If you weren’t old enough to be fully impacted by the last recession in 2008, then you’ll get to experience the next one first-hand. The coronavirus pandemic is letting loose a lot of firepower on the economies of all countries around the world. The stock market is seeing a lot of damage similar to that of the previous economic crisis. While it’s too early to know the exact time and the impact of the upcoming recession, its inevitability isn’t really up for debate. If you’re not quite sure how to deal with the potential recession, this guide is for you.
Understand The Nature Of A Recession
In official terms, a recession is the declination of the global domestic product (GDP), the value of products and services in a country as a total, for more than two financial quarters. This simply means that this decline will translate to less economic activity in the market for a relatively long period of time. The impact of a recession is visible in all sectors, such as employment, manufacturing, retail sales, and many others. Whether it’s a global pandemic or a debt crisis, a recession can cause the economy to slump down significantly, halting its growth.
Whether you’re a digital or physical marketplace seller, you need to take a few precautions because recession can affect both platforms. The reduced product sales are going to force you to reduce your budget and goods. Having some cash on hand is going to be very beneficial, especially when most loans and credit interests are frozen. Your emergency fund should at least keep your household afloat for no less than 3 months. Whether it’s an online savings account, a bank, or a joint account; these funds should be liquid and easy to pull at any time. Avoid using stocks and bonds as emergency assets because it’s much harder to liquidate without loss during an emergency in a recession.
The impact of a recession on economies of different countries can vary in strength; some countries will face more damages than others. If you’re an online marketplace seller, you’ll have the opportunity to expand into new geographical locations as other eCommerce businesses reduce or completely remove their presence due to the recession. As this very helpful post explains, the tendency of people to liquidate their assets and business as they panic due to an economic crisis is understandable but it’s far from being right. It’s known that after a recession is gone, markets start growing exponentially.
Keep Debt At Bay
Fortunately, the government has frozen student debt and issued stimulus relief funds to help battle the coronavirus impact on the economy. This doesn’t mean that you are suddenly out of debt, but rather have more of a chance to keep it at bay. It’s recommended not to use stimulus checks to pay your debts because it’s considered a limited resource to help you survive the upcoming days. Instead, try transferring high-interest loans to the new federal almost 0% loans if your credit score allows it.
Invest In Your Infrastructure
Many investors managed to make a lot of money out of recessions because they implemented long-term strategies that ended up benefiting them in the long run. The lower asset prices affect renting warehouses, servers, and retail shops, which means that you can use this opportunity to expand your infrastructure for a fraction of the price you’d originally end up paying. Online marketplace sellers can start taking advantage of the lowest warehouse prices to increase their inventory’s capacity. You’ll also have a chance to start investing in robotics and automated machines to reduce your dependence on labor, which costs a lot during recessions.
Avoid Getting Too Emotional
Recessions can hit economies quite hard as people struggle to make ends meet. Since there is no way to remain completely unaffected by the recession, your business decisions as a marketplace seller should not be prone to panic. Avoid letting fear fog up your view of the market trends and investment opportunities. You should always keep a short amount of cash in an interest-bearing account to avoid stock market fluctuations during a recession. That way, you’ll be able to continue your marketplace activities without worrying too much about surviving the crisis.
It can be quite anxiety-inducing to think about the many changes that the market will endure during a recession while witnessing the coronavirus wreak havoc on many individuals at the same time. Recessions aren’t exactly easy to understand due to their nature that’s filled with a lot of variables, so it’s understandable if you feel overwhelmed by the whole matter. But don’t let fear stop you from ensuring that your business stays strong during these difficult times.