How to Recession-Proof Your Business in 7 Steps
In reality, recessions and downturns are a normal part of a business cycle. It’s wise to plan for them now.
Jeff Reeves, Director of Middle Market Banking at SouthState, offers some stabilizing advice to help your company thrive.
What is a recession-proof business?Before you set out to achieve the goal of a stable business, it’s good to know what you’re aiming for. A business that is less affected by the ups and downs of the economy typically provides vital services the majority of people rely on. Companies that offer goods and services people need regardless of their financial situation are best. Specialty shops, unique entertainment venues and similar niche businesses may not fit this bill.
Protect your revenueWhen money is tight, the competition really heats up. How will your business rise above similar ones in the marketplace to retain customers?
You can position yourself as a market leader before a recession begins by collecting intel on your customers now. Are you listening to what they have to say about your service, products and employees? How are you capturing feedback to improve? Consumers have a lot of opinions – harness them to better understand your product's strengths and weaknesses compared to your competitors’.
Make small, necessary cutsCutting costs can feel like an overwhelmingly negative exercise. A clearly outlined plan, however, shows your employees and stockholders, if applicable, that you are focused on the long-term health of the company.
You can begin with a simple trimming of the budget. Renegotiate contracts with suppliers, switch vendors for office cleaning or telecommunications, or reduce staff perks. If small cuts are successful, you can likely delay larger reductions in staff or office space or outsourcing select tasks. Just understand they might become necessary if a recession lasts longer than planned.
Understand financing options before they’re neededLooking for financing during a downturn is too late. Gather information on funding options well before you think they’re needed to save time and stress. Talk to your banker about sources of capital, such as revolving loans, lines of credit, private equity and SBA loans.
Examine your supply chainSuppliers are a vital part of many companies. They help you meet the demand for products and critical timelines.
Even if you enjoy a longstanding supplier relationship, assessing costs is a natural part of business planning. Is there a new supplier that delivers faster? Or one that can help you expand your product line? Just as you push your team members to think creatively, you should expect the same from your supply chain.
Empower your employeesAre your team members operating at their full capacity? What training can you provide to improve efficiency?
Cross-training employees will allow your business to continue operations at a high level if a team member goes on leave or is away unexpectedly. Empowering your employees also boosts morale, allowing you to retain workers and incentivize them to go the extra mile when needed. Retaining employees can save you the money you may spend on advertising for positions or new-hire training.
Spend marketing dollars effectivelyNo matter the size of your marketing or advertising budget, it’s smart to analyze the results often. Don’t just assume if you see a bump in sales that your dollars achieved the best outcome. You may need to update your methodology or tactics.
Before starting a campaign, understand the KPIs, or key performance indicators. What will you consider successful? How can you replicate results in a recession? Do you want to reach new customers or recapture existing clients? Answering these questions will help your team craft the appropriate strategy.
Implement technology for security and streamliningSouthState Bank offers a wide variety of services to improve your efficiency. From payables to receivables to making excess funds work harder, streamlined security is a top priority.
Companies can reap benefits, including improved customer experience, from the latest technology like contactless payment options. Talk to a banker today about Treasury Navigator, ACH payments, remote deposit and a full suite of additional solutions.
About the Author, Jeff Reeves
Jeff Reeves is an accomplished financial services professional with SouthState Bank. He is the director of Middle Market Banking for South Carolina. In this role, he works with a team focused on delivering capital structure solutions, treasury platforms, and risk management solutions for businesses.
As a 32-year veteran of the banking industry, he has had the opportunity to work with cross-functional and multiple geographic teams throughout the Southeast. He has worked with a variety of industries including manufacturing, transportation, financial services, and construction.
Jeff currently serves on the Riverbanks Zoo Commission and the SC Chamber of Commerce board.