every business - at least in the same way. However, diversifying your revenue stream is crucial for businesses looking to stay resilient in an ever-changing business environment.

No matter your business, you can implement a few universal diversification approaches immediately.

Here are ways to successfully diversify your revenue stream, with examples from well-known companies:

1. Identifying new target markets: From their rapid growth in the 1960s until the 1990s, McDonald's focused most of its marketing on kids. Its iconic smiley face logo, happy meals, and in-store playgrounds were central to its promotions. And, of course, there was Ronald McDonald, the colourful, friendly clown mascot. But as times changed, so did social attitudes towards marketing unhealthy fast food to children. So, after evaluating new markets, McDonald's started promoting itself as great-value food for low-income, price-conscious consumers. Alongside this shift, the chain gradually grandfathered its old brand identity (that's why you don't see those iconic Ronald McDonald statues in its stores anymore). In the current climate, it's fair to say Mcdonald's wouldn't be doing as well if it didn't identify a new target market. So, consider what emerging markets could (or already) benefit from your products.

2. Develop new offerings: In the late 1990s, Apple was on the brink of bankruptcy, facing declining market share as Windows dominated the PC market. Staying true to Apple's ethos of innovative, user-friendly products that enrich their users' lives, the company set out to develop new products. The results were iconic, notably the iPod, iPhone and iPad. These became the gold standard in consumer electronics and propelled Apple to its current position as the world's most valuable brand. Think about who your target audience is, the problem you solve for, and what makes you different from your competitors. Are there opportunities to introduce new products that align with your business's value proposition? It doesn't have to be the next iPhone. It can be as simple as packaging solutions you already offer and promoting them as a separate offering. 

3. Search for business partners with a similar market and/or a complimentary offering: Red Bull isn't just an energy drink. It's a lifestyle. They own sports teams and have aligned their brand with adventure and extreme sports. An emerging brand, GoPro identified that its target market was similar to Red Bull's, so they partnered with them for a co-branding initiative. The result was the iconic space jump. Since then, GoPro and red bull have continued collaborating on initiatives such as the Red Bull rampage. At a smaller scale, your business may consider running an event alongside other companies with a similar target market, giving you access to each other's audience and customer base. 

5. Reflect on your business costs - do you actually need to spend that much?

Yes, we know, this is the lowest-common-denominator advice. But that's for a good reason. Auditing and finding ways to cut costs in your business can produce some quick wins in terms of savings and make you more profitable in the long term.

Cutting costs across the board can be as uncomfortable as switching to thinner toilet paper. 

But it's also rewarding. And finding ways to save ahead of time means you have more time to find cheaper solutions that don't sacrifice quality.

Consider your business telco solutions. Are you getting the best value for money? With the complete picture of how your business uses its internet, office phone, and mobile phones, it's easier to decide whether changing your plan is in your business's best interests.

Contact our Australian-based business experts for a comprehensive, no-obligation audit of your business's telco solution.

Call them on 1300 480 905 or get in touch via our website.