Is a Recession Actually a Good Time to Expand Your Business?


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Entrepreneurs typically respond to recessions in two ways. The natural tendency is to hold back expansion plans or even scale back current efforts. But then there are those brave business owners who are taking the reins and moving their business forward. You know the time to make it big is when others cut back because their efforts will be noticed.

It’s smart to stay busy while your competitors are quiet, so a recession could be the perfect time to expand your small business. Here’s why.

See also: How to recession-proof your business

Less competition

As mentioned above, an uncertain economic situation leads to a wait-and-see attitude among many entrepreneurs. They can cancel previously planned product launches, put hiring plans on hold, or significantly scale back their marketing efforts—it just means more opportunities for bold entrepreneurs to step into the limelight.

However, this does not mean that you should proceed blindly with your growth strategies. Instead, look back at your plans, see what still makes sense, and prioritize. Some regions may be harder hit by a recession than others, so you may need to reconsider expanding into certain markets. However, your research may uncover other areas that would welcome your business and may even provide you with incentives to enter their market.

One of the first things companies often cut back on in a recession is their marketing spend. Not. Your marketing budget will likely go further, and your efforts will have a better chance of standing out while other companies have gone silent.

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The same goes for attracting investment funds. According to Crunchbase, seed funding thrived last May with $3.1 billion invested in seed-stage companies, up 11% from the average $2.8 billion invested monthly in 2021 became.

Related: It’s easy to cut your marketing budget in a tough economy — but it’s a bad idea. How to save money on your PR strategy.

Top talent emerges

In the wake of the Great Resignation, 47.8 million workers quit their jobs last year, and the trend is continuing. According to a recent McKinsey report, “competition for talent remains fierce,” with 40% of workers planning to leave their current job in the next three to six months. That’s good news for companies looking to hire top talent—if you understand what employees expect from their employers.

According to the McKinsey report, workers are quitting their jobs because they want better career and advancement opportunities and want to make more money. They also face uninspiring leadership and a lack of meaningful work. Many want flexibility from their employers and prefer to work remotely, at least part of the time.

Fortunately, with many companies shedding or hiring freezes during a recession, this can be an excellent time to hire qualified staff and solidify your future position.

let’s make a deal

Although inflation has pushed prices higher in recent months, there are signs that inflationary pressures may be easing and the threat of a recession could bring them down even faster. Be on the lookout for special offers and promotions on key equipment, technology, inventory from your supply chain, or even the cost of real estate. Given the recent drop in gas prices, most experts believe high prices will generally be lower in 2023.

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See also: Don’t let a recession ruin you. Here’s how your business can thrive in tough times

Expand your business

If you plan to expand your business into other states, be aware that most states have specific filing requirements in order for you to legally operate in them, and these rules vary from state to state. In most cases, entrepreneurs do not have to start from scratch. Instead, they can apply for a “foreign qualification,” which allows a state incorporated corporation to register its business with the Secretary of State in the states where it wishes to do business, including:

  • Having a physical presence (eg, office space, warehouse, or retail store) in the state
  • Store stock in a state e.g. B. Goods stored by Fulfillment by Amazon (FBA).
  • Conducting face-to-face meetings with clients or clients in the state
  • Have employees who live or work in the state
  • achieve economic nexus

Each state has its own economic nexus threshold, which usually means that a company in that state achieves a certain level of sales. Once a business has an economic connection, it must collect sales tax and submit it to that state.

Companies structured as Limited Liability Companies (LLCs), C Corporations, S Corporations, or Limited Partnerships (LP) must register for a foreign qualification. Because the process varies by state, many business owners typically hire an independent “founder” to handle registration in the states where they want to do business so they can focus on other key aspects of growing their business.

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Related: If you do business in multiple states, you may owe more taxes than you think

Prepare now

Recessions are obviously nothing new to the US economy. According to data compiled from studying past recessions, reported in Harvard Business ReviewThe key to succeeding in a downturn is preparing for a downturn before it hits.

Research on companies that thrived during the Great Recession shows that companies that made contingency plans before the onset of the Great Recession were able to grow, while those that didn’t went into “survival mode,” cutting deep and reacting defensively.

While these studies primarily concerned large companies, the information is also useful for small business owners. Two important steps to take now:

  1. reduce debt. Review your cash flow, make sure your accounts receivable are up, and collect those that aren’t. Look at your liabilities. Do you pay for things you don’t use?
  2. Digitize. Small businesses that have digitized their operations are more flexible, productive and cost-effective.

If you currently outsource things like payroll or managing your accounts receivable and payable, don’t think you’ll save money by doing those tasks in-house. It might cost less in dollars, but it’s not worth the lost time.

It may sound counterintuitive, but recessions are often good times to invest in your business and devote your energies to sales, marketing, and idea generation.



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