How to recession proof your business!
We know it is coming, if not technically there yet many feel we are in one already! Inflation and interest rates
are rising ….and don’t even mention fuel and power….it’s all gone crazy! LFL retail sales are coming down and we are all starting to tighten our belts.
If you are not already scrutinising costs and outgoings, then you should be.
Here’s some top tips…to build your plan of action
Communicate to your teams
Whether in a recession, or preparing for one, once you start doing some different things in your business to protect it like looking at what you spend, being worried about the daily sales, proactively looking for new business and making sure you have little debt and managing closely working capital whilst natural things to focus on… as you amplify the scrutiny all at once, your people will get worried if you don’t talk to them.
All the above actions should be happening in your business anyway! We’d be more worried if they weren’t. So, communicate well your actions to your teams, get them involved in it so everyone can see the wins! Show them that you are putting in the right checks and measures to protect the business through the challenging times, we have had them before after all.
Minimise your outgoings
Look at every cost line, where can savings be made? Where are those savings hiding? Are you spending in the right areas right now? What can you put on hold or spread the cost?
If in doubt, then don’t spend! Everything you spend whether it be on people or activities needs to deliver a revenue for you.
Understand your business…where your revenue comes from
Having visibility and a great understanding of your underlying revenue and volumes allows you to take calculated risks with 'one off' bigger opportunities. If you have increased your prices to customers, when you compare your performance to previous years it may look okay!! But the reality is that your volumes is less, so hiding a weaker performance.
Right now we are in inflationary times, so when prices fall and we are in a deflationary remarket, your lower volumes will be revealed and it will take you time and effort to build it back up! Excess stock will be only one of your major issues. You need to future proof now to survive this time!
Note :- your stock right now is costing you more, freight is higher, exchange rate poor, raw materials is high so don’t be sitting on too much high priced stock right now…keep it lean!
Maximise and protect what is coming in - Every little helps !
Look at your ongoing agreements, even those less profitable, over the long term they will be invaluable. Even a deal that only contributes to overheads and costs, can be the type of deal that can keep a business afloat, while you spend energy finding the profitable ones. In a recession it is all about sustainability rather than high profits…this is reality. 'A bird in the hand is worth 2 in the bush' they say. We tend to agree!
Right now, chasing a big windfall in a recession is a high-risk approach, in that it certainly cannot be guaranteed on, so building and maintaining a series of sustainable agreements that can be serviced well, will spread the risk and create a business model that has much more resilience.
Losing the big contract, if you get it, could kill the business, losing one of your smaller agreements will be a blow but not terminal.
Watch your debtors and the amount outstanding to you, if you are finding it difficult than others will certainly be feeling it too. Getting in every penny can help your situation and cash flow. As for your borrowing you will find due to interest rises your older debt is cheaper than new debt so keep your borrowing to a minimum.
Expand where you can?
If you have funds, then a recession can work to your advantage. As we look back in history, through troubled times, retailers such as John Lewis have been known to buy up businesses! Acquiring equipment, new product lines and/or even the purchase of new business are all creative ways you can use to expand, and ultimately don’t discount the odd M&A opportunity. (*mergers and acquisition)
What new services could you offer?
Who could you collaborate with to try new things and help each other out?
Whatever you decide to do, get planning now!
Improve your COG’s (cost of goods)
In the same way you should communicate well will with your teams, communicate strongly with your suppliers and your supply chain and all the partners you have. Everyone is feeling the pinch so make sure they are stable, the last thing you need right now is to lose a key supplier. Ask them if they can contribute and help though this challenging time and if there is anything further, they can do to help…even better if you
can all help each other.
Strategic focus for the future
Whilst it is difficult to take your eye away from the many burning platforms that may be challenging you right now, the best way to be successful through a recession is to grow through it, you can’t easily save your way out of a recession.
Look for new ventures, new partnerships, new business opportunities, new revenue streams….
But at the same time make plans. Your strategic planning will be critical when things start to improve, and they will. Don’t fail to have a sound strategy even if some of it needs to be delayed for a little time, remember by the time you realise you should have been planning your future you will be late…always move forward, these days a business standing still is effectively moving backwards...evolve your plans, develop your teams, have a focus on the future and you will get there.
If you want to discuss your plans and have us sense-check your ideas, book a discovery call today – email email@example.com