Four Mistakes Businesses Make in a Recession

The Small Business Trends blog has an interesting article, Four Mistakes Entrepreneurs Make in a Recession (the title of which I've modified for the title of this post, for SEO reasons).

I'm going to add another mistake, but first let's review Scott Shane's four mistakes:

1.  Failing to take advantage of decreasing costs.  [good point; I made this in Businomics]
2.  Thinking the only way to increase demand is to cut price [also a good point]
3.  Failing to recognize increased competition.  [sometimes true, especially across normal industry lines; for instance, residential contractors may move into non-residential work when their sector weakens.]
4.  Forgetting that some products, or even whole businesses are counter-cyclical.  [Bad point; I'd challenge Scott to show hard data on any industry being counter cyclical; however it's certainly true that some industries are pretty much immune to recession ( health care) and other have cycles of their own not correlated with the economic cycle (agriculture) ]

Now let me add my own candidate for top four mistakes: discouragement.    Sales people don't have success with their calls. The sales staff is cut back, so the remaining reps become order takers.  Nobody's making cold calls or following up with past clients.  When the economy turns around, the sales people are still discouraged, waiting around for the phone to ring.  But it rings in the offices of the people who kept hustling through the recession.  My hunch: the biggest swings in market share occur at economic turning points.

(For more on this topic, see my comment on Seth Godin's comments.)

Comments

[Robert Bradford]

One example of a couter-cyclical business: security products. The property crime rate goes up when the economy gets bad...leading to more purchases of, say, padlocks to protect property. A client of mine in this industry inevitably saw increased sales during recessions. Another (not as good) example would be nursing homes, which don't grow more during recessions (getting old, it appears, happens steadily despite the economy), but do make more money as their labor costs decrease.