This Article is from Daniel Crosby with SPERDUTO & ASSOCIATES, INC. The most recent downturn in the U.S. Economy has prompted widespread fear and comparisons to the Great Depression. Notwithstanding the negative reality of the current economic milieu, there are things that can be done to survive, and perhaps even thrive in a recession. The suggestions below represent a synthesis of ideas on “recession-proofing” your business, learning from the hard lessons of the past, and adapting to a changing economic reality. Some of the ideas are intuitive, some less so, but all can be held up against your current business practices as you inevitably look for ways to weather the current economic storm.
-Be flexible
-Stay lean and nimble enough to adapt to a changing marketplace.
-Cross-sell existing clients, revisit old clients, send them a hello letter, a thank-you for their business in years past, revisit the possibility of working together.
-Utilize social networking sites.
-Sites such as LinkedIn are free and allow broad marketing potential at no cost. Contribute to the community and broaden your exposure by answering questions and contributing to discussions in your area of expertise.
-Tapping into client “pain” is an important way of marketing your services. Currently, there is pain all around. Identify the clients’ pain and explain how your services can help reduce some of the pain that seems to be everywhere these days. Identify and reduce non-essential expenses.
Increase customer service
– Send thank you letters to existing clients, thanking them for their loyalty in hard economic times. Take added measures to ensure that customer service is better than ever so that you can retain the clients you do have. Increased customer service is one of the only ways to add value without actually spending money.
Hang on to star employees
– Your employees have financial problems of their own during an economic downturn, and their first allegiance will be to themselves and their families. In you have cutbacks, don’t lose sight of compensating and treating your best-performing employees well, or they will look elsewhere.
Utilize technology
– Technology may provide some solutions for streamlining some expenses. Determine whether any of your business operations can be automated. Use email, telephone calls, and video conferencing to save clients money on travel expenses. Optimize your search engine placement by updating and expanding your search terms. Start a blog and make regular entries. With each entry you increase your footprint on the web, and increase the likelihood of being found.
Innovate
– The tendency of many businesses is to lick their recessionary wounds during a downturn. However, hard economic times provide new marketplace realities that yield new opportunities. Seek to understand the new economic reality and find a niche. By staying forward-thinking while others are focused on the dismal present, you may grow exponentially relative to the competition.
Increase your skills
– Hard times may leave you with more time on your hands. Use this time to increase your skills. Continue to attend conferences, read books, and attend professional networking events. This will keep your relationships vibrant and ensure that you remain on the cutting edge of your field.
Offer payed sabbatical
– Hoping to retain talent and cut costs, some companies offer payed sabbatical. This entails letting an employee stay out of the office, at a fraction of their salary (typically 25%), while business is slow. When business picks up, the employee is guaranteed their job back at the original pay scale. This allows companies to cut costs without the loss of morale that accompanies more traditional layoffs.
CFO Partner with others that have synergistic aims
– Unfortunately, many companies become increasingly insular during difficult times. By partnering with others with synergistic aims, businesses can share information, maximize resources, and form valuable new relationships. This provides all parties a smaller piece of a bigger pie.
Reserve discounts and maintain prices
– Slashing prices will reduce profit margins and dilute your brand. Avoid getting in a bidding war with the “Wal-mart” of your line of business.
Offer employees non-monetary incentives
– Offer employees incentives such as extra vacation, reduced work hours, and casual days in lieu of cash incentives. These incentives allow you to maintain your liquidity while showing your employees that you want to reward their hard work.
Renegotiate contracts
– This is no time to have excess office or warehouse space. If possible renegotiate your contracts in a way that provides your business adequate room without overspending on wasted space.
Free up cash flow
– Now is the time to call in old debt. Approach those that owe you money in an attempt to increase your liquidity. Doing so will ensure that you are able to pay your employees in a timely fashion and remain committed to a marketing strategy going forward.
Look to expand
– Be alert to ways in which others’ loss may be your gain. Have competitors lost talented employees or good clients? Is there a piece of business that you might not previously have been able to afford that is now within reach?
Strengthen relationships
– Your clients will remember who stuck by them during difficult times. If you can prove valuable to a client during a tough stretch, you will have won a loyal client for life. Adversity often forges tighter alliances than do times of prosperity; take advantage of this fact.
Give back
– Volunteering as well as staying involved in civic and religious groups increases face time with potential clients. Additionally, it boosts employee morale and gives perspective during trying times.
Diversify
– The more services you offer the more clients you will be able to reach. Try repackaging existing products or services in such a way that you can reach new clients.
Offer a referral reward program for existing clients to incentivize giving referrals.
Organize and energize your staff
– Reassure them within reason and keep them abreast of changes in the marketplace and within the organization. Uncertainty and fear are distractions, and will negatively impact their morale as well as their performance. You can effectively combat these distractions by keeping them in the loop.
Continue to advertise
– Many businesses cut advertising budgets first but the effects of doing so can be disastrous. Reassess your advertising strategy to ensure that each dollar spent is resulting in a return for the company. Focus advertising on any products or services you have that are “recession-proof” or assist clients in the economic situation in which they currently find themselves. Streamline and tailor your advertising, but do not cease advertising altogether. A part-time CFOwe know well stongly advises his clients to cut everything but advertising.
Learn from the past
– Revisit the history of your business. When have you faced tough economic times in the past? Which strategies worked and which did not? Research mistakes and successes of others. What has the competition done historically that has proven effective in lean times?
Tie compensation to productivity
Maximize profitability
– Which of your products or services provide the largest profit margin? Examine your lines of business and identify the most profitable among them. Seek to funnel business in the direction of your most profitable goods and services.
Be positive
– Some of the most successful industries during the Great Depression provided non-essential services. Certain entertainment industries thrived as people looked for respite from their day-to-day concerns. Stay positive when interacting with clients and employees and seek to be the bright spot in an otherwise bleak economy. Over-communicate good news and be sure to let your employees know of any successes that arise.
Negotiate
– Try and get better deals with suppliers. Remember, they are trying to hang on to your business during the downturn.
This report represents a synthesis of ideas taken from articles found in Business Week, The Wall Street Journal, CNN Money, morebusiness.com, steveshapiro.com, midmarket.eweek.com, smsmallbiz.com, powerhomebiz.com, reuters.com, ehow.com, ezinearticles.com, and white papers from the Pennsylvania Small Business Development Center as well as Deloitte and Touche.
