BOBBY STEVENS / CHRONICLE FILE PHOTO Springfield's Banner Bank.
Believe me, I’m knocking on wood and squeezing my lucky rabbit’s foot in hopes that the subject of this column will not come to fruition. But given where the economy might be headed, I thought it would be a good idea to provide some tips and counsel on how to recession-proof your business.
I know, I know. It makes me nervous just typing the dreaded “R” word.
However, as every good business owner knows, it’s always important to plan for the worst and hope for the best.
To that end, I’ve cobbled together business advice from national experts as well as colleagues in the financial services industry that lay out strategies nearly every small business can employ to lessen the damage a potential recession may have on its bottom line.
Make a plan. Coming out of the teeth of the pandemic, many business owners are so busy that they barely have time to catch their breath. While this is understandable, it’s critical that you and your team start planning for an economic slowdown and brainstorm ideas that will help your business navigate slow or even negative growth.
The plan you put in place right now could be a lifeline during a recession.
• Don’t fail alone. You should be meeting with your banker, your CPA, and even your attorney right now to strategize for a potential recession. Your team of trusted advisers are not only experts in financing, tax planning, and legal strategies, they are also great sounding boards for how your business should operate during harder economic times.
• Frontload some costs before a recession even begins. Right now might be the best time to purchase critical software or machinery that will help support net profits toward the end of the year. Money is still relatively cheap, so if you can, make those pricey improvements ASAP and invest in your business for the long term.
• Launch new sales and marketing plans. Customer acquisition is more expensive during a recession. By putting some resources and effort into an expansive sales and marketing campaign today, you can increase your sales funnel, as well as your closings, while customers have more money to spend.
• Be proactive and honest with your employees. Unfortunately, some business owners wait for an economic downturn to have “the talk” with their employees about belt tightening, wage freezes, and even layoffs. If the storm clouds of a recession are on the horizon right now, then take the time to have important conversations with your entire team so you can all plan for the potential rain to come.
• Make your shop as efficient as possible. Hopefully, during those conversations with employees, a host of ideas bubble up about how to make your business more efficient. Cost-cutting measures and strategies to wring out redundancies that are put into effect today can save a business from some really destabilizing problems during a downturn.
• Don’t become a wallflower. Yes, all this planning and strategizing will take time and energy, but now is not the time to cut back on the vital practice of networking. Attending trade shows, chamber of commerce events, and industry gatherings may not initially seem like a high priority, but I would counsel that such activities are never more important than when a recession looms. Gathering ideas from peers and experts during networking events now is like gathering food before winter – it just might sustain you and your business during lean times.
• Increase your communication with customers. Your sales team should be setting up extra check-in appointments with clients; your marketing team should be re-doubling efforts on social media; and your customer service team should be launching new tools to reach out and gather input and feedback about your products and services. You want to be top of mind with all your stakeholders so that if and when a recession hits, and they are scaling back purchases, they instantly think of you and your responsive team.
As I write this column, the Fed just implemented the largest interest rate hike in 22 years to help cool inflation, and according to experts that’s just the beginning. Correspondingly, many economists warn that such rate increases historically have led toward recession as the Fed’s goal of a “soft landing” for our overheated economy is challenging to navigate.
Again, as I said at the top, I’m leaning heavily on silly superstitions to help ward off the possibility of a recession, but feel it’s very important to be proactive. So please don’t blame me if a recession comes to pass; instead, take a proactive approach now to prepare your business for the possibility.
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