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Entrepreneurs around the world should always be on the lookout for the dreaded ‘r-word’. They appear from time to time and wreak havoc on businesses by decreasing sales, decreasing income, and cutting jobs. Of course, we are talking about recession — This is a natural phenomenon of the economic cycle, but certainly a painful one.
There is no way to completely protect your business from the effects of a recession, but there are steps you can take to mitigate it.
As a marketing and technology entrepreneur, I wanted to know more about how to “recession-proof” my business. So I asked ChatGPT, the world’s leading Large Language Model (LLM) and Silicon Valley artificial intelligence darling.
Below, I share a conversation with ChatGPT on how entrepreneurs can protect their business from recession, and eventually share my own thoughts on these ideas.
Related: 9 Smart Ways to Protect Your Business from a Recession (Quick)
prompt
At the beginning of the conversation, I asked the following written question:
How can you make your business recession-proof?
ChatGPT then offered the following short disclaimer before responding with the following steps: No company can completely insulate itself from inflation.
ChatGPT’s formula for ‘recession-proof’ entrepreneurship
Below are the 7 verbatim recommendations ChatGPT offers to help businesses weather the recession storm.
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Build a strong cash reserve.
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Diversify your offerings.
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Focus on efficiency.
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Maintain good customer relationships.
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Be aware of your financial situation.
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Prepare for the worst.
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Stay flexible.
My Thoughts on ChatGPT Official
Personally, I think ChatGPT’s advice is excellent and I agree with most of the points. However, I do have a few qualifications. Below are my thoughts on each.
1. Build a strong cash reserve.
To survive the down period, need This is to save cash for rainy days. This applies not only to personal finances, but also to businesses. But I would also recommend going one step further and holding non-cash savings to protect yourself from the effects of inflation. Assets such as gold and other precious metals, as well as real estate, are much less liquid than cash on hand, yet serve as highly resilient reservoirs of wealth during downturns.
2. Diversify the offerings.
This is a big deal. Don’t rely on a single product or service to drive your business. By offering multiple products and services, he diversifies his revenue streams so that if a recession hits one hard, he can keep his business alive with another product or service.
For example, car dealers can diversify their product offerings by adding commercial vehicles and trucks to their existing passenger car line-up.
3. Focus on efficiency
Be careful with this. Preparation We aim for lean and highly efficient operations when the economics require it, but efficiency doesn’t have to be the only focus by automating, downsizing, and streamlining every task. Sometimes customer satisfaction and product improvement require more staff and time to devote to non-core functionality, so make sure you have space for that as well.
4. Maintain good customer relationships
This is a given. Long-time loyal customers are much more likely to stay with you during a downturn if you provide friendly, high-quality service. To keep repeat customers, it’s a good idea to add perks and discounts to repeat customers.
5. Watch your money
Make a budget and stick to it. ChatGPT stresses the importance of monitoring cash flow, and they’re right. If you’re saving for a rainy day but don’t have enough cash inflow left to cover all your expenses, you’ll need to reassess your spending and re-budget accordingly.
6. Prepare for the worst
Plan proactively for the coming recession.Depression happened in modern history every 3.25 years on average. A good entrepreneur should use this as a baseline to anticipate recurring business downturns and consider contingency planning. This way, you can react quickly if sales decline due to economic factors.
7. Stay flexible
Always be willing to adapt. Market conditions can change suddenly, and smart managers need to be prepared for that with the flexibility to pivot if necessary.
Related: 5 ways to protect your business from recession
Overall, ChatGPT presents a good set of principles to follow if you want your business to be more resilient to downturns.But it’s worth repeating no Business strategies are ‘recession-proof’ because severe events across the economy can and will have an irreversible impact on businesses of all kinds.
But as ChatGPT above suggests, maintaining a flexible and responsible approach to business management will certainly make your company more likely to survive an economic downturn than those that don’t. .