If you don’t have a plan in place for a potential recession, now is the time to focus on getting one in place. Scrambling at the last minute is not ideal for you or your business. Get a jump on things by being proactive.
We are seeing layoffs in the tech sector, from big companies. We hear about a potential recession on the news daily. Now is definitely the time to get your plan in place.
Start with some research and see what you can dig up, explore different approaches to surviving a tough economy. Do your best to figure out what will work for you.
Take a close look at revenue and expenses, see where your money comes and goes and at what rate.
Next take a closer look at your spending habits. Are there areas you can cut costs? Ask yourself what is the impact of those cuts, will they end up creating loss in another way that costs you more?
Can you reduce overhead? Can you reduce inventory? Are there ways to change your services that will cut costs but still deliver the quality your customers expect? Play with different scenarios – get creative and think ahead to envision the impact the various options will have. Try to identify problems and how you will handle them. At this point, it’s about playing with the numbers in various scenarios to find the one that seems like your best option. Think outside the box.
Talk to friends that have businesses and see what their plans are.
As we are seeing with the big tech companies, cutting back before the recession hits can be a wise move. However, overreacting and cutting too much, without a solid plan, can have a big negative impact on your business. Analysis and strategy is what should guide your decisions. Keep in mind that large drastic cuts will often backfire. If you determine it makes sense to reduce inventory, do it gradually. You have time now to see what the impact is of running leaner.
Investing the necessary time into research and strategy will make it easier for you, when you face hard decisions about cutbacks.
There are some areas that your business requires and it will benefit you to spend time looking into how you can make cuts but still get the service you require.
You will need:
Financial services such as your accountant and bookkeeper should be kept, unless you have the time and knowledge to handle that yourself. Don’t fool yourself here, winding up in financial trouble as a result of working to avoid financial trouble, is a really bad place to be.
Legal services may be required if you tend to need a lot of contract review, have any on-going litigation, if you are employing or letting go of staff, dealing with leases or mergers and acquisitions. Consulting with a lawyer can save you a lot of expense down the road. If you have a lawyer on retainer and need to cut them, or if you don’t have one and are looking to get the legal help you need while also keeping costs down, look to an alternative legal service provider (ALSP) as a way to get the legal help you need, without the large fees of a law firm. You will also typically get more time and attention from an ALSP than a traditional law firm, if you are a small fish compared to their bigger clients.
Marketing is another area you want to keep things going. Turning off the machine that brings you business is not wise. You may cut budgets, but whenever possible, don’t turn marketing or advertising off.
In addition to looking at the ways you can cut costs in some areas and get creative about getting the most out of your budget, there are other things you can do to survive tough economic times.
Take care of your customers. You need them more than ever. Don’t let the quality-of-service slide. Communicate with customers via newsletter, promotional emails and on social media. Connect with them with messaging they will be able to relate to. Be open and honest about any changes and demonstrate empathy for the impact of the economy on them. Stay on top of trends that impact, engage or motivate your customer base. There has never been a time to be more customer centric (pro tip: continue that even after economic times improve). Customers are more likely to want to support and help you during tough times if you’ve earned their loyalty. It’s never too late to start.
If you serve a local community, make sure your presence is known and be a pillar of support for the company, let them know they can count on you.
Look to build new partnerships and nurture existing ones. Partnerships are a great way to generate new business, get the support you need, and allow you to tap into knowledge and experience that you don’t have.
If you have staff, be open and honest with them about your plans, foster positivity at the same time. The reason you have planned out your strategy is because you are dedicated to surviving the tough economic times. Ensure they understand the importance of customers and good customer service. Make sure they know how to handle customer inquiries about any changes or cuts that customers may be aware of and worried about.
Monitor cash flow – regularly. The sooner you identify an issue, the easier it will be to deal with. You may want to contact your banker and learn what options are available to you if things get really bad.
Monthly projections based on historical data and the anticipated impact of the economy will help you have something to benchmark revenue and expenses against.
Now is the time to prepare – you will be grateful if the economy continues to worsen. And if it doesn’t, you will still have learned a lot that will help you when running your business and you will be prepared for whatever the future brings.
CEO Law is an ALSP that offers high quality service, without the huge legal bills of a traditional law firm. During rough economic times, our goal is to be the legal resource that you need, without being a drain on your budget. Connect with us today to learn more about how we can help you.