Rebuilding as the L-Shaped Recession Ends

The world — especially the business world — is constantly changing around us. Since the global pandemic and resulting L-shaped recession, these changes have been even more pronounced and quick to occur.  In 2020, the pace of changing customer behaviors, their needs, and industry trends accelerated so much that, in the last year alone, we’ve probably experienced 10 years’ worth of change.

The trend-studying economic commentator of Business of Brand (BoB), suggests that these changes are just the beginning of a global overhaul. He has studied the trends of the past and present, and his results point straight toward an economic and social boom over the next ten years.

The way businesses gain more market share has evolved and the global pandemic has furthered this trend. How will you and your brand rebuild to join the new 21st-century modern era of business? Can you innovate your business model to be brand-led and focused on truly connecting with people, versus just selling your products and services?

Sooner than you think, the current L-shaped recession is coming to a close — now is the time to reimagine and reshape how your brand interacts with the world.

 

The L-Shaped Recession

We’re all familiar with the term “recession” and what it means for businesses — but what about an “L-shaped recession”? According to Darren Shirlaw, it’s what we have been in since March 2020. The type of recession you’re probably familiar with is called a V-shaped recession. When it begins, the market falls at a drastic rate. Once it has fallen, the market shoots right back up. These are far more common than an L-shaped recession.

In fact, until the recent market drop, there hadn’t been an L-shaped recession in 33 years. That’s right — the last one was in 1987! It is described as an “L” because the markets fall very quickly; usually one day of trading losses. The recession then begins at the bottom, lasting about 18 months. This creates an L-shaped effect on the market.

But what happens after the flat line of the L? As we’ve learned through BoB Earth™, that’s where things get exciting for businesses.

 

The infographic to the right, courtesy of BoB Earth, shows the following:

L-Shaped Recession Driving into Growth

L-Shaped Recession Phases

• Center Phase 1 – SHOCK  (3 months — March 2020 – May 2020)
• Middle Phase 2 – RECOVERY (4 – 9 months)
• Outer Phase 3 – REBUILD (10 – 18 months)

Growth Phase

• High-Growth (September 2021 – September 2026)
• Economic Boom (September 2026 – September 2031)

 

 

The Shock Phase

When we first go into recessions, especially “L’s”, people never see it coming. It comes as a shock. Overnight we need to adapt our businesses, as revenues drop off quickly and our exposure to overstaffing and over-investment etc. becomes clear. It hurts. During this phase, we need to learn. Understand the timings, understand the impact, and adjust quickly.

Think Personal Brand over Company Brand, think pricing strategies, not new products (yet). It is also a time where we must get the numbers right; cashflows and staffing numbers — structures are critical and must be set in place early across this 18-month phase to maximize efficiencies, margins, and cash.

 

 

The Recovery Phase

After the shock, people move their thoughts to “what’s next?” This is the clean-up phase, to see what is left and what opportunities now lie ahead. Recovery means the innovation of products and your customer journey. New products, new services, re-packaging, and re-pricing. This is time to work out what can be taken out to market and how to have people engaging with us again. Expectations are low, people are not in “spend mode” as a result, businesses are cautious about launching too wide or expanding too quickly again.

As clients start to walk back through the door confidence will slowly improve over this six-month period.  The products and services that you took into the recession are not normally those that you will sell during the recession. You need to innovate to capture the audience.

 

The Build Phase

Now over the worst of it, the damage is visible, and we need to rebuild. However, the impact of the recession will have impacted confidence and most will be reluctant to rebuild quickly. Understanding the customer and their true needs is imperative at this stage. Doors will open quickly here to partnerships and new ventures as people are looking to rebuild — together for safety and comfort. This is when to sow the seeds for fast growth; it’s a short phrase; it’s only 9 months; it will go quickly, and the opportunity is to take advantage at speed. Those that launch new products and secure partnerships during this short window are those that will reap the biggest rewards in a few years from now.

 

 

Opportunities for Growth

On October 19, 1987, also called Black Monday, the US market fell 22.6%. This was the second-highest one-day fall in history, and it also marked the beginning of the L-shaped recession that led to the economic boom of the ’90s.

You read that right — the shocking and sudden recession led to an extended period of economic growth. By 1989 the markets had returned to the highs of 1987 and pushed on for the next ten years. And they’re about to do it again!

We watched the markets plummet for three days in March 2020 and have since hunkered down to weather the flat line of this L-shaped recession. As business owners, it has seemed the only logical thing to do — cut costs and wait for it to end. Now, the time has come to make the strategic brand choices that will grow business exponentially.

 

 

Getting the Most for Your Brand

Darren, the economic commentator we mentioned earlier, further explains how to prepare to get the most out of the upcoming economic rise. He suggests that rather than waiting until the economy turns around, start rebuilding your brand and business as the recession has ended now. Companies that jump in earlier have much higher opportunities for growth. This means solidifying your brand, uniting your company on purpose, and investing in the right areas to be prepared to benefit from all ten years of the upcoming growth curve.

On the other hand, you could take the conservative route. Business owners who follow this traditional model will have to take on average an extra 18 months to prepare on top of the 18 months of the recession. Using this model, from the start of the recession business owners won’t move back into a growth phase for 4 years — and will only benefit from 7 of the 10 years of prosperity.

Let’s put that into quantifiable terms. A purpose-led brand that starts with reaching 1,000 people in 2021 will reach over 10,000 people in the next ten years. A business that waits until 2024 will reach less than 4,000.

You do the math — which route is better for the future of your business?

 

Rebuild Phase to Prepare for Economic Boom

The time for reacting in shock to the present economic crisis is over. You need to decide now where you want your business to be after the recession. As you recover and rebuild, though, consider how this recession has changed your audience.

Most notably since the events of 2020, trends show that consumers are moving away from big companies and toward brands that bring humanity and community into their business models. No longer can a business be a faceless entity, driven by products and sales. You must discover the purpose that drives your brand and let those emotional, human aspects of your business lead if you want to reap the benefits of the upcoming economic boom. People need to know who you are as a brand — and be able to connect with that purpose.

How will you innovate your customer journey to capture your audience as the recession comes to a close? What types of changes will you need to make to your product? To your brand messaging? These are the types of questions you need to ask to get the most out of the next ten years. Don’t just rebuild your business as it was before the recession — reimagine the relationship you can have with your customers and how to innovate your business to fill the new market needs and gaps.

The future of business is being shaped now. Business owners and brands that are ready to step forward with brand identities people can connect with are leading the way. As the world of business shifts from mechanics and gridlines to creativity and humanity, it is up to your brand choices to ensure that your business remains at the forefront of your industry.

 

Rebuilding Together

Through our partnership with Business of Brand (BoB) and all of the global businesses on BOB Earth, there is an ever-expanding movement of business owners rebuilding to prepare for a high-growth economic boom.  There are brand building and entrepreneurial business online courses available — and we would love to learn and grow with you.  Contact me if you are interested.

 

*BOB-Earth – The first Purpose-led community platform where people can come to connect, learn and trade.