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The Trends team ran a survey of hundreds of companies that survived the Great Recession. Here are 10 key insights we pulled on weathering economic uncertainty that you should bear in mind — especially with the whole “next economic catastrophe” thing potentially on the horizon.
1. Cut The Lard
The most common strategy adopted by business owners who survived the Great Recession was to cut unnecessary costs.
A quarter of survey respondents said that operating lean saved their businesses.
While keeping a team intact where possible is a priority, many business owners reduced headcount, trimmed the number of hours worked, or gave essential staff furlough days in lieu of layoffs.
Managing inventory and payables was another popular cost-cutting measure, including:
- Not purchasing new equipment
- Only buying what you need to get by for 30 days
- Paying essential vendors
Many business owners reduced their advertising costs, and, where possible, eliminated their rent by going fully remote.
Ernest Montgomery, founder of the creative agency Tmg, adopted a more drastic cost-cutting measure — he relocated from New York to the Dominican Republic to reduce his living and business costs.
While these hard cuts are often painful, business owners such as Samantha Blumenthal, former director of Communication at thredUp, recommend making them “quickly to keep the business running: “Don‘t wait, and make sure they’re deep enough that you only have to do it once."
2. Offer Discounts
Many respondents offered free or discounted services during the recession as a way of growing their customer base.
Having a larger customer pool led to increased sales as the economy recovered.
“We endeared ourselves to our local community,” said Bill Tobin of New York's Tribeca MedSpa. “At one point we offered free facials. Many of these customers we have today. We funded the company at a loss for a while believing that times would be good again.”
It wasn’t always easy, but it paid off.
Revenue dropped nearly 50% during the recession, down to just $350k per year. “We were at the end of our rope by the time things started to come back,” Tobin wrote, “I am glad we stayed the course because we had regular 20% YoY increases in revenue for the next decade.”
3. Make Strategic Acquisitions
When your competitor closes, their clients are left in the lurch. Some of our respondents found that a recession was a good time to make a strategic acquisition.
“Don't be afraid to reach out to competitors that are struggling to try to purchase their market share,” said Michael Moore of TJM Promos, Inc., a marketing company that was started in 2004.
By acquiring customers this way, Moore kept his business steady through the recession, and has quadrupled in size since then, growing from $3m to $13m per year in revenue.
4. Stay Young at Heart
The average age of companies that increased revenue during the Great Recession was three times lower than that of companies that suffered significant loss in revenue over the same period.
One hypothesis: Younger companies are often leaner and more agile than their more established counterparts.
A clear takeaway from successful business owners was this: Don’t wait for an economic crisis to be lean.
“Do not over-hire or get yourself locked into expensive recurring costs,” said Scott Baker of Baker Hesseldenz Studio in Arizona. “Resist the urge to overspend during the good times.”
5. Be Nimble
Willingness to adapt, put ego aside, and pivot where necessary proved to be a successful strategy for many companies (18% of all respondents) that survived and prospered in the Great Recession.
Brad Emerson, of St. Louis, Missouri, owner of FixYourOwnBindery.com, attributed his survival of the recession in part due to “follow[ing] where the market took the business."
6. Create Strategic Partnerships
Of the companies that pursued strategic partnerships as a way of staying afloat, nearly all (88%) saw revenue either increase or stay the same.
North Carolina-based 2 Hounds Design, for example, partnered with dog trainers, veterinarians, and behaviorists to build influence and promote its products.
Pre-recession, the company's revenue was around $300k. By 2010 it was $1m, and in 2012, it reached $2m. The business continues to use this influencer approach today.
7. Pick A Winning Strategy Based on Your Business
There were two very clear and distinct approaches taken by business owners to survive the recession.
- Aggressive, “promotional‘’ companies with the means and extra cash to do so took full advantage of changing market conditions by expanding, buying competitors, pivoting, or developing strategic partnerships.
- Other companies with less wiggle room, perhaps as a result of already low margins, focused on minimizing downside risk by cutting costs, pivoting, or digging into their emergency cash stash to keep operations afloat.
8. Avoid Debt
While only 2% of respondents reported using traditional SBA loans to keep their business afloat during the recession, several mentioned borrowing from friends, or charging up credit cards, and several reported that this kind of leveraging was one of the hardest and most stressful decisions they had to make.
Others report having a strong aversion to debt, a habit which they believe may have saved their businesses.
“Debt is never a good thing,” said Tom Villane, president of Design 446, a New Jersey-based marketing company. His company saw its business drop from $15m to $4m during the recession. “Had we carried a lot of debt into the recession, we would have never survived.”
9. Promotion Beats Prevention
Overall, those that chose a defensive strategy reported losing revenue more often than those that chose an offensive strategy.
Roughly 47% of respondents that implemented a defensive strategy reported that revenue went down a lot, with only 5% saying that it went up a lot.
Meanwhile, among those that chose an offensive, or promotion-based strategy, only 13% reported that revenue went down a lot, while 30% saw dramatic increases in revenue either during or shortly following the recession.
10. Communication Is Key
Companies that grew placed a lot of focus on communication and transparency with their teams. Of the respondents that expressly mentioned the importance of communicating with employees, 80% saw revenues grow during the recession, sometimes tremendously.
“During tough times, you genuinely realize what a difference a good team makes and you want to work to keep that team strong,” said TJM Promos‘ Moore. “Let them know what’s going on, make sure no one is blindsided with tough decisions — be vulnerable."
Others echoed this sentiment.
“Beyond focusing on your plan, be close and over-communicate during rough times with your team, vendors, and the community,” said Grant Rowe, CEO of Arizona-based Valor Healthcare, which doubled its revenue from 2007 to 2009. “Be positive, transparent, and real.”
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