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Why a Recession Can Be a Good Time for Expansion


May 18, 2023
Why a Recession Can Be a Good Time for Expansion


Opinions expressed by Entrepreneur contributors are their own.

“We very much believe strongly in investing through downturns” is a famous remark by Tim Cook, CEO of Apple Inc. With this philosophy, Apple has time and again managed to not only survive but thrive during periods of economic upheaval. At a time when major tech companies were shutting down shops during the recession of the dot-com collapse, Apple focused on acquiring graphics and productivity software companies.

Opportunity and hidden value are often-overlooked aspects of recessions, but it takes the right entrepreneurial mindset to see the potential upside of recessions in the first place.

The mainstream and more conservative approach calls for minimizing costs and risks and “waiting it out” until the economy improves. Indeed, the current economic climate, with a boogeyman recession that has been looming “just around the corner” for a year or more, has induced similar feelings of uncertainty, caution and a desire to tighten things down and wait until sunnier skies prevail.

But does this strategy make it harder for you to spot new opportunities that may arise? Could a shift in mindset to viewing recessionary periods as rife with opportunity help take your business to the next level?

As someone who has helped scale hundreds of companies, I sit firmly in the camp that views recessions as opportunities for growth. It doesn’t mean I act or advise clients to act recklessly. Far from it. In fact, investing in new markets, technologies or sectors during challenging economic times requires even greater awareness of market conditions on the ground and an ability to perform due diligence optimally.

International expansion, my area of expertise, is one area in particular where businesses can find greater value or opportunity during periods of economic uncertainty or downturn. But how do you spot those opportunities, particularly in a market where you have no presence and limited knowledge?

Related: Is a Recession Actually a Good Time to Expand Your Business?

Spotting value in overseas markets

Through accurate assessment of internal and external factors, you can maximize your chances of spotting value overseas in the wake of reduced competition. For instance, you can reprioritize your expansion plans by focusing on markets that are hit harder than most during a recession. This will increase your chances of success as your competitors are likely to be on the defensive in such markets. Businesses operating in industries relatively immune to a recession, such as consumer staples, shipping, utilities and healthcare, tend to fare better than others when executing expansion plans in recession-hit economies. What opportunities may offshore markets yield for your company in these areas?

Once you’ve evaluated your product/market fit in new markets and identified any gaps you may be able to close, you stand to benefit immensely by identifying and investing in undervalued assets and opportunities. These investments can develop into a sustainable competitive advantage to last for the long run.

Identify top talent

Recessions are almost always accompanied by companies laying off employees in droves to stay afloat. This often results in even the best employees departing despite stellar job performance and drive to grow. This creates a unique scenario where the supply of top talent increases while demand decreases.

If the world were to experience another Great Recession, the job market would be flooded with people looking for opportunities even at lower compensation in return for job security and a growth ladder. Your business can take advantage of this skewed job market by seeking out top talent and investing in it.

This human resource investment can prepare your company for success in the future. You can hire skilled, ambitious and growth-oriented employees at less-than-market rates to become partners in your future vision.

Related: Most Businesses Slow Down During a Recession — Here’s How to Keep Pace and Grow Your Company in 2023

Explore incentive programs overseas

It is not uncommon for a country to offer incentives to foreign players to pursue investment and expansion plans during a stagnant economy. This can be a win-win for the affected economy and the foreign businesses setting up shop in a new market.

For instance, China’s recent stimulus package in the wake of its zero-Covid policy, tax cuts and liquidity injections are meant to spur demand and kickstart business activity.

Such government incentives are great for providing a cushion for your global expansion plans and gaining a first-mover advantage. While your competitors are busy firefighting a recession, you can strategize and pivot to expanding rather than cutting back.

To avoid missing out, you need to stay up-to-date with the policy changes and new incentives, which can be quick and time-sensitive. One way to spot opportunity in an unfamiliar market and act quickly is to leverage the local expertise of a Professional Employer Organization (PEO).

Expand through a recession with a local expert

A recession can be a challenging period for growth, especially when expanding into a new country, and it is not for everyone. There are often unprecedented market forces to tackle in addition to intense competition and thin margins. But if you manage to focus on your strengths while minimizing your risks, you can use the recession to your advantage.

A recession offers unique value that simply requires experience and the right timing to yield significant rewards. Partnering with a trusted PEO partner like INS Global is one such strategy that helps you leverage decades of global expansion expertise while being fast and effective.

Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns

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