The key is to conserve capital, maintain relationships, and try to find alternative income streams.
‘When I find myself in times of trouble, Mother Mary comes to me’.One of John Lennon’s best performances? Yes. A way to guide your business through the looming recession (some say it’s already here)? No. By evolving a proper recession-proofing strategy, you can guide your business through the recession – any recession – and reap the full benefits of the recovery that’s inevitable.Here’s a 6 step guide to recession-proof your business.
Run your numbers
Business owners, especially small business owners, typically have so much on their plate that a lot of the time they are unaware of the financial numbers of their business.Under normal circumstances, an unknown cash outgo may not amount to much. However, in a recession, every cent needs to be accounted for. That’s why, the first step to recession-proofing your business is to run your numbers.
Key question such an audit should answer are:
- What is the cash flow situation?
- Are all cash inflows and outflows accounted for?
- Is there a cash outgo you aren’t aware of?
Review your cash outgo
Say you’re the owner of this escape room in Huntington Beach.Typical cash outflows would be
- Franchise payments (if you’re a franchisee)
Identify which ones of your cash outflows are negotiable.
Negotiate and shop around for better rates
Typically, cash outgo under heads like rent, utilities, and (maybe) insurance are negotiable.
Items like rent can be negotiated to a better rate.For example, as far as rent is concerned, your landlord will understand it’s hard to keep up with payments in a recession. They wouldn’t be averse to giving you some relief, even if temporary. The trick in such a negotiation is to remember that the other person would also be worried about their income, and would be amenable to some reduction, rather than lose you (and the income you provide) altogether.
As far as things like utilities are concerned, you should shop around with different providers.Typically, you can gain from two kinds of offers:
- Another provider has a better plan (lower billing rates, or more facilities) than your current provider.
- Another provider is offering an incentive to switch providers.
In either case, once you spot a comparative advantage, you can try to negotiate with your current provider, asking them to improve their package.It’ll be the same principle as with ‘Negotiate’ – they won’t want to lose customers, especially during a downturn. If you can get a better deal, fine; otherwise, switch.
Payroll: Are you wondering why I made no reference to payroll, even though this is an expense that is completely under your control?
Well, there is another aspect to payroll negotiations; and I shall bring it up a little later.
Keep in touch with your customers
Yes, it’s a recession, and they’re not likely to come calling in a hurry.However, once the economy shifts to recovery from recession, once businesses reopen, once consumers are back in the market, the relationships with your customers that you maintain will pay off, and they’ll be back.
How to keep in touch?
Well, my favorite way is to send a small email once in a while.
- It should not be too long.
- It should not have any commercial content.
- It should preferably be image-based.
Remember, you’re trying to be a friend at a dark time, not a business owner. Of course, the content should be yours, but a mass emailing service can automate the email creation and sending process, saving you some time, and labor.
Maintain your staff relationships
Say you run this Chicago escape room. You’ve got game masters, a receptionist, people who run your backoffice, and so on. Staff you have trained, and who you keep comfortable working with. You want to maintain your relationship with them, for when the economy recovers, and the business reopens. Everybody understands it’s difficult to maintain payrolls during a recession. Nevertheless, you should take the time to sit with them, talk with them personally if possible, and explain clearly what’s coming. Remember, the aim is not to show yourself as their savior, but to stress that whatever measures you’re taking are crucial for the business to survive.
Find alternative income streams
Even if your primary business has been hampered, you may be able to tap into a second income stream.
Typical ways to do this would be
- Affiliate marketing
- Digital products and/or services
- Ad revenue
- Sponsored content
Bonus tip for a recession
You always want to conserve cash in a recession; however, some investments made during a recession may pay off handsomely.
- If there’s a service you’ve been looking to subscribe to, like a mass emailing service, or a social media management platform
- If there’s an online course you’ve been looking to take, like (from earlier), an auditing course
Sometimes, the companies offering these offer discounts to push sales during recessions.You may find it worthwhile to latch on to the lower rates. Finally, remember that every recession leads to a recovery. Your focus, throughout the recession, should be on keeping your business viable, and maintaining all your existing relationships, so that when the recovery begins, you can reap its full benefits.