This healthy economy has consumers feeling better about their finances and consumer spending is up in US households, which makes sense based on the Bureau of Labor Statistics’ report that unemployment fell to 3.7% in the same quarter; the lowest level since December 1969. However, some economists point to signs of an impending recession on the horizon. Many believe the growth can be sustained for perhaps another year but point to indicators that predict by 2020 or 2021 the US economy will begin to lose steam, triggering a recession.
The last recession that began in 2007 lasted over 18 months, longer than any other since World War II. Can your business sustain 18 months of lowered sales? If these predictions do hold any shred of truth, there are a few lessons learned from the recession that occurred a decade ago that could help prepare companies ride out the wave. The businesses that will survive are those that are prepared to respond quickly to economic change.
Following these proactive tips will make your business leaner, stronger, and more financially stable.
- Build a cash reserve. Cash is king, especially during a recession. Examine your expenses and decide what you can let go of without diminishing the customer experience. Squirreling away a little savings each month will help you build a healthy cash reserve that may be needed during times of slow sales.
- Reduce or resolve debts. Entering a recession with less overhead puts you ahead of the game. When sales are lean you need your money to pay for current expenses, not past debts. Take advantage of the good economy that we are currently enjoying and use those profits to alleviate any large debts that you have incurred. Even if a recession does not happen, you will not regret paying off looming debts.
- Negotiate with vendors. When sales are down, all expenses must be reduced. Start negotiating now while you have the power to be sure you have the lowest prices before vendors start to feel the squeeze. Build strong relationships with several suppliers so you are not left in limbo should one or more be forced to close their doors. Also, consider local vendors as many of the large national firms may impose higher shipping fees as gas prices rise.
- Boost employee productivity. Learn to operate lean and mean now. Invest your time in your top talent now and get them focused on sales as well cross-trained to help in other areas. Laying off several employees at one time can immensely affect your staff’s morale, so try testing the waters of operating with fewer staff gradually.
- Diversify your customer base. Even during a recession, the world does not come to a complete halt. People will still make purchases and go out for special occasions, so be sure to be top of mind when they do. Social media advertising is typically free and easy to do, so don’t wait until business slows to learn the ins and outs. Now is the time to become an expert so you have a healthy following to share specials and promos with to get them in your door now and in the future.
- But also take extraordinary care of your current customers. It takes far more effort to make a new customer than it does to keep the ones that you have. Be sure to focus on customer service so that your customer base is always happy so that they remain loyal. Stay positive in your daily interactions with employees and try to keep them motivated.
- Remember that it’s temporary. Our economy is in a constant cycle of ebbs and flows. Some are just bigger than others. Plenty of businesses made it through the recession last decade and have flourished since. It is wise to be prepared just in case.