When you turn on financial news everyone is speculating about the coming recession. I wish I was smart enough to predict with any certainty if, when, and how deep it will be, but I am not going out on that limb.
But I can say that preparedness is always a smart move! Any Business Owner that waits without making appropriate preparations are certainly playing with fire.
So how do you make your business ready for whatever the economy throws at us? Well, that is much easier said than done, but here we go with the punch list:
FIRST: Hoard Cash – Sounds simple but let’s get more specific…
- Put off large purchases as long as you can. If the purchase was going to be a nice to have that would not improve sales lower expenses, then this is obvious. If it was to increase output then consider that if things go south you won’t need as much capacity anyway, so plan accordingly.
- Make your operation more efficient. Lean but not Mean, finding less laborious ways of accomplishing just as much.
- Better utilization of the human and fixed assets that you have. This will ultimately lead to better efficiency.
- Eliminate any overhead where you can. Shop insurance, eliminate subscriptions, trim overhead positions if you can, etc.
- Do not increase your Debt Load. HOWEVER, if you are on some type of payment plan for existing Debt DO NOT attempt to pay it down at this time, because you will still need to make payments through the recession. Just keep that cash in reserve.
- Renegotiate with Suppliers. They may want to secure your loyalty before hard times hit.
- Watch and collect your Accounts Receivable more aggressively.
Now these are always important in business and should be done regularly. But the goal here is to make as large a stack of cash as we can to help us through the lean times ahead.
In an economy that cash is in shorter supply, you’re having plenty of cash makes you king/queen.
SECOND: Secure Loyalty – Make sure your existing customers are happy.
- Reach out, follow up, and secure their loyalty.
- Create added value rather than lowering prices. This can be in delivering a better product or in providing better service.
- Create Loyalty Incentives.
- Look at your warranties. Perhaps there is a way to add value and reduce risk for the Customer.
- Perhaps, refer business to your customer(s) once and a while. This gains HUGE Loyalty.
This is critical so that they stay with you through the leans times and your customer loss is way less than your competitors.
THIRD: Lower Your Personal Overhead – Every household requires different amounts of cash each month.
- Eliminate or reduce expenses where you are able. Subscriptions, utilities, retail purchases
- Pay down all company & personal credit cards.
- Pay off loans that are close to term.
If you can reduce your monthly cash needs, the panic won’t be as desperate if that time comes. And it will allow you to keep a little more cash in the business to provide even more safety as well as growth. If you don’t do these things now, you may be forced to do them during the recession without nearly as much planning and positive results.
LASTLY – Taking Advantage of a Changing Economy
Let’s assume that you have done these things successfully and have more than adequate cash reserves. Ask yourself “Do you want to come out alive, or in a stronger position after the recession?”
During a Recession is a great time to grow IF you have deep enough pockets. As you know people can make money in a Bear Market if they play their cards right.
Buying Up Your Competitors – There will be some great bargains available.
- Do not pull the trigger too soon on buying during a Recession. The later you wait the better the price AND the sooner to the end of the Recession which will preserve your cash.
- Buying Competitors will give a larger slice of the existing market now and especially after the Recession is over.
Expand to new locations – Landlords are looking for you.
- Whether you rent or buy that next location you should be able to negotiate better terms.
- Perhaps you can time that new location to open just as the Recession ends.
- It will be easier to find and negotiate with contractors while their business is slow.
Now Make that Large Purchase – Again, their business is probably slow.
- Time is good to negotiate better pricing or financing.
Don’t Wait for the Rush – When the Recession is Over it is Too Late.
- Hire Employees
- Stock up on supplies
- Don’t wait for your competitors to start the ball rolling again.
Everything I have talked about today depends on how deep your pockets are and how much cash you have hoarded, not to mention timing. A few sacrifices today could mean you end up with twice as much (or more) business after the sun comes back out.
So be wise, be fruitful, and be careful…