Recessions are inevitable as they are a natural occurrence in the business cycle. Historically they happen, on average, every four years. With the recovery from the Great Recession that began in 2008 in its eighth-year, some are wondering if a recession in the United States is due to hit shortly.
According to CNBC, “The U.S. economy is on track for its next recession, according to a prominent research firm, but it’s not likely to be that severe.” Said Andrew Staples, director of the Economist Intelligence Unit for Southeast Asia, told “The Rundown.” Preparing your business for it will be a crucial part of surviving and even potentially thriving during it. So what can a business do to prepare?
Preparing Your Business For the Next Recession
Continue To Market – NEVER stop marketing your business. In fact, marketing should be a fixed budget item and not something that you do or don’t do when you can afford it. To ensure that your marketing is targeted, prepare a strategic marketing plan for your business for, track your rate of return from your marketing efforts and adjust as the facts show you.
Develop Sales Goals – It is sometimes surprising how many businesses do not have sales goals. Without goals, your sales are neither predictable nor sustainable, and you cannot forecast your growth. Sales goals, and corresponding sales management tools (even if you only have 1-salesperson or you are the salesperson) help you ensure that your sales efforts are successful. You must ensure that your sales efforts are ongoing, even if you are at your capacity. You can always create a pipeline for future sales.
Understand Where Your Money Goes – This is not an “ask your accountant or bookkeeper” matter although they will have a role. Your Accountant or Bookkeeper prepares various reports for your business. These reports tell you what has happened financially in your business. They do not tell you why or help you address specific causes for that why. By understanding your processes, how they contribute to your financial success, is an important part of successfully recession-proofing your business.
Stay On Top Of Your Accounts Receivables – Obviously, the money coming into your business ensures that you can pay your bills, helps you and your employees meet all of your needs, provides for the “extra’s” in life and so on. You should ensure your customers pay you on time and in full always. Review your payment terms, if they are longer than 30-days consider shortening them to 30-days or less. Work with your Business Advisor or Attorney to amend your late payment (anything over 30-days) processes. If you can, consider a Credit Card Merchant Account to help speed up payments.
Build Good Customer Relations – Helping your customers be successful is a great strategy for excellent customer relations. That means being a resource to them and not simply a supplier of product or services that they pay for. Keep in touch with them on a regular basis but not so often that you are seen as an interruption, and don’t make those contacts all about them buying more from you. Seek their input on how YOU can help THEM be more successful.
Diversify Your Customers – It is important that where possible, you diversify your customers. Generally, this is done by establishing customer relationships with different industries instead of different individuals. Examples would be a Building Supply operation that could provide service or product to building construction, homeowners, government entities and other businesses who could use your product or services.
Add Value, Not Price – Your product and services should be offered at a fair price, but more importantly, what you offer should have value. Reviewing your pricing strategy along with the feedback you get from your customer relations will help you balance price and value appropriately. Ideally, you only want to increase price when value is increased. Consider a “Good, Better, Best” pricing strategy that offers more value for an appropriate price.
Know your business processes – Understanding your business processes and implementing a “Constant Improvement” approach can help you profitably deliver your product and or services all the time. Making changes to those processes where the change provides more value than cost helps ensure that you are as efficient and productive as you possibly can be. Constant improvement ensures that you don’t become complacent or accepting of the status quo and are working diligently to keep your business efficient and profitable.
Even if you only use some of these steps your business will be the better for it. When the next recession arrives, you will find that your chances of surviving and even thriving are greatly increased. The choice is yours; it’s your business.