Have you wondered who will be the winners and losers during this current recession? Okay, maybe it hasn’t been officially announced that we are actually in a recession, but I am sure we will be after the 2nd quarter. Some industries will do better, such as grocery stores that deliver, swimming pool companies, online learning platforms, video conferencing services, and online gaming and entertainment. Sometimes companies can just be lucky to be in the right place at the right time. But what can we do if we aren’t one of the “lucky” ones? Can we do anything to increase our odds of surviving or growing in this economy?
Here are five ideas that will significantly increase your odds if your companies were to implement them.
1. Marketing and Investing in New Services
I am a believer in continual marketing and business development. There is a tendency to cut these expenses first, but this can make it difficult for your growth. In a Harvard Business Review article, Roaring Out of a Recession, the author states that the groups that have the best chance of survival are those that reduce costs selectively and focus on operational efficiency more than their rivals. They also invest by spending more on marketing and R&D more than others.
How do you know what kind of marketing will work or what services will be the best? To know where it will be the most beneficial for you to invest, you much revisit your Vision and Strategy for your business. In Michael Hyatt’s book, The Vision Driven Leader, he says that “both in business and life, you’re more likely to get to a destination that you’re going to like if you’re intentional about where you’re heading.” He says, “That’s one of the reasons I view vision as the lifeblood of any organization. It keeps you moving forward.”
2. Cut Expenses Intelligently
As I mentioned above, you can’t just market and invest your way out of an economic downturn. In the Harvard Business Review article mentioned above, it states that “businesses that boldly invest during a recession only have a 26% chance of becoming leaders after a downturn.” What expenses do you cut? Are you aware of clients or products that are less profitable? These would be the first place to cut. Do you have costs that are no longer necessary? Do you have employees that are low performers? Have you reviewed software expenses or business insurance? Do you need the office space you have or parking expenses? Review your Income Statement compared to last year, last month, or previous forecast (expectations). Sometimes you have to go line by line to justify. I have a client that has forecasted expenses this year of 16% less, but revenue from 7% forecasted. This pruning of expenses will set them up for higher profitability as the economy rebounds.
3. Interview Potential Employees Now
In any economic downturn, people lose their jobs, and more employees are available. If you foresee the need to hire people as the business grows eventually, then start the interview process now. In a high service-oriented business, personnel is the key to growing your business. It never hurts to have a bench of potential employee prospects that can be called upon when needed.
4. Build Up Cash
If you have not participated in the Paycheck Protection Program, I encourage you to take advantage of this if you are eligible. You will need the cash, so don’t let the government scare you into thinking you don’t. Also, work with clients regarding Accounts Receivable collections and vendors in delaying your payables if you can. Businesses can also delay payroll taxes until 2021 and 2022. The only caveat is that you can do this if you received PPP funding up to your loan forgiveness date. You never know – this could be a few months of taxes. If you don’t have a Line of Credit, I would consider getting this set up if you can. Always look at the full cash picture before making some of these decisions.
5. Experiment and Be Flexible
I recently implemented a new Group CFO Service program as there are smaller businesses that need help, so I am looking at ways to provide my services in a group setting at a lower price. I don’t know if that will work. So far, clients have chosen one-on-one CFO services, which is priced much higher. I have to be flexible at trying new things and giving clients what they need and want. I am experimenting with marketing, networking, new products and services, and even different content. If this does not work, I will try something new. I think it is easy to get into a trap of frustration when something does not work. It is not necessarily your fault, and sometimes it is just one tweak away from working. The key is to experiment and be flexible. Don’t wait for perfection; keep trying new things.
We know that in a few years, we will look back and see that the things we did now made a huge difference in our business. Don’t let the recession run you out of business or take your growth down so much; you may never recover. Continue to invest offensively while defensively cutting unnecessary expenses. Find the employees that may be a “diamond in the rough.” Do what you can to build up your cash the best you can. Overall, be flexible and experiment in new things so you can find the right combination that works. Don’t be surprised if you don’t figure it all out right away. Just keep doing all of the above.