Are we in a recession?
Is it looming out there on the horizon like an impending storm? Is it going to happen at all? Good questions. The answers depend on who you ask. But one thing is for sure: Whether a recession hits us or not right now, it will happen sometime. Recessions are a natural part of the normal business cycle.
A short history on recessions in America: Since WWII, we have gone through 12 recessions, according to the National Bureau of Economic Research (NBER). It averages out to one every six years. NBER defines a recession as “significant decline in economic activity that is spread across the economy and lasts more than a few months.” It involves declines in the gross national product, income, employment, sales and other factors. It tends to hit small companies the hardest.
Because recessions happen rather regularly, companies need to put plans in place to ride out those down times. Do you have a plan to recession-proof your business? If not, here are a few tips.
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Get a firm handle on your cash flow. If you do only one thing to prepare for a recession, let it be this. It’s critical. If you have clients who continually pay late, resolve those issues. Make invoicing a top priority if it isn’t already. Create a rolling cash flow forecast for the year to get a picture of what will be coming in, and when. And if possible, create an emergency fund that can cover six months of payroll, utilities and other essential operating costs. One way to start that fund is by getting serious about collecting outstanding receivables.
Streamline your inventory management. There is a delicate dance between having too much inventory and not enough. Get onto that dance floor and own it. Finding the right balance is crucial during down times. Also, take a look at your vendors with a critical eye. Might someone else have products or materials at better prices?
Do what you do best. Now may not be the time to branch out into a new product line or service. Focus on your proven strengths.
Shore up your workforce. Now IS the time to take a bird’s-eye view of your company as a whole. Do you see any redundancies? Do all of your employees have the skills they need to succeed and grow? Is everyone pulling their weight? One great way to prepare for down times is to cross-train your staff. Invest in employee training and upskilling so you have a massively qualified crew. Side bonus: Investing in your employees makes them feel valued, which in turn creates more engagement with your business.
Consider new client programs and arrangements. The goal is making sure your clients stick around through a recession. They will have less cash flow to work with, so ensuring they continue to spend some of it with you is crucial to your bottom line. Think about things like loyalty programs, discounts for contracts and monthly subscriptions that automatically renew.
Focus on your technology. Your IT needs to just work, period. The last thing you need during difficult economic times is your IT to let you down. Find an IT services provider who can come in with a comprehensive approach, assess your technology, and support all of the devices, systems and software within your organization. We’re talking about servers, storage, networks, desktop and laptop computers, whatever it is that powers your business. It shouldn’t be about fixing things when they fail, but making sure they don’t.
You don’t need a recession to put any of these strategies into place. They will make your company stronger, no matter what the economy is doing. At Logic Speak, we specialize in taking the stress out of technology for you and your business. We offer you IT peace of mind so you can focus on doing what you do best, in good or challenging economic times.