Recession Strategy

Business is slowing and there is a lot of news about an economic recession.  Like many businesses you have probably worked hard to build your businesses and it hurts to look at cutting costs and giving up what you have created.  Here are some options to consider as part of your business strategy in recessionary times:

Recession strategy for business:

1. Continue cost reduction but add profit improvement.  Use the Business Solutions Profit Equation to help guide your efforts.  Profit is a function of expense, loss and revenue.  So look at your losses (e.g. waste) for opportunities to improve and examine your revenues in detail for opportunities to improve them.
    

2. Reevaluate your entire pricing structure.  As costs go up, so must prices in order to maintain margins.  Test pricing to see what happens as you go up and down.  Better total margins may be found at higher or lower prices.
    

3. Think strategically.  Consider that your closest competition may not be as flexible as you are.  Create a business advantage where they are having problems and you can act faster.  Also, your competition and suppliers may be more willing to partner with you on ways to preserve business or create new business.
    

4. Go bargain hunting.  Look for acquisition opportunities.  As business pressure increases, competitors or businesses in complementary product lines may be looking to sell.  Market consolidation always creates opportunities for some people.  Why not you?
    

5. Consider strategic investments.  Now might be the time to invest in new equipment or technology to reduce costs, improve quality or gain some other business advantage that others cannot afford.
    

6. Monitor your cash flow.  Keep your accounts receivable current and healthy.  If you are having trouble, so are your customers.  Don’t let them leave you holding their bad debt.
    

7. Engage your employees in the process.  Everyone must be part of the quest to keep the business healthy in hard times as well as good.  Use a process such as the Profit Improvement Process to organize and manage your efforts.
    

8. Be slow to hire and quick to fire new employees to keep only the best.  A layoff should be a last resort.  Use some excess time and resources to get people working on cost reduction and profit improvement.  Don’t however keep people around just filling in time.  That waste will drag everyone down for a long time and could take your business with it.
    

9. Talk to your bank, investors and other sources of capital.  Let them know what your business recession strategy is.  Get them to endorse it and/or give you suggestions for improvement.  The more they are involved in the strategy, the more likely they are to be there when you need more cash.  Invite your banker to lunch.

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An economic recession or business recession is also an opportunity.  Invest in tools such as a Profit Improvement Process to capture those opportunities.  Read “Instant Profits: Making Your Business Pay” for over 250 ways to improve your business even in a recession.  There is a lot more to profit improvement than simple cost reduction.  Contact us today to see how you can cut costs and improve profits.