Recently, I was asked what will the economic outlook be in 2020 and 2021. My response was “who really knows!”. But the real question is they were asking was, when will the next recession come? No, one can tell you when the economy will move downward; or exactly what will change. However, here are 3 action items that you can do today to prepare for the next recession.
Secure your cash flow
In the last recession, “cash was king.” 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. Look at your loans. First make sure you are using 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. Obviously, with 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. Also, look on the supplier side. Assuming that 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 is will be unlikely you will have to pay more. Consider using your line of credit if the interest rates make sense. Lastly, if you are in the services business, ask for payment up front. When the recession comes, if you then want to give terms. In that case, you are making an accommodation.
Rebuild your Sales and Marketing
I had a business executive say to me, “why should I do 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 investments to update your image. Now is the 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, explore search engine optimization.
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. Your current customers are the best examples of the power of your solution. Create 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 increased funds (due to your price increase, see above) you can fund some new programs. Here are a few ideas for loyalty programs.
Put on 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 to participate. They may even help fund the event. You can also use your open house to capture testimonials or give your customers an opportunity to interface with top management.
Offer a 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 1% on what you know you can sell, but 5%, on items that are bit more speculative.
Think about 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 just 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.