Published March 2008

Don’t Let the ‘R’ Word Get You Down

By Judy Kneiszel (page 14)

People still do business during a recession; just make sure they are doing business with you!

Unless you’ve cut yourself off from all media for several months, you know that economists, journalists and even some politicians are throwing the word “recession’’ around. The weak dollar, rising energy costs, the subprime mortgage crisis … all seem to add up to a downturn.

Recession is defined as an extended decline in business activity, but extended can mean anywhere from two to six consecutive months or more depending on whom you ask. And the severity and length of a recession will vary by region. Weathering the current economic storm may require some creative thinking. Here are some strategies that can help as you try to make your business recession-proof:

Listen to employees

Your staff are the eyes and ears of the company. They are out in the field every day experiencing how the economy is affecting the company and the customers. If you have treated employees fairly in the past they will be willing to help the company through the tough times. If you come up with a plan to deal with difficult times but keep it a secret from employees, morale will drop, making the situation worse. When dealing with a slowdown, take a team approach so your employees know you are all in business together. Brainstorm with staff for money-saving suggestions. Ask employees for input and ideas. Seriously consider their thoughts on route consolidation, areas where you can extend coverage and ways to save money.

The Customer is King

It is crucial during tough times to keep the customers you have, but you may have to work harder than ever to make them happy. Don’t slash service or cut the quality of supplies just to save a few pennies. That might push customers to leave you for a company that offers more for their money. Put yourself in the customer’s shoes. The economy is as tough for them as it is for you. Be willing to work out a flexible payment plan for them. Try to lock them into longer service contracts whenever possible. Throw them a few bones in order to keep their business.

Know Where the Money Goes

Watch every penny. Search for ways to save money on office long distance service, Internet, company cell phone service, office supplies and utilities. Consolidate suppliers where you can if it will save you money.

Manage Cash Flow

In good times you can carry slow-paying customers on your books without much difficulty, but in lean times this can put a lot of stress on the business. It’s not going to mean much to your creditors when you show them how much money customers owe you. They want to see the actual money. It’s not fun, but spend more time on collections. Be aware of who owes what and be persistent in your billing. Work out payment schedules with slow remitters if necessary to keep some cash flowing in.

Watch the Debt

Think twice about taking on any unnecessary debt in an uncertain business climate. And if you have debt, don’t make the banker your enemy. Work with lenders to find ways of making payments affordable. Keep them abreast on how business is going. They’d rather work with you through a slump than get a phone call out of the blue that your company is sunk.

Don’t Neglect Marketing

If all things are equal when money is tight, customers will choose the lowest price, so you’ve got to make sure all things are not viewed as equal. You’ve got to stress what makes your business unique. Show customers that you offer something others don’t. Make yourself indispensable to customers. While you may be cutting discretionary spending out of your own budget you don’t want customers to view YOU as discretionary.

Invest in Sales

Ignoring sales and blaming a downturn in business on the poor economy creates a self-fulfilling prophecy. People still do business during a recession. The whole world doesn’t grind to a halt. You may just have to try harder and that means sell harder. Build a referral reward system where existing customers earn a discount by bringing you a new client. Scour your files for old clients and give them a call just to let them know you are still in business and would like to do business with them again.

And finally, while I don’t want to encourage anyone to be a vulture circling around waiting for competitors to fail, if you hear of a competitor going out of business, consider that their equipment, employees and customers have to go somewhere. Place a well-timed, well-meaning phone call to inquire about purchasing equipment or supplies, snatching up their best employee or taking on their remaining customers. Their loss could be your gain.

If and when there is a downturn in your local economy, focus on the long term. Don’t panic and make hasty decisions. If the foundation of a business is strong, it should be able to stand up against the winds of a recession. Will it be the most profitable year ever? Maybe not, but remember that a company can stay in business indefinitely just by breaking even, as long as enough cash is flowing in to flow out again and pay the bills. So if you can hold your own, you can outlast a recession.