Recessions are a Clear-out

Every January I empty my computer hard drive of unnecessary files with a vibrant re-format.

Just after Easter my mum, bless her soul, would give the house a robust spring clean, emptying the home of all excesses, and if I wasn’t careful that would include me.

A recession is exactly the same. A chance for an economy to rid itself of excess and should be welcomed.  It’s the chance to clear out, stop, step back, reduce consumption and economise.

It’s the natural course of events and should be allowed so long as you prepare for it. A worldwide recession is most effective but countries or zones, such as the eurozone, can go into a recession on their own.

In times of recession:

  • Companies cope by halting expansion, reducing employment, cutting back on employees, doubling jobs to save costs, reducing expenditure on non-essential items. The bean counters take over, finance departments rule.
  • Individuals cope too. People cull direct debits, don’t go out so much, stop eating in expensive restaurants and generally stop spending where they can. They holiday in the UK, buy less expensive cuts of meat, shop at Aldi and cut out non-essential items just like businesses.

The issue here is that the UK economy is 65% driven by individual expenditure, so we lurch into a recession.

If you’re in sales or sales coaching you need to prepare. If you’re in sales, then take a serious look at what you’re selling.  How will your product or service fair? Is it non-discretionary?

Can you diversify if it is?

Safe sectors are: education, accountancy, IT, healthcare, financial advising (not mortgage advice). Think what does the business or individual really need? What can’t they do without.

If you’re in the mortgage sector, think equity release, re-mortgage, later life borrowing (RIOs), further advances, second charges (people improve rather than move), life assurance and becoming an IFA.

Other safe industries: Cheap booze, cheap takeaway food (think KFC and McDonalds and chain restaurants such as JD Weatherspoons), childcare, DIY stores, dental care, rental property, bargain food stores (Aldi, Lidl).

If you’re not, see what you can do to hold on, take a breath, ride the storm and live off your capital. The storm will blow over, it always does, but only once the purge has happened.


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