Recession Proofing Your Business

Recession is one of the major themes, in the mainstream media, when discussing the economy. With the fall out from subprime mortgages, increasing numbers of housing foreclosures, and balance sheet write downs among the financial corporations, many business people are becoming worried about the future of the economy. Instead of tearing out your hair, it is always best to take the initiative and a proactive approach with your company.

Making your company recession proof, or at least able to survive an economic downturn, requires some planning and creative decision making. It is all too easy to simply say cut back on expenses and lay off staff. In fact, these rather simplistic steps may be counterproductive and do more harm than good. Along with the short term benefits, the longer term picture must be considered carefully. It is of little value to an organization to leave a recession unable to capitalize on the return of better times.

A recession proof company is a creative company. One of the hallmarks of a creative company is a willingness to listen to everyone within the organization and pay close attention to their ideas and suggestions. Front line employees in customer service, delivery, purchasing, operations, and sales often have powerful money saving ideas at their fingertips. There is no better time to employ cost cutting measures that do not harm the company’s revenue than during an economic slowdown. Note that the cuts must be ones that do not impact revenue in a negative way. Think of them as eliminating unnecessary waste instead.

A recession proof company listens to its customers. That statement is often used by business, but is sadly often ignored as well. In recessionary times, many of your customers will be feeling the pinch. They may suggest different sizes of shipments, and even new product formats. Don’t take their suggestions lightly. They may be offering you an entirely new and profitable product and service line. Simply changing your offer size, or something similar, can pay huge dividends. A recession is no time for take it or leave it marketing practices.

A recession proof business values its employees. Other companies will follow the traditional approach of laying off staff. It is time to go against the tide, and perhaps consider adding employees. Some very talented people will be let go by your competitors. There is no better time to add their skills and experience to your organization. They may bring some much needed fresh thinking and ideas to your company. At the same time, your current staff morale will remain high as they won’t feel threatened by impending layoffs. Leave those concerns to your competitors.

A recession proof company understands its costs of providing its products and services. Knowing your cost of production, and cost of goods sold, helps to keep profits flowing in the face of possible price reductions. Be sure to understand all of the costs, including staff time, that go into providing your goods and services. This cost knowledge is especially important for service based companies where some services provided may be much more profitable than others. Let your competitors have the low profit margin business, while you take the highly profitable projects for yourself.

A recession proof company lowers its debt levels. A recession is no time to have high overhead costs associated with servicing high debt loads. This is even more true if the debt incurred was for non-productive purposes. Those company limos, new designer furniture, and extravagant gala parties won’t provide much long term value. Their repayment may cause some severe cash flow headaches though. Keep only productive debt on the books, and if you must expand, try do so organically from company cash flow. Being paid off means lasting through tough times.

A recession proof company is flexible and seeks opportunities where other companies see only doom and gloom. An economic downturn brings with it new product and service demands. Be sure to be ready to seize the day and your business will be safe from any threats a recession might bring.

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