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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

Three Action Items to Get Prepared for the Next Recession

Written By: Mark E. Goodman | Comments Off on Three Action Items to Get Prepared for the Next Recession

Recently, I was asked about the economic outlook for 2019 and 2020. My response was, “Who really knows?”

But the real question they were asking was: When will the next recession come?  

Nobody can tell you exactly when the economy will move downward, but the next recession is not an “if” question it’s a “when” question. And while it’s easy to be happy and confident with SMBs at all-time highs, it’s also the perfect time to get prepared and not be caught off guard.

Here are three action items that you can do today to prepare for the next recession.

Secure your cash flow

In the last recession “cash was king.”  Take the time to understand your cash resources and work to optimize them.

When it comes to banking, now is the time to execute or expand your line of credit. Banks are more open to making money available when the economy and your business is good.  Revisit your loans and make sure you are utilizing the appropriate loan type for your given situation.  Talk to your banker if you are not sure.

But, banking is just a start. Here are a few more suggestions:

  • Raise your prices. Higher prices you get more money / cash. Also, in a good economy, your customers are likely to pay more. Come the recession, you can offer discounts from your higher prices and still retain your profit margins.
  • Evaluate your supplier / vendor agreements. Assuming you have the cash, offer to pay more quickly if the supplier will give you a lower price. Come the recession, you can extend back to “normal” terms, and it will be unlikely you will have to pay more.
  • Consider using your line of credit. If the interest rate makes sense, you might want to leverage an existing line of credit.
  • Ask for payment up front. If you are in a services business, consider asking for payment in advance. When the recession comes, you can offer terms at your discretion. In that case, you are making an accommodation.

Rebuild your sales and marketing

I had a business executive say to me, “Why should I build a new website? I’m sold out anyway!”

It’s not a question of should you do it, it is the idea that you can do it.

When business is good, make the investment to update your image. Now is a good time to try some new initiatives.

The internet offers a wide range of new ways to reach customers and prospects. Create an email marketing campaign, experiment with internet advertising, and explore search engine optimization (SEO).

Some programs will work and some will not. Take advantage of consultants and creative resources.  They can provide capabilities that you don’t have on staff.

Thinking about hiring another salesperson? Stop. Use that money to deploy the internet to better engage your current sales team.

Take advantage of the positive momentum in your business to create testimonials and case studies. Produce videos that both you and your customers can integrate into internet marketing.

Create incentives for loyalty

In an economic downturn, it’s much cheaper to keep your current customers and employees than find new ones. With your extra cash due to your price increase (see above), you can fund some new programs. Here are a few ideas for loyalty programs.

  • Have a customer thank you open house. Invite your current customers, but also invite prospects. Open houses are a great way to showcase your current products and perhaps discuss or test new concepts. Encourage your suppliers and vendors to participate. They may even help fund the event. You also can use your open house to capture testimonials, or give your customers an opportunity to interface with top management.
  • Offer cash back if your customer hits a designated purchase volume. Give that customer a reason to buy more from you. Cash-back programs are also a great way to promote new products. Perhaps offer 1% on what you know you can sell, but 5%, on items that are bit more speculative.
  • Implement loyalty programs for your channel partners or employees. Take advantage of your higher prices to give out bonuses to your top performers. Consider non-cash incentives such as trips, dinners, and events. Often these are more powerful than money.

Yes, the good times will not last forever. However, careful utilization of money, marketing, and loyalty today will pay dividends when things get more difficult.

Article written by
Mark Goodman is the President & CEO of e-Conversation Solutions. He is also past workshop chair at SCORE Chicago. Prior to founding e-Conversation, Mark held numerous positions as a technology executive, including Director of Business Development at Motorola, where he was the first business manager in the cell phone group. In addition to Motorola, Mark was an executive for a Silicon Valley company and a film buyer for General Cinema Theatres. Mark holds an MBA from Boston University and an MA in radio/TV/film from Northwestern University.