Most people think of a recession as being when all the money stops flowing and everyone starts losing their jobs. Well, that’s just a teeny part of the story.
For certain industries, a recession can mean losing out on potentially lucrative opportunities. That’s why some businesses choose to set themselves apart and become recession-proof businesses. They figure out how to make sure that even during tough economic times, they can still thrive. Albeit, with differing levels of success.
That’s exactly what happens in Singapore during recessions. Even though consumer spending may slow down during a recession, consumers here are likely to spend more on essentials like food and shelter than they otherwise would. Demand for other unique services went up as well.
If you run a small business in Singapore, here are four tips for surviving a recession and thriving during tough economic times. But first, some definitions.
What is a recession?
A recession is a sharp, sustained fall in economic activity. It is generally measured through reductions in Gross Domestic Product (GDP), which is the sum of all the final production output for all products and services produced by an economy during a given year. Some economists define a recession as being three months long, others say six; however, no agreed-upon common definition exists. In practice, recessions occur when an economy contracts for two consecutive quarters. While bleak, a recession is simply part of the four stages of the economic cycle that routinely goes from peak to contraction.
Why are workers leaving?
When most were forced to work remotely during the pandemic, people had the chance to take a step back, take a breather, and take a good hard look at where they were at in their lives. Many came to the realization that it was actually possible to get things done remotely while having more time for themselves.
So when companies started calling employees back to the office after COVID-19 restrictions had started being lifted, want to fathom a guess what happened? People started leaving. Many have experienced a paradigm shift in their attitudes toward work and are no longer willing to put the power in the hands of corporations.
1) How to tell if a recession is coming and what happens when a recession hits?
1.1) Increased layoffs
A clear sign that a recession has begun is when firms start laying off workers and jobs begin to disappear from the labour market.
During a recession, the unemployment rate tends towards increasing as companies struggle to stay afloat. The US Bureau of Labor Statistics reported in March that unemployment peaked at 14.7%, the highest level since the Great Recession.
Many economists monitor the number of people seeking unemployment benefits each week. And the increase indicated whether layoffs are worsening. Since November 2021, weekly applications for jobless aid have risen dramatically, suggesting that layoffs may worsen.
1.2) Inverted yield curves
Many economists also monitor the yield curve for signs of a coming recession. An inverted yield curve generally means that investors expect a future economic downturn and anticipate that the Federal Reserve will cut interest rates to try to prevent a recession. And as we all know, whatever happens in the US will have a trickle-down effect on countries around the world.
1.3) Decreased production or manufacturing
Due to the rise in the price of raw materials, business owners often reduce production during recessions. That causes fewer jobs, lower wages, and less spending. While these reductions may not last forever, they cause lasting damage to the economy.
1.4) Decreased consumer spending
One aspect of consumer spending—retail sales—is the total amount of money consumers spend on goods and services. Retail sales tend to decrease as people have to spend less money. As retail sales decline and companies start closing stores, the economic effects can be devastating. Some companies may have to cut back on staff or shut down entirely.
How Singaporean businesses can survive a recession
1. Reduced unnecessary fixed costs
Companies can sometimes go a bit too far when they start doing very well financially. From lavish offices to random arcade machines, too often have we seen how companies spend on things that employees don’t actually need and sometimes even use.
One way to deal with a recession is to cut unnecessary fixed costs. For smaller companies, office rental costs can definitely be channelled to other things. And to provide a conducive work environment for their employees, they can subscribe to co-working space booking apps like Deskimo. These kinds of apps allow users to book workspaces at an affordable per-hour fee. Compared to high rental fees, this is definitely an alternative to consider when times are tough.
2. Be Ready To Adapt And Adjust
During a recession, customers tend to hold back on discretionary purchases, choosing instead to focus on necessities. Retailers must adapt quickly to these changes in consumer behaviours, software businesses need to shift to focus on retention, and traditional in-person service-based businesses like restaurants will need to rethink how they can continue to serve their customers. Otherwise, those who lack foresight will quickly fall out of the race.
For example, during the recession brought about by the COVID-19 pandemic, Robinsons closed its final store in Singapore due to the lack of customers visiting the stores. Prior to this, the brand had always had a heavier focus on its physical store and placed less emphasis on solidifying an online presence. Had it started investing in building a strong online presence sooner, it could’ve avoided such a quick downfall as its customers would have already found an alternative and efficient channel to make purchases.
Another example would be how Singaporean startup Novocall launched a new product for free to help their customers and other local business connect better and facilitate remote work. This helped them retain many customers during the pandemic as they saw that the company was genuinely out to help them instead of increasing prices at times of need.
3. Look for Ways to Expand Your Market Share
When customers are tight on cash, they sometimes turn to smaller, local businesses instead of bigger ones. When that happens, it’s important for businesses to shift their approach to target these newly underserved customers. Some examples of strategies that Singaporean businesses have employed during recessions include:
- Offering discounts to attract customers
- Introducing special promotions to entice customers
- Raising prices on essential items to make them more affordable
- Investing in advertising to reach new customers
- Acquiring competitors to gain access to new customers
4. Take Advantage Of Government Programmes
Besides taking advantage of these strategies, businesses also have government programmes available to assist them. Let’s take a look at some ways how the Singapore government has supported businesses during past recessions.
In 1997, the Singapore government implemented various measures in order to lower business costs and provide financial assistance to individuals and families. These included a reduction in the value-added tax rate and the removal of certain taxes such as inheritance and gift duty. Other measures included an increase in the retirement age and the introduction of flexible working hours and part-time work.
In order to support small businesses and workers during the 2008 global financial crisis, the Government announced an Economic Stimulus Plan worth $10.7 billion in November 2008 and another package of assistance worth $22.3 billion in January 2009.
And during the COVID-19 pandemic, the government came up with the Jobs Growth Incentive (JGI), a $1 billion support programme to help businesses increase their headcount even in times
As you can see, the Singapore government has been incredibly supportive of businesses and have provided a lot of support during tough times.
5. Increase Customer Service Standards
Making sure that your customer service standards are up to par is another great way to keep your costs low and your revenue steady. Customers appreciate being treated well. Even if you’re not a company known for its stellar customer service, you can still take steps to improve. Provide additional information via e-mail or social media, provide updates on sales, or add features such as shopping carts.
Building a rapport with clients is vital because they will eventually refer you to friends and family. You never know when a client might decide to leave his present company and take you with him. And this is essential during a recession when keeping customers around is key to tiding through tough times.
Do you have a better idea of how to survive a recession now?
A recession is hard on everyone.
Hopefully, this guide will give you some ideas to help you prepare yourself for tough economic times ahead. We hope these tips will not only help you survive a recession but also ensure that you don’t get stuck with bad debts once things pick up again.