Can Recessions Be Good For Your Business?

It’s no big secret that during recessions or just plain bad economic times many people become price conscious beyond anything else. For example, during America’s recession of 2008, McDonalds actually opened an additional 600 stores while other companies scaled back.

McDonalds is proof that people would rather buy cheap but non-nutritious food rather than nutritious but more expensive food during hard economic times like recessions. We also have to consider that this is happening in America, one of the most richest countries in the world.

Recessions or bad economic times may happen occasionally for people in developed countries, but for many people in poor and developing countries, recession like living conditions are a normal way of life.

This means that if you start a business that excels during recession or bad economic times, you have a huge market of people from poor and developing countries. This must be the reason why McDonalds have one of the largest fast food chains in the world.

They don’t happen frequently in developed countries but they do happen on a regular basis (See the chart below courtesy of Wikipedia). This means that everyone should anticipate them especially those who are earning money as employees of companies.

This is because when recessions happen, what companies normally do is to trim down their operations and enforce cost saving strategies. If you don’t know it yet and you’re an employee who still thinks in the motto: “employment for life”, you should be wary.

This is because companies treat employees as a necessary expense, an expense yes, but completely necessary. This means that if the company doesn’t see an employee as a necessity anymore especially during recessions, they can simply fire the employee.

If even mega companies like Google have to layoff thousands of employees to remain profitable then what about much smaller companies? What do employees do? Ironically, the best way an employee can protect themselves from unemployment is to become bosses.

Ask yourself this: “Who fires a boss? Bosses don’t get fired, it’s them who does the firing.” But how do you become a boss? The answer is that you have to start your own business and be the boss of your own company.

If you’ve ever considered the costs of a company, you would know that one of the largest if not the largest cost of a business is employee costs. This is the reason why businesses want to pay employees as little a salary as they can.

During recessions, it’s the business owners who have the upper hand over their employees and prospective employees. This is because during recessions there are not many jobs available because there are less business operating than in normal times.

During recessions, employers can afford to be more picky with the employees they hire. Usually, a lot of job applicants are so desperate for a job that they would go into erroneous contracts with employers.

Employees are also usually more loyal to their company during recessions because they know that it is hard to get another job during recessions. Employees also are more willing to work much harder because they fear that they could lose their job.

This lopsided employee situations do not only happen during recessions in developed countries but are a daily occurrence in poor and even developing countries. This is the reason why the word ”sweatshop factories” was coined.

Normally, during recessions fewer companies operate. As a result, a company’s vendors and suppliers are more complacent or negotiable to the company. For example, if the company wants to delay paying a vendor or supplier, they would likely succeed.

This is because the company’s vendor doesn’t want to antagonize the company by asking the company to be more on time in paying their dues. Vendors and Suppliers know that during a recession, even the loss of one company client could mean the end of their company.

The same can be said for the company’s lenders. With less companies operating during recessions, banks and other lending institutions have less clients. This is the reason why lending terms are more favorable during recessions.

The same goes too for a company’s competitors. It’s usually the biggest and the most efficient companies who not only thrive but also prosper during recessions. This is because smaller companies are less efficient and have less money to see them thru during hard times.

As a result, the best companies end up with lesser companies which has the chain effect of making them even larger that normal. An example would be my article: "How Did Qin Yinglin Became The World’s Richest Farmer?" He expanded while other closed down or cut back.

Oxford Languages define the word “Gig Economy” as: a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. The gig economy might seem daunting because they don’t provide full-time employment.

But if you’re working for more than one company, it lessens the chances of you being unemployed. Sure, finding clients could be hard, but this is the nature of business, you’re not an employee now but a business owner in the gig economy.

The gig economy is growing fast. The industry reporting firm Market Watch reported that the global Gig Economy market is valued at US$ 355 billion in 2021 and is expected to expand at a CAGR of 16.18% during the forecast period, reaching US$ 873 billion by 2027.

The explosive growth of the gig economy could be attributed to the fact that companies are increasingly trying to drive down their employee costs by firing full-time employees and replacing them with gig workers whom they don’t have to provide salary and health benefits.

And this trend would continue whether or not there is a recession. It also doesn’t matter if you’re from a developed country, developing country or a poor country, you’ll likely to be replaced by a gig worker at some point of your company employment.

No matter how bad the economy gets, people still need to buy the basic things in life like food, toiletries and so on. This is the reason why China has become the second largest economy next only to the US.

As the US concentrated more on high value items, China initially concentrated on selling cheap basic goods. At first, many people laughed at China made basic goods treating them as inferior products to western made products.

But as times got financially tough and harder, more and more people started buying cheap China made basic goods. Even people from developed countries patronized cheap Chinese basic goods.

This is also the reason why Walmart became one of the largest supermarket chain in the world and not only in the US. Walmart concentrated on cheap basic goods and killed off mom and pop shops who cannot compete with their cheap pricing.

This is also the reason why many Dollar Stores thrive during the economy. They offer the shopping experience to many people who are on a very tight budget. A dollar store can make as much as 80% profit for each item they sell. This is how profitable they are.

These stores are definite proof that a lot of people are living in recession-like conditions even in developed countries. These stores might not seem much until you do the maths:

According to an article from Chron titled: “Thrift Stores & Average Income”, thrift stores have become big business for some American businesses. For example, the company Goodwill earned US$ 5.3 billion in retail sales in 2014 and US$ 6.1 billion in 2018.

This means that at least for Goodwill, their second hand/recycling/thrift store business is not only very profitable but is in fact growing. Goodwill in fact averages an increase of $US 200,000,000 every year based on their 2014 to 2018 earnings.

It is to be noted also that even well-heeled people are entering the second hand market. The second hand luxury goods market is valued at US$ 4.9 billion in 2021. Even well-heeled people are now going to second hand stores in the hopes that just maybe a luxury item could be there.

During recessions, people tend to hang on longer to their possessions instead of selling them at a discount or giving them away. This is especially true with cars which are considered the second most expensive possessions of people besides their home.

This is the reason why it has always been a good time to become a mechanic. Even one year old cars have been known to malfunction, what more of cars more than three years old? This is the reason there would always be a steady stream of clients for a mechanic.

A car needs an oil change, tire change, air conditioning cleaning and even engine cleaning regularly. Don’t forget that a car needs to be certified roadworthy by a mechanic before its registration can be renewed.

A lot of people are also increasingly owning a lot of electronics: mobile phones, laptops, tablets, large flat screen televisions, EVs and so on. These are also not cheap items to replace especially if they are premium brands.

This is the reason why electronics repairing skills are always on demand especially most of these electronics are software driven. A person with decent software skills can earn good money repairing these things.

Recession happens in cycles and is mostly felt by employees. Their work tasks could be increased as their co-employees are laid off, they might not get salary increases and may even be fired.

But for many people recession is a fact life. Company owners know that with or without recessions, their business could tank. Then there are the people who live in poor and developing countries who must contend with low salaries and heavy workload.

The best way to improve or leave your recession-like status is to become a business owner yourself. If you are a business owner, no one can fire you no matter how bad your business gets.

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