So, the potential “recession” is a big topic these days and there are numerous posts out there about how to “recession proof” your business.Â Here’s what I have to say about all of that…Â There isn’t any “magical” advice to give.Â The bottom line is you have to be smart.Â Run your business well, be better than your competition.Â The strong will “survive” and the weak will not.Â
A BusinessWeek article offers this advice:
1) Don’t be caught off guard if the slowdown hits your company.Â They go on to say you should be conservative and assume a 10 to 20% drop in revenue.Â In my opinion, whether a recession is pending or not, you should prepare for worst case scenario.Â Any number of things can cause a drop in revenue.Â You should always be aware of your financials and make timely decisions to bring costs in line with revenue.
2) To keep your company lean, you should set and measure inventory targets and keep in daily or weekly communication with your sales and operations staffs, Landers says. You may also want to weed out unprofitable customers (BusinessWeek.com, Oct./Nov., 2007). Good advice here, not just for a recession, but for everyday business management.
3) To keep from losing business, keep in close touch with your customers. “Show that you care. Understand how their business is being affected and look for ways you can help. Lasting relationships are built in hard times.Â Ditto on my last comment…
4) Develop strategies to land more customers. Hmmm – you weren’t going to do that anyway?
5) Spend on hiring. Tom Gimbel, CEO of Chicago staffing and executive search firm The LaSalle Network, says business owners should hireâ€”not fireâ€”during a recession. “Most of the time, economic downturns are short-lived,” he notes, a powerful incentive to keep the bigger picture of long-term growth in sight.Â I’m not sure that I’m onboard with this idea.Â I think you always hire/fire based on what your business needs.Â Don’t fire someone because you had a bad month, but if you see a lasting trend, get out before it costs too much.Â This really depends on how stable your business was in the first place.Â I would say this is the most tricky part of managing any business and deciding whether to layoff or hire is highly dependent on your particular financial situation.Â I wouldn’t take any blanket advice in this area.Â Talk to your controller, your managers, plan your budget and make a decision that fits your business.
6) Continue to get the word out about your business. Yep, always.
7) Entrepreneurs must keep their personal credit ratings high, since business borrowing often depends on personal credit in the small business universe.Â Right, good credit never hurts a small business owner.
So, to sum it up – Run your business well, make smart decisions, be better than the rest.Â It’s not rocket science, it’s good business management.
~Kelly Totten, Acclaro Accounting