How to Recession Proof Your Business
Recession Proof Your Business
Are you looking for ways to recession proof your business? You should – it will help you to survive the lean times. And it may even help you to prosper more in the good times!
We’ll be covering what is a recession and what causes them, and what you can do to offset the negative effects of a recession, and why. Enjoy!
1. What is a recession?
Essentially, people stop spending money, and start keeping it. They do this so that they have enough because they might have more outgoing expense than incoming payments. The problem with that is, when enough people do this, all the business models and planning based on the current reality that people had come to a conclusion on, disappears. Essentially the goal posts get moved, and people (both employers and employees) have to find where the new goal posts are, and start kicking at them. For example, a certain company might have built their plans on a turnover of $50,000 monthly, and so hires the right facility, and enough staff to handle that volume of turnover to cover all expenses and make a profit. But due to a down turn, that turnover might drop as little as $5,000 monthly, which was all of your profit. Essentially the business would be running in a way that meant everyone else got their payments, but the business would simply be covering their costs. Which is okay for a season, and much better than the drop being more than $5,000 monthly, in which case the business starts to lose money. This does sometimes happen, but cannot be sustained.
So the business will either have to make some cuts, which is a problem for employees, initially, and the company, in time, when the recession passes and they need to get workers back to fill the roles. Will those trained staff still be available? Maybe not. This lack on continuity will result in quality issues, as well as having to invest in new staff training, after interviewing new prospects.
The other thing with a recession is what is the cause.
Sometimes the cause is a literal thing, such as a war happening, but it could even be the fear or anxiety of a thing happening; what if we go to war? So not only is the event happening a recession causing event, but even the perception of the event eventuating can literally cause an economy to take a downturn.
This is why these methods will help you to survive and even flourish when a recession is happening, when your competitors fall by the way side.
2. Diversification helps you recession proof your business.
If you have one garden hose, and someone treads on it, you cannot water your garden. Likewise, if you have one income stream, and a recession treads on it, you cannot flourish financially. By not having only one offering, or one client, you save yourself from going under if a recession or down turn happens. By having all your eggs in one basket, that is wonderful when everything is going well, but unfortunately life doesn’t always work like that. By having a more diverse portfolio of clients and offerings, you will be able to generate income even when one or more areas takes a hit. Often you just need to survive for a while, and then things will improve as the market becomes less conservative. If you have the ability to survive for a few months on additional areas of expertise, even if they are not your main offering, you manage to keep all your existing customers happy and keep all your staff, who you have trained and invested in to. Once things return to normal, you have everything in place to engage the market as before.
But how do you diversify?
Well, it could be something as simply as additional services or keeping clients on retainers to branching into a new client base. For example, Woolies and Coles now do home delivery, even though they have invested millions of dollars into their stores all across Australia. They want your business, and have established additional distribution centres that process the online orders. So whether you want to go to them, or have them come to you, they have you covered. This is no surprise after Uber and Uber Eats have disrupted the Taxi Industry, and Uber Eats was a direct way to get around the murky area caused by the issues Uber created with their method of service delivery. Uber wanted to keep all these new drivers on their payroll, and so created Uber Eats to keep them gainfully employed until Uber was made a lawful service, and the Government paid out the Taxi Driver’s Plate registration costs (to a degree). Woolies and Coles then saw that people wanted to have food delivered to their home, and thought why not? Better us doing it than some middle man.
What services could you offer that coincide with what you already do? Maybe you are a car detailer with a location at a shopping centre, but you have investigated the demand for a mobile detailing service, and could branch into that area? A typical example for Gardeners is doing a rescue job on people’s yards and gardens, but then offering them an ongoing service for maintenance that would stop things from getting out of control again, though of course for a smaller fee than the rescue job required.
3. Good relationships helps you recession proof your business.
Did you ever realise that it is harder to get a new customer than it is to keep an old one? A new customer is a far more expensive investment than keeping your old ones, so with that in mind, take the long view with you customers. You already have experienced this; when you go out to eat, do you usually go to the same place? Yes, most people do. And when getting your car serviced, you generally keep going back to the dealership or mechanic, than changing who your car is maintained with each time. Unless they do a bad job….
So don’t do a bad job! That should be easy, as you are already driving towards perfecting your offering in the first place.
Be patient with people.
Ultimately, not every customer or client is a keeper. Some people are a bad fit for you or your company, for various reasons. Let them go. But others will be a good fit for your company, but sometimes they go through a rough season. If you can be patient with them, but remain professional (for instance, they do still have to pay their bills, even if you give them an extension due to extenuating circumstances) then you will have won them over and kept the relationship alive. Most people remember that you have done good by them, and so you keep them keen to keep engaging with your services. And you might have helped keep their business afloat, which is essential to them being able to engage your services in the future!
Then you can approach these loyal customers with other offers, or repeat offers of what they have already bought (depending on what you line of service is). Because they know and trust you, and you have a proven track record with them, they will be interested in hearing what you have to say and offer. Business is challenging, and if you can gather around you reliable people who are interested in your well being and success, it makes it emotionally and financially easier to stay alive when the economic droughts hit us.
Have a look at this article by Forbes about brand loyalty being so important to Apple’s success.
And remember that Apple is the most profitable company in the world….
That is our take on how to Recession Proof Your Business. Over to you…
Thank you for reading our Blog Post. We hope that you found it useful, and gave your useful and actionable tips and ideas to implement in keeping your business alive during a recession. Or simply confirmed that you are already on the right path with what you have already done to keep your business healthy in the lean times.
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