How to survive a recession: an effective strategy for business
What is a recession in economics
The period known as a recession is a significant decrease in economic activity lasting for months or years. During the recession, consumption spending decreases, the unemployment rate levels up, and businesses go bankrupt. At the same time, national economies experience negative gross domestic product (GDP) because of the recession.
Various factors can cause a recession, including excessive debt of individuals and businesses, asset bubbles, inflation, and technological shifts. Although a recession is a natural cycle in the macroeconomy, businesses have to take well-thought-out steps in minimizing the negative effects of the recession. Now when we’ve defined what is a recession, let’s look at how it impacts companies.
Effects of recession on business
At the beginning of July, it is known that over 24 thousand workers in the US technology sector were fired in 2022 as reported by Crunchbase news. Also, it states that the investors are worried due to geopolitical instability, rising interest rates, and inflation at a 40-year-high.
Investors in both the public and private markets appear dedicated to giving up some criteria they formerly used to evaluate digital companies. Instead of significant growth, they place more focus on a company's solid cash flow and profitability during the recession.
Ten years ago, Harvard University researchers examined the activities taken by 4,700 publicly traded companies from a range of industries throughout the world recessions that hit in 1980–1982, 1990–1991, and 2000–2002.
What strategies can a company use in an economic downturn
What are steps that businesses typically take during a recession? One of the ways to make your business withstand the recession is to cut down expenses. You can automate workflow to cut paid hours of your employees. When you delegate a task to the system, it allows you to do the same job and save money you otherwise need to pay to the expensive employee. In some cases, this also minimizes the risk of errors and miscommunication, eliminating the so-called human factor. However, not any kind of task can be effectively performed by the machine so you have to consider other strategies to spend costs wisely during the recession. One more way is to restructure your approach to getting a job done and hire an outsourcing company.
Some time ago, companies were not ready to outsource their tasks. Now they are more willing to do this. Clutch has conducted a survey and asked 1003 US small businesses in 2022 and 500 companies in 2021 about the way they approach outsourcing work. The results demonstrate that 90% of businesses (9 out of 10) intend to outsource business tasks in 2022. In contrast, the rate in 2021 was 80%. So as we move into the recession, companies are more eager to outsource tasks.
Let’s look at what makes outsourcing a time-tested solution to stay afloat during the recession. Then you will be able to decide for yourself if outsourcing covers all your needs and wants. So, how to survive during a recession?
What steps to take to during a recession to get better control over your business
Control cash flow
You can save money during the recession by contracting out work that doesn't require a full-time team. Due to the decreased costs, you are able to keep the people who are crucial to the ongoing success of your company. The recession in business cycle makes you prioritize your core workers.
A full-time income is a set expense that changes to a variable cost when you outsource (a pay-what-you-need).
Cut costs
This is one of the key benefits of outsourcing for small businesses. Your fixed costs become variable costs because you don't need to maintain any infrastructure for the outsourced activity. Small businesses frequently struggle with cash flow management, but by outsourcing and reinvesting the savings in your core business activities, you may boost growth while lowering costs. Additionally, this increases investor confidence. Cutting costs will make your company feel stronger during the economic recession.
No Additional Staff and Training Costs
It takes a long time and a lot of money to find professionals with highly specialized skills. That's before you consider the expense of onboarding new employees, and paying for benefits like social insurance. Also, don’t forget the expense of paying for extra perks like health insurance, and handling tax issues. These expenses transfer from a company's budget to the service provider when specialized skills are outsourced.
No Software or Hardware Costs
By spreading these costs among all of their clients, outsourcing companies can cut the price of pricey software and equipment. When a business selects an experienced service provider, it also benefits from contemporary technologies. This helps the business in a recession not only withstand economic decline, but also acquire new technologies.
Independence from Labor Obligations
A business that outsources a portion of its work is not subject to collective agreements, wage settlements, or staff count reductions. Through outsourcing, a business can only pay for tasks that are completed successfully.
Cost Transparency
The maximum cost is made clear and quantifiable by establishing a predefined price for each completed task. Businesses that outsource could potentially gain tax advantages depending on the country they outsource to.
More hidden economic benefits of outsourcing
Saving Time
In both 2022 and 2021, 27% of small businesses plan to outsource in an effort to increase productivity and cut costs, according to Clutch.
Leverage Well-established Procedures
Companies that you can outsource work to are results-oriented. They are often aware of the latest technologies and trends. Since they collaborate with a wide range of clients, they have relevant expertise and constantly improve it. It takes significantly less effort to trust the job to outsource companies than to enhance the qualification of your team.
Maintain Focused Approach
Outsourcing tasks gives you an opportunity to focus on your internal goals and processes. Clear up your mind from the hustle that comes with managing routine assignments by outsourcing them to experts and keeping the focus on what matters most to you and your core team.
Advanced Vision & Insights
Development teams tackle the task from viewpoints you'd never even know existed because they provide software for businesses operating in various industries. These experts are extremely likely to contribute worthwhile components to your program that will make it distinctive and effective.
Fitting Technology Usage
Professionals always know which technological stack is best to use for a certain project. The fact that they are aware of the technologies that should not be used to avoid long-term hidden costs is most significant. Typically, this argument will be sufficient to convey the benefits of contracting out your IT services to a third party.
A recession can put you as a business owner in a situation when you are anxious about the future of your company or have to make unpopular decisions. Nonetheless, what really matters is your mindset. If you approach recession not as a threat but as the chance to rethink your current processes and the way of working, you can find unexpected benefits in this way. You may find out that outsourcing time-consuming work is what your company needed for years, but only the urge to cut costs made you consider it and do the first step. This is how to survive a recession and thrive afterward. So don’t be afraid to change the way you approach recession in business and make a shift that can bring you to an even more prosperous future.
How COAX software can be useful for your business
COAX software is a team of experienced professionals that deliver solutions of high quality. We take the best of Agile methodologies and cover all stages of the software development lifecycle from discovery to maintenance in an effective and timely manner. By outsourcing your work to us, you can be sure that your advanced product will be created in time and meet all of your business needs. In addition, you will pay a reasonable price only for work that was done which will help you to sustain the business during the recession.
We help companies change their internal organization to promote future progressive growth.
COAX Software develops the necessary resources for success. Here’s a short overview of our services.
Research
Through the use of UX techniques such as market research, scope definition, prototyping, and user validation, COAX supports customers on the route from problem description to solution. Our product discovery involves talking to clients, collecting requirements, and planning the framework for the finished product.
Development
Whether it's a basic CMS or a sophisticated SaaS application, we can offer cutting-edge online solutions to support your business objectives. By offering seamless user experiences across all current mobile platforms and IoT devices, we assist our clients in expanding their businesses with reliable mobile solutions.
Design
COAX bases the design of its products on market and user research. To develop a testable and optimized design system for usage in upcoming products, we generate a product strategy. Real user testing of the target audience and good prototype research forms the cornerstone of efficient product market distribution. At this early stage, we collaborate with clients to foresee problems and validate concepts at a reasonable cost. We also design mobile apps with the idea of a high engagement rate for your app and bringing high-quality results.
Testing
Human interaction is still one of the best ways to ensure software quality. We use testing for strategy, test cases, checklists, and reporting. Every service we provide to clients is automated. Automated tests have been built into the code and product to guarantee that your application functions properly. COAX quality engineers examine all software engineering, algorithms, functionalities, and requirements for compliance with predetermined standards. Our team is in charge of performing functional, integration, load, and stress tests on your application.
With the right team getting the high-quality job done for you, you can be confident you spend costs wisely during the recession. Ready to hire experts from COAX software to create your dream app? Get in touch with us.
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