How to Deal (as a Business Owner) with Inflation, Recession, and Other Tough Times, Part 2
A recent article in the New York Times just last month had this headline: “Is Recession Staring Us Down? Already Upon Us? Here’s Why It’s Hard to Say.”
There is no denying we are in for some interesting economic times ahead. I’m sure this is weighing heavy on the minds of most business owners right now. But, as I mentioned in last month’s blog post, there are certain fundamentals that will always be true when a business faces a crisis. We covered three points in that earlier blog post:
#1 – Cash is everything.
#2—Do something about debt.
#3 – Determine what expenses can go and what expenses must stay.
But there are some other things you can do in an economic downturn to put your business in the best possible position to weather the ups and downs. Here are four more principles to consider as you strategize about the future.
#4 – Hang onto your team, if possible; you will need them on the other side. You’ve assembled a team you love. It has taken time and effort. The last thing you want to do is lose valued team members, or leave them hurting for pay in a time when costs are going up and the economy is going down. You may have to make the really hard decision to let some team go or to consolidate several roles into one. But make this a decision of last resort. Your people are the backbone of your service business. Look at every other possible cut before you touch payroll. Once the economy starts looking up again, good people will be snapped up right and left; you might not be able to find good replacements for your team when the hiring starts again. Do your best to preserve what you have.
On the other hand, if you have some extra cash flow you can part with right now, consider the fact that you might be able to pick up some highly qualified team members that other businesses are laying off right now. Balance your need for cost-cutting today with your need for potential growth in the future.
#5 – Get creative about new streams of revenue. Now is the time to look at your business model and consider how you may need to shift that model to match up to what the market is doing. Are you tightening your belt? Your customers are probably doing the same. But some services remain indispensable for businesses; consider whether you need to add some service offerings to your lineup so that you are also indispensable. Or perhaps your model runs on offering high value for a higher price point; in a down economy, you may need to consider offering scaled-back services at a lower price point to reach a market that you weren’t targeting before. Study the market and start brainstorming all the new and innovative ways you can give the people what they want.
#6 – But don’t forget to serve your existing customers/clients to the best of your ability. In spite of point #5, you do not want to make the mistake of slacking in your service to your existing customers. Now is not the time to do anything that jeopardizes your relationship with your current customers. Next to your valued team, your book of current clients is your greatest business asset. And they are usually the first market you can offer any new services to.
Much like cash and team members, you want to preserve your client list as much as possible during an economic downturn. Make sure your customers feel valued, heard and served.
#7—Make plans, work your plans, but stay flexible enough to revisit and reevaluate those plans. Any times of economic uncertainty are the right times to make careful, detailed and strategic plans in all of the areas listed above. Knowing how you will handle the loss of a major client, a tight credit market or price increases from your suppliers will bring you peace of mind.
But know that the best laid plans of business owners rarely match up with reality. There are too many variables for any plan to accurately reflect the future in every detail. So be flexible enough to know your plans will probably change. And be ready to reevaluate those plans on an ongoing basis, so you can keep your strategies up to date with what is actually going on out there in the economy.
I know the points in this 2-part blog series are fundamentals, but they are fundamental for a reason. Countless businesses have weathered tough times by taking care of the fundamentals. You can too.
And remember, your track record for surviving tough days so far is 100%. So keep a positive outlook and carry on.