The industry is holding its breath to see if economists who are predicting a recession will begin this year are right. A survey by the National Association for Business Economics (NABE) released in March 2023 found that 53 percent of economists predict a recession will begin before the end of the year. Other economists say it’s further off, with 34% looking for a recession to begin in the first half of 2024 or later. Additionally, 5% say the U.S. is already in a recession.
Although the outlook looks dim, leading a business through a recession is possible, particularly if you’re open to learning from the past. Phil Tee, CEO and co-founder, Moogsoft shares his insights and observations about how businesses have prevailed in economic downturns in the past, mistakes that businesses commonly make, and whether entrepreneurs on the fence about starting a business now should dive in.
What similarities or differences do you see between the economic downturn of 2008 and now?
Tee: The financial crash in 2008 happened very quickly. Initially, the economic climate shocked investors and consumers. Shortly thereafter, the economic recession followed. Comparably, our modern economic decline has been a slow burn. We are macroeconomically dealing with the fallout of the pandemic alongside a massive increase in the money supply and the availability of almost free money for startups and new ventures. This situation will see a major correction in the venture climate this year and probably next. Additionally, rising interest rates and inflation have persisted across the developed world. Recessionary times are coming, but in many senses, we are still waiting for the other shoe to drop.
Looking back on 2008, what mistakes do you think most businesses made that others can avoid today?
Tee: However bad you think it is going to be, plan for it to be twice as worse. This piece of advice has guided me throughout my time as a founder and CEO. Companies should keep a level head, be bold and build for the future, but always be mindful of planning for 2x the runway you think you need.
What were the keys to navigating challenges in 2008 that businesses should repeat today?
Tee: One of the keys to success when navigating recessions is to continue spending on marketing — specifically demand and brand profile. Downturns create unique opportunities for companies to boost their visibility and online presence. The more companies spend on marketing (in a targeted fashion) — especially during an economic downturn — the more returns they can expect to see. Investment in marketing differentiates industry leaders from laggards during tough economic times.