It’s difficult to not learn anything after $1.1 trillion and 8.7 million jobs are lost in the matter of months. We are now a little more than a decade removed of the financial crisis of 2008. Nearly every walk of life, age range, and industry was affected; whether you lost a job, savings or retirement monies, or a business, there are several lessons we can glean from the Great Recession. Much like any dilemma, there is always work to be done and improvements to be made and reflecting on what happened is imperative to moving forward and uncovering what we have learned. It is in this reflective period that we can all learn how to persist through any future downturns or lean times. Here are some key takeaways from the Great Recession and lessons learned in its aftermath that can help to avoid negative financial moves.

Instant gratification:

The saying that “no news is good news” can prove to be true in some businesses; however, that same contentment lulled much of the U.S. into a false sense of security. Pre-crash there was a longstanding period of economic calm (fittingly titled “the Great Moderation” due to a lack of market volatility and economic stabilization). As the calm turned into a larger-scale economic expansion and optimistic bull market, consumers, business-owners, and more were getting caught up in the excitement of the economy being so good, as if there were no end in sight.

In the years leading up to the crash, credit was easy to come by and liquidity wasn’t of much concern due to over-optimism. Credit was easier to get at the commercial level because of the competition and, in some cases, lending standards made it easier for mortgages and other loans to be borrowed. Leading up to the crash, the ability to easily get credit on nearly anything gave consumers a sense of instant gratification leading to borrowing more than what was needed, businesses to needlessly expand, loose spending, and more.

Unfortunately, it was this sense of comfort and getting caught up in the excitement that led to the crash, which felt as though money had run out overnight. “House values dropped. Commercial businesses couldn’t fund themselves. It was a free fall. In a matter of a few quick months, we learned the market wasn’t going to come back immediately like we had been used to,” says Joe Ambrose, First Bank Vice Chairman. The over-confidence that grew pre-crash was a decisive factor that eventually led to the bust.

Great recession photo

Solutions and lessons learned, however, are easy to come by; simple adjustments can right the course for businesses that endured the 2008 financial crisis.

Consider these tips:

  • Prepare yourself. No one knows your business better than you – and this will help avoid any future dilemmas. While there may be historical trends and red flags indicating a downturn, the market can’t ever be timed. During those times when business seems to be booming, it is essential to equip yourself with a better knowledge of your business, the industry, and risks surrounding your field. Your ability to bounce back relies on having the insight to be flexible and persevere. Review your business plan, properly forecast by reviewing historical reports, and analyze your operating cycle. Need help to successfully run your business in the case of an economic downturn? Get more information here on cash reserves and balancing liquidity in your business.
  • Distinguish between wants and needs. Equally as important to analyzing your cash reserves, evaluate what stage your business is in. Business needs will play an essential role in helping you realize what is necessary to continue operations and will differ from stage to stage. Established businesses won’t have the same requirements or inventory as that of a business in its growth stage and vice versa. Determining necessities over desires can help avoid overspending or riskier spending behaviors.
  • Stay calm and disciplined: Markets do recover. Ambrose emphasizes, “Things are neither never as good nor ever as bad as it may seem in the moment.” One of the most difficult things to do in times of turbulence is to stay calm and disciplined. Even when times are tough, it is crucial to stay invested in your business and remain faithful that the dip is only temporary. Operating through a financial downturn is easier after preparing yourself and analyzing your business, and staying the course or being more nimble can lessen the blow of a recession, no matter how temporary. History may repeat itself in the context of regular dips and market volatility, but it’s what we learn from the past to assure we alleviate the constraints, build on, and grow in to the future.
  • Choose the right relationships. Prioritizing relationships with clients, vendors, suppliers and the like can help in both the short and long-terms. It’s easy to get caught up in having relationships with customers, but it is critical to build strong relationships with vendors, your own employees, and even competitors or other business disruptors. Maintaining these relationships can help during challenging times and, furthermore, can provide valuable insight, open up the possibility and access to share resources, and make your business stronger.

Relationships are at the heart of everything. One of the best ways to survive the next financial crises is to lean into these strong relationships, prioritize your connections to those relationships, and add value to your client. “Value is a two-way street. Businesses should find a way to add value to their clients beyond just pricing. There are ways for companies to add value to their clients; business owners can use personalized service, stand firm on pricing by not competing to the point of undercutting, and simply knowing their clients,” expounds Ambrose.

While markets have historically recovered from various recessions, it’s never easy facing these turns and confronting economic vulnerability head on. There are plenty of elements behind these financial crashes that are beyond immediate control, but preparing yourself and your business is essential and can mitigate economic and direct financial damage. Survive future downturns by staying informed and being receptive, avoid overspending, and make wise, conservative financial decisions. Preparedness and recovery takes time, patience, strength and strong relationships.

Speaking with a First Bank trusted advisor today can ensure your business has the systems in place to keep your business running smoothly in the case of any future turns. Our skilled advisory team can assist with solidifying your cash reserves, diversified investments, a Business Line of Credit, and much more.