Be a Successful Entrepreneur Even in a Recession

If you use them right, recessions are the greatest opportunities for investing and growing your business.

But the media, the “finance” guy on LinkedIn, and conventional wisdom do not talk about this incredible opportunity.

This is why the rich get richer and everyone else gets distracted by fear and misses out.

Fortunately, it’s not too late to take advantage of this moment to give yourself an edge to win.

We hosted a live zoom session with Patrick Gourley, professor of economics at the University of New Haven.

The full video including the Q&A is saved here. Subscribe for our new bi-weekly series on the skills and strategies entrepreneurs need win.

And now, his top 6 tips:

1) Build Social Capital

Building and contributing to a strong social network is one of the best and most overlooked strategies for professional success. Do you have people that you could call up if you were unexpectedly laid off, your company went under, or you needed emergency capital?

Goodwill compounds faster than money does, take note of how much you’re investing in relationships with people who you could rely on in a tough moment.

How many mentors do you have? How many mentees? These relationships are one of best ways to build your social capital. You benefit just as much from contributing to others as you do from them contributing to you.

The corollary: get yourself involved in communities, networking groups, masterminds, and anywhere there are people playing the game at the next level.

2) Market as an Investment

When money gets tight, people tend to be more conscious about whether their expenses are costs or investments.

One gets cut first, don’t let it be your product or service. Entrepreneurs need to take this into account in their marketing.

If you do portrait photography, for example, show consumers why an outstanding photo will help them land more job interviews, speaking engagements, or business connections on LinkedIn.

Show them the direct connection between paying for your product and the immediate, measurable payoff they will get.

Be creative or invest in an expert to market your product in the investment category and you’ll stay in demand regardless of the economy.

3) Compare Loans to Inflation

If you’re deciding about paying off loans early, compare their interest rate to the rate of inflation. If the inflation rate is higher than the interest rate on a loan you have, then value of your outstanding loan is decreasing by the net difference.

That’s advantageous to the borrower, so early payoff might not be the best move. Inflation isn’t a fixed number, but it’s an effective benchmark for evaluating loans.

4) Don’t Panic with Investments

Resist the urge to change strategies or dump everything into gold. The best response is actually counterintuitive, or at least not what everyone else is likely doing.

The best returns in the stock market always come right after the dips; moving your assets around and missing the rebound will cost you dearly.

Over the last 50 years:

• Inflation: up 8x

• S&P 500 dividends: up 19x

• S&P 500 total return: up 40x

If you play the long game, you can beat inflation and protect your purchasing power. This is another area where it’s recommended to hire an expert — find a true fiduciary (more on that here) to help with deeper investment strategies.

5) Focus on High Margin

Get involved in a business whose products’ revenue is much higher than their cost. This is generally always the best strategy, but it is often misunderstood because business owners fail to calculate the true cost of creating, marketing, and distributing a product.

Does your product need to be delivered in-person? How long between purchase and fulfillment? Is it vulnerable to supply chain issues?

When launching a new business or product line, entrepreneurs need to ask themselves the right questions so they can give themselves the best chance for success.

6) Invest in Yourself

According to Warren Buffett, one of the best ways to make yourself recession-proof is to increase your individual earning capacity. Invest in your mindset and skill set so that you become indispensable.

Get better at the things you’re good at. Tough economies don’t weed out entire industries, they weed out the weakest players. This is where your chance to stand out lies.

This is where you have the most power to differentiate yourself. How confident are you in your soft skills and your network? Are you absolutely indispensable no matter where you go?

You can lose relationships, money, property, and anything tangible, but you can never lose your knowledge and drive. This why they say you only need to get wealthy once; if you lose it, you already have what it takes to get it back.

The Bottom Line:

While everyone else is focused on factors outside of their control, successful entrepreneurs and investors double down on decisions like these to succeed, recession or not.

Don’t wait around to see what happens, take action before the opportunity misses you.

If you’re still not sure where to start, book a complimentary call with me to map out your next steps.

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