The last 10 years have brought, in general, great success and growth for many businesses. The next 10 years may not be so easy.
Recession is on the horizon and many, including me, have been looking into ways to make sure their businesses weather economic turmoil.
Hopefully this article will give you some ideas on how to weatherproof your business. And there’s good news: Economic recessions bring huge opportunities to those positioned correctly. So here are the four things you can do today to prepare for the next recession.
Grow your customer base, not just your revenue
Many businesses have experienced growth during the last several years, however, many business owners focus on one factor of growth: revenue. In reality revenue growth is only one target businesses should be shooting for as building a customer base is important to reduce risks on multiple fronts. When recessions hit, they don’t affect everyone equally, some industries actually experience a lot of growth during recessions and won’t be undergoing the belt-tightening many people are. Business owners need to make sure their customer base is wide and diverse to reduce risk during the next recession or, at the very least, increase the likelihood of having a small but solid group of customers resistant to the ups and downs of the economy.
Build cash reserves and lines of credit
In general, businesses fail not because of a lack of revenue; but rather due to a lack of cashflow. This is especially true during recessions where money is tight. However, having a cash reserve and lines of credit do not simply allow you hold- out longer than your competition. They also allow you expand aggressively during economic troughs. The reason for this is simple: Your competitors are likely also struggling and those who did not build enough cash reserves are likely looking for an exit. That is where you come in. Even if competitors are not looking to sell during this period, many things are for sale at a discounted rate during recessions. From office space to advertising services, almost everything is cheaper during recessions and this presents many of exciting opportunities for those wise enough to have built up reserves before times got hard.
Keep your team lean and mean
As business owners know, the worst part about cutting back is reducing staff. This isn’t just unpleasant. It has a lot of effects on your business, especially during a recession or slowdown: 1) it destroys team moral, 2) it’s a drain on the owner’s or manager’s time and energy, 3) it generally doesn’t happen before you have spent at least a few weeks of pay, something you can’t afford if business is slowing down.
To avoid these issues, make sure your team stays “lean and mean” if you know a recession is on the horizon. Don’t hire unless you have to and be very strategic in how you set compensation so that you don’t end up paying anyone to sit around. You also need to ensure your culture is strong. These are the people who you need to stick with you and your business when times get hard, so you need to make sure they actually want to stick with you and your company.
Get ready to advertise
Recessions can be hard for businesses and, unfortunately, the first thing many do when cashflow slows is cut advertising and marketing budgets. The issue here is obvious though. If you cut advertising and marketing, how do you expect to generate more business? This is especially true during recessions when marketing and advertising agencies and platforms begin slashing prices and offering extra services in order to keep their own businesses afloat. Take it from someone in the industry — downturns are the best time to start up new advertising campaigns. We follow our own advice: We have multiple commercials and promotions ready to launch as soon as the economy gets rocky. The early bird gets the worm right?
Ultimately, no matter what you do, there is always risk associated with economic downturns. But if you are able to grow your customer base, build cash reserves and lines of credit, maintain a lean and mean team, and prepare to advertise, you may fare better than your competitors during the next downturn. Though it might not be the most fun, if you, your business and your team are prepared, the next downturn could be a huge opportunity and not just a spectre that keeps you up at night.
Timothy A. Zercher is president and CEO of Pueblo-based EasySocial. Zercher can be reached at easysocial.solutions.