Recession-Proof Your Business
Running a successful business through the ups and downs of changing market conditions is a sign that you’re doing something right. But do you have what it takes to thrive during an economic downturn or recession?
According to the Duke University/CFO Global Business Outlook, nearly half of U.S. chief financial officers believe the nation’s economy will enter a recession in 2019, and 82 percent expect it will happen by 2020.* The CFOs surveyed said that signs such as declining revenues and margins, decreased capital spending, excess capacity and anxious investors could point to uncertainty ahead.
After a decade of record-breaking economic expansion, going through a period of slower economic growth is almost inevitable. Indicators such as a flattening yield curve (when the gap between long-term and short-term interest rates narrows), market volatility and other factors could point to an economic dip, downturn or full-on recession.
Create Your Contingency Plan
What happens next is anyone’s guess, and it’s wise to be prepared for a range of economic scenarios. Consider the following tips for managing your business in changing economic conditions:
- Identify your strengths. Focus on what you do best and how you can leverage those capabilities in a difficult economy. During lean times, it’s important to deliver on what makes you indispensable to customers — whether that’s cost, quality, turnaround time, convenience or something else.
- Be ready to downsize. Review costs and look for opportunities to streamline operations. For example:
- Downsize inventory rather than storing or warehousing needless overstock.
- Renegotiate contracts with vendors at lower prices.
- Examine the success of your marketing/advertising efforts. Focus on what gets results and spend marketing dollars accordingly.
- Limit business travel and conduct meetings via video conference.
- Keep your best customers. Instead of scaling back on products or services across the board, shift resources to retain high-margin customers. Use discounts strategically to reward your most loyal customers.
- Ramp up service. Providing an extra level of service or convenience is a relatively low-cost way to get a competitive edge. Ideas for going the extra mile:
- Offer refreshments for customers as they shop or wait.
- Extended or weekend hours/availability.
- Delivery or drive-thru convenience.
- Invest in employees. Having a strong team in place is critical during challenging times. Reward productivity with low-cost incentives such as flex time or extra vacation.
- Plan ahead for financing needs. Don’t wait until you’re in a cash crunch — plan your safety net now. In addition to maintaining a comfortable balance of liquid assets, consider borrowing options designed to streamline your cash flow. Business loan products and credit lines can provide the flexibility your business needs to keep growing.
*Source: Duke University CFO Survey 2018.