Growing a business is hard in the best of times. However, in the worst of times, such as the conditions found during a recession, growing a business is next to impossible unless the right strategy is developed.
A prime example is the modern-day Great Recession where more than 170,000 small businesses closed their doors between 2008 and 2010, according to the US Census Bureau.
While the loss of over three million small-business jobs was catastrophic for many individuals, there is an opportunity to learn lessons in an effort to remain prepared should a future lengthy recession occur.
After all, if companies can learn how to grow during a recession, then job loss will be reversed and the economic conditions will be more easily reversed so that a positive gross domestic product (GDP) can be restored.
What Happens during a Recession?
By definition, a recession occurs when there are two or more consecutive quarters with negative GDP growth. During a recession, economic growth grinds to a halt, which leads to a fall in sales, reduced revenues for corporations, falling stock prices, reductions in incomes, and a higher unemployment rate.
As a result of a recession, many individuals lose their jobs and are unable to afford their mortgages, which leads to an increase in home repossessions.
Pushing the negative chain of reactions further, the increase in home repossessions leads to an increase in supply with a simultaneous reduction in demand and the potential for significant financial losses for real estate investors.
Speaking of investments, recessions also lead to unfavourable investment conditions. Reductions in investments mean that firms will cut back on risk-taking and uncertain opportunities, such as funding entrepreneurs or small businesses.
Finally, during a recession, it is harder to borrow from banks when they are short on liquidity.
In short, a recession creates a domino effect, whereby increased unemployment leads to less growth, a reduction in consumer spending, the closing of more businesses, poor investment conditions, and inevitably a state of negative economic growth.
The Contenders: Florence Nightingale and Ernesto “Che” Guevara
Creating a strong recession-proof strategy is necessary if a business wants to grow during challenging marketing conditions. To do this, history has taught us to turn towards powerful leadership figures.
Two unlikely names come to mind: Florence Nightingale and Ernesto “Che” Guevara.
The former was an English statistician, social reformer, and founder of modern nursing. During the Crimean War, Nightingale managed nurses and organised tending to wounded soldiers.
She became an icon of Victorian culture by serving with an unparalleled level of devotion, loyalty, and skill that brought a new level of respect to the nursing profession.
Che was a physician, author, diplomat, military theorist, and Argentine Marxist revolutionary. As a major figure during the Cuban Revolution, he became known for his ability to rally the troops with insightful prose that cut to the heart of his competitors.
Prior to his days as an Argentine Marxist revolutionary, Che was a medical student who travelled throughout South America. During his journey, he was moved by the poverty, disease, and hunger that he witnessed. It was during this time that he grew passionate about changing what he saw as the capitalist exploitation of Latin America by the United States.
Both Florence Nightingale and Che Guevara had unique leadership styles that can be applied to businesses during a recession.
From Florence’s ability to create a personal, lasting brand to Che’s iconic knack for exploiting competitor weaknesses and searching out quick wins, these two iconic historical figures inspired growth in the most challenging conditions.
What Would Florence Do?
A business strategy during the recession that focuses on Florence Nightingale’s strategies would include the following:
- Creating a personal brand. This entails getting people to buy from people. You want to establish a strong personal network and brand that will make customers want to support your business, even when times become tough and their belts are tightened (so to speak).
- Follow the data. With the right research, numbers don’t lie. More so than ever, it is important to listen to what the numbers are telling you during a recession. This means that gathering and analysing data is imperative to growing a business during this time.
- Become the champion for a cause. People want to root for a company that supports a great cause. If you become a champion for a good cause, you will notice that people will rally to your side.
Venmo: The App that Catered to Its Inner Florence
Venmo is a prime example of a company that was able to grow during the recent 2008 recession. The company is dubbed the pioneer of social payments. Following the “Florence keys to growth”, they were able to do the following:
- Create a personal brand. Venmo was literally able to get people to buy from people by leveraging the connectivity power of Facebook. New users were asked to connect via Facebook, which was a brilliant strategy because it made it easier for users to find the people that they needed to pay.
Additionally, this strategy provided free marketing on a trusted platform. In its early days, Venmo transactions could be published to Facebook newsfeeds, which was an easy way to quickly raise awareness about the app without spending a dime. During a recession, when budgets are tightened, free anything is a plus, especially if it is marketing.
Finally, Venmo created its own social network within its app. Thanks to its in-app social network, users could leave comments, post inside jokes, add descriptors, use emojis, and essentially engage with their personal network all within Venmo.
- Follow the data. Venmo appealed to millennials. During the recent recession, millennials were the largest group entering the professional workforce. From the get-go, millennials knew their worth and struck out to make changes. Over the years, millennials were able to steadily increase their influence and power.
Venmo saw that over 80 percent of millennials owned a smartphone. They leveraged the data, followed the numbers, and created a product that naturally appealed to on-the-go millennials who desired instantaneous results, including making payments with a tap of the button.
- Become the champion for a cause. Venmo might not have had a charitable cause, but what it did become a champion for was its target audience: millennials.
Venmo built its app and created a loyal following simply by giving their customers what they wanted. They focused on adding features that would appeal to their target demographic while simultaneously recognising that millennials place a higher premium on ease-of-use and expediency.
In this vein, Venmo was able to grow during the recession simply because it became synonymous with its customers’ way of life.
By completing the above three components, Venmo was able to change the conversation from, “Do you have Venmo?” to “Why don’t you have Venmo yet?” which enabled it to grow during a recession.
What Would Che Do?
Che would grow a business during a recession by focusing on the following three strategies:
- Look for quick wins. Che understood that long-term gains can be made through a series of quick wins. This means that during a recession, businesses need to focus on areas that are easy to implement and benefits are immediate — which will lead to additional opportunities.
For example, sales associates might focus on a short-term sale instead of the “big fish” that requires a long-term pitch.
- Listen to customer feedback. Che was a master at listening to and understanding the needs of people. Listening to customer feedback during a recession is paramount to business success and growth.
Customers are less likely to spend their hard-earned money during a recession, which means that businesses need to go the extra mile to let customers know that their wishes, needs, desires, and even complaints are being heard loud and clear.
- Look for competitor weaknesses. Che was able to use competitor weaknesses to his advantage. This cutthroat business strategy can often be necessary during an economic recession.
If a business wants to grow during a recession, then they need to offer something that their competitors can’t. If you want to offer a service or product that is superior to that of your competitors, then you need to know their weaknesses.
Netflix: The Company that Beat a Modern Recession
Netflix is one of the most successful businesses to not only come out of the recent recession, but to also grow during those challenging economic years. And while they may not have known Che’s strategies, they did apply the same strategies:
- Find opportunities for quick wins. Netflix capitalised on the opportunity for quick wins via streaming. It recognised that the once profitable video rental store was going the way of the dinosaur, which meant that its own disc-delivery service might soon flounder.
- Listen to customer feedback. Netflix was able to gain three million members during the peak of the recession in 2009 simply by listening to the needs of its intended demographic.
People wanted to be able to stream television shows and movies without paying money they didn’t have. They wanted to be able to find entertainment while the economy crumbled. Finally, they wanted to have access to their favourite shows or movies with a click of the button.
Netflix delivered with a subscription plan that provided an unlimited amount of entertainment each month.
- Look for competitor weaknesses. Video rental stores were becoming obsolete, and people were wary of the high premium video-on-demand services offered by Apple or Comcast.
Netflix capitalised on these weaknesses by offering various price plans and different services for its streaming platform. They combined these strengths with great customer service to create a highly recognised brand that today boasts over 36 million members.
The Bottom Line: It Is Possible to Grow a Business during the Recession
Whether you prefer to follow Florence Nightingale or Che Guevara, one thing these two historical figures can teach us is that it is possible to grow a business during a recession.
Listening to customer feedback, establishing a personal brand, following the data, looking for competitor weaknesses, finding opportunities for quick wins, and becoming a champion for a cause are all factors that can help you to grow a business during a recession.