Recession Prevention: What Are You Waiting For?

Smart business owners aren’t waiting to see if the economy will falter—they’re acting now.

By Dennis Boone

Smart business owners aren’t waiting to see if the economy will falter—they’re acting now.

The long-term future of a truly successful company isn’t determined by survival strategies, but by the ability to leverage an economic downturn to its own advantage. Easier said? Sure.

The big companies, for the most part, are going to be fine. There are reasons they became big. As the Pandemic Plunge of April 2020 showed us, though, even some big names aren’t immune to failure in a downturn if they employ outdated or stale business models.

Before you start to prep for what might be coming, make this No. 1 on your list: Don’t panic. Don’t get emotional. Don’t be afraid. 

Business periodicals and Web sites are overflowing right now with advice on prepping for a looming recession. In reviewing some of the best guidance out there, common themes emerge. Here’s one: Many in leadership today might soon confront a challenge bigger than any they’ve ever had to manage through. The time to prepare is now.

 One key challenge is to understand the potential impact a downturn will have on your competitors, and on your ability to grab market share. Define new opportunities, and build a back-out plan with steps you must take to reach your growth goals. Key elements in that structured approach will involve financing, cash flow, collection of receivables, staffing and personnel, equipment, and, as always, process, process, process: What are you doing now that will kill you if business slumps? What are you doing that could be tweaked to bolster existing revenue streams and create new ones?

Offense or defense: Pick one. Defense might get you to the other side; offense can, too, and probably in better shape overall once the clouds lift.

There’s an aspect of branding involved, as well. Your needs as a business will change during a recession—but so will the needs of your customers and vendors. How will you define that impact, and what will you do to capitalize on it? Whatever approach you take to defend and support your brand, it’s a good idea to do it before a sense of desperation kicks in.

Think hard: Is your product or service something your customers need, or is something they merely want? The latter category is going to be challenged as companies and consumers scale back on discretionary spending. If you deal in “wants,” how can you convert more of those into “needs,” or make marketing moves to shape customer perceptions of what you do?

Consider, as well, which parts of your customer base hail from sectors or groups that, historically, have fared well during a recession. Are there new ways to reach them? What product or service, at the best possible value for buyers, can you add to your line-up?

Volumes—hell, libraries—have been dedicated to the role of mass psychology in turning a potential recession into the real deal, or a short recession into a long one. When it comes to finances, business overall can add fuel to recessionary fires by scaling back on outlays in order to shore up the financial position. Don’t do that.

On some level, business has to keep spending. The key will be focusing those outlays to take advantage of shifting conditions, rather than burying your debit card under a mattress or chopping up your credit cards. 

Get your financial house in order now to make yourself an attractive customer for business bankers—they’re going to be highly motivated to make loans when your competition stops borrowing. Be that ideal candidate.

Remain flexible. Yes, you implemented some new process or procedure six months ago, expecting it to carry you through 2022 and 2023. But be prepared to scrap it and go back to the drawing board if it’s not demonstrating the potential to withstand disruptions to your sales.

The job of securing capital is not finished once you have emergency reserves in hand. That will be the time to increase available cash to capitalize on inventory price reductions or reduced commercial property costs for your post-recession expansion. Maximize potential reductions in marketing costs or fees of professional services and trusted advisers to shore up metrics like cost per lead.

All of that means you’ll be spending more quality time with your CFO. 

Getting laid off truly stinks, but for companies in a position to bring on talent, a lot more of it will be on hand if we get into mass-layoff territory. Be prepared to go after the big game that will help breed success for years to come. 

Arm your sales staff for battle, and if needed, define new sales approaches defined and be ready to launch. A downturn is no time for thumb-sucking discussions of “what we want to be” to drive sales.

One of my favorite quotes in the aftermath of the Great Recession—we heard it multiple times from companies that emerged from 2009 poised for rapid growth—was an elegant “We chose not to participate in the recession.”

For many of those who will ride out the next dip, it’s as simple as that: Choices. 

Be sure you’re making the right ones, starting today.  

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