No one likes to hear the word “recession.” But the fact of the matter is that markets are cyclical — it’s normal for it to cycle from bullish to bearish.
The good news is that there are ways that your business can prepare for a bear market and even profit off of it if you plan accordingly.
In this article, we’ll cover different strategies you can use to make sure your business is prepared to thrive in a bear market.
What Is a Bear Market?
A bear market is defined as a stock market decline of 20% or more in broad indexes like the S&P500 or Nasdaq Composite. Because it can be quite common for stock markets to decline by 5% or more, it’s not considered a bear market until it gets past 20%.
Bear markets can cause a lot of indecision for investors. The combination of losses, the uncertainty of the future, and higher market volatility can all contribute to long-term damage to their portfolios.
Although historically there have always been higher prices following bear markets, it’s not uncommon for portfolios to be permanently damaged from bear markets.
A bear market is the opposite of a bull market, where financial markets are impacted by consumer confidence. In a bull market, investment prices rise for sustained periods as confidence soars.
Strategies to Survive and Thrive In a Bear Market
It’s important to know that your business doesn’t have to feel paralyzed by a recession or economy. There are ways that you can prepare for the market. Let’s take a look now.
Separate What Your Business “Needs” Vs. Things That Are “Nice to Have”
The first step when enduring a tough market situation is to prioritize expenses that are essential versus what you don’t need. This will lay an essential foundation for the steps that follow.
As you scour your business for places to reduce costs, it’s important that you don’t weaken the core and fundamental processes of your business. This means protecting any area of your business that generates revenue as well as areas that actually protect your business.
Maintaining the best customer service possible won’t mean anything if your website is overrun with viruses and cyber hackers. Managing your budget will take careful consideration.
Focus on Efficiency
After you cut all of the non-essential expenses from your business, you might find that your expenses are still quite large. Instead of cutting out important parts of your business, look for innovative ways to improve the efficiencies of your business.
Perhaps there is an oversight in an area that is creating unnecessary costs. Maybe there are some employees with hidden expertise that you can leverage in a different department. Maybe there is a junior associate that can help with certain administrative tasks.
Don’t be afraid to draw power from your team to find new and innovative solutions to cutting costs and raising efficiency.
Leverage Technology
Finding team members who can help contribute in other areas is easier said than done. In reality, not everyone will have the spare time and resources to contribute wholly to other tasks.
Another option is to look into ways technology can ease the burden. Go through your different departments and find which ones have mundane, manual labor that could be automated.
Artificial intelligence and machine learning have taken huge strides in recent years and can help support a wide variety of job functions. Taking advantage of AI will not only help ease costs, but it can reduce errors, improve efficiency, and allow your workers to focus on more important aspects of their jobs.
Prioritize Your Employees’ Well-Being
It’s always important to remember that your employees are the foundation of your business — and they’re feeling the effects of the bear market just as much as you are.
At work, they’ll already be asked to put more on their plates on top of the work they already have. Most likely they have a lot of stress being put on them in other areas of their lives as well.
Make sure to check in on the physical and mental health of your employees. Happy employees will be less distracted and more productive.
It’s far too normal for companies to focus too much on hours worked or output gained when buckling down on costs and increasing efficiency. It’s very important to understand what the underlying potential expense of that might be for the employees’ well-being.
Create an environment that keeps employees happy and stimulated.
Take Advantage of the Opportunity
In every unstable environment, there is opportunity. If you can handle the pain of a bear market, real money can be made if you know where to look.
Some of the most successful companies in the world started during a recession. By following the business strategy listed above, you can take advantage of the bear market and find new opportunities lying in wait. These steps include:
- Reduce business spending
- Improve internal procedures
- Empower staff
- Leverage technology and automation
By following these steps, you can stay one step ahead of the market and continually search for new opportunities.
The Next Step to Keeping More of Your Hard-Earned Money
Just like any other perilous situation, the more you understand and are prepared for the situation, the less scary it will seem. Surviving a bear market is no different.
No matter what you do, your business will need to learn how to keep operating in a bear market, so it is best to make sure your business is flexible and prepared for the challenges to come.
If you need help keeping more of your hard-earned money, look no further. Bennett Financials provides bookkeeping, CFO services, tax planning, and tax resolution for service-based businesses.
Click here to get a free consultation on how we can help you save more money in a bear market today!
