Lessons learned from the GFC…
The severity of COVID-19 has sent shockwaves through the economy and affected businesses on a massive scale. As the outbreak continues, business owners are counting their losses and wondering how they’re going to survive. The government has offered support measures and lifelines to assist businesses and their employees to endure periods of partial and perhaps total lock-down. For businesses forced to hibernate temporarily, it’s time to plan and position for rapid recovery on the other side.
Economists are forecasting tough times ahead, with most suggesting that a global economic recession is imminent. But while the news is bleak, history has shown that by being resilient and making smart decisions businesses can survive, and even prosper, in the most turbulent of times.
We only have to look back to the global financial crisis (GFC) of 2007-2009, when millions of people lost their jobs, businesses faced financial ruin, and economies experienced their deepest recessions since the Great Depression in the 1930s to see evidence of this.
For many businesses, the GFC seemed like it could have been ‘the end’, yet some of the world’s largest companies rose from the ashes and were more productive, profitable, and less burdened by debt than they were before the GFC.
In some cases, it was due to brand loyalty, exemplary customer service, and the product or service the business was offering. But for others, it was a result of innovative thinking and the fact that the business entered the downturn in a strong financial position, which meant they were able to buy companies, equipment, and real estate at rock-bottom prices.
Companies that thrived in the global financial crisis
Whatever the case, some of the world’s biggest companies not only managed to stay afloat during the GFC, they increased their market share and went on to become leaders in their field. These businesses include:
When the recession hit, Domino’s wasn’t exactly America’s favourite pizza. But rather than shut up shop, the pizza chain overhauled its recipe and spent millions of dollars on research and a new marketing campaign. By the end of 2009, the company’s profits more than doubled and sales for that quarter increased by $23.6 million.
While retail companies were hit hard by the recession, Amazon’s sales rose by almost 25 percent. This was due to its competitive dominance, which allowed it to offer more products at lower prices, and made it a top choice for consumers trying to save money. It was also because the company continued to introduce new products into its range and made customer service their top priority,
In 2009, while most companies were struggling to survive, Lego made the bold choice to expand into the global market, in a bid to increase their sales in Europe. Lego’s exploration of the global market proved to be a success, with company profits soaring by 63%, and the brand’s popularity reaching an all-time high.
By the end of 2009, Netflix had attracted three million more subscribers and its stock price had risen by 57 percent. This was due to their new streaming plan, which offered subscribers access to an unlimited amount of entertainment a month, their wide range of price plans, and unrivalled customer service. Netflix has gone on to become a market leader and currently has over 167 million subscribers worldwide.
How starting a business in a recession can lead to success
Not only did some of the world’s largest companies thrive during the recession, but many successful businesses were forged in the doom and gloom of the financial crisis. These businesses include:
Smashburger is an American fast-casual restaurant chain that serves ‘smashed’ burgers and other fast-food favourites. Founded in 2007, the restaurant saw rapid growth as soon as it opened and added hundreds of locations within a few years. In 2018, Jollibee Foods acquired 100% of Smashburger, which at the time had more than 370 corporate and franchise-owned restaurants in 37 states and 9 countries.
“It was a time when guests were buckling their belts, paying close attention to their budgets and seeking more value from restaurant options. This was how the fast-casual movement was born,” says Scott Crane, CEO of Smashburger. “Real estate was more affordable during this time, so we were able to take advantage of better economics and key locations we would not have been able to access prior to the recession.”
Founded in 2007, Zeta Global is a data-driven marketing technology company that helps brands acquire customers using data insights and multichannel marketing. Built to capitalise on major shifts in the advertising and marketing industries which occurred with the rise of Big Data and mobile technologies, the company’s revenue grew to more than $400 million in 2019.
According to David A. Steinberg, CEO of Zeta Interactive, formerly XL Marketing, much of the company’s success lies in the fact that they could afford to buy other businesses at a time when most people could not. “We were able to acquire smaller companies for very favourable multiple since there was less competition bidding for these businesses. Moreover, their limited access to capital stunned their growth allowing us to gain leverage very quickly once they were part of XL Marketing,” he said.
How to build a successful business in difficult times
If you want your business to prosper in tough times, you need to think outside the square. For example, if your customers are facing financial hardship, change your offerings or find a new audience. If your products aren’t selling, do your research and find out what your customers actually need now. By fulfilling your customers’ needs and offering innovative, cost-efficient alternatives to your competitors, you can grow your customer base and increase your market share.
Almost any business has the potential to survive an economic downturn as long as you are willing to evaluate your current processes, make some hard decisions, and reshape your current business model to align with new world needs. Change is an opportunity for advancement. Do the right planning and make the right changes and on the other side of the pandemic, your business might just end up being more successful than you ever imagined.