Recession Survival T ips

Cash Flow

During a recession, cash flow is critical to longevity. A business must have more coming in than it has going out. That means reducing monthly expenses while also trying to increase incoming funds. Monitoring cash flow and calculating monthly expenses vs. expenditures may help gains outweigh losses. Look ahead two to four months, to get a good handle on where you will be going forward. Focus on core competencies and what your business does best to carry you through a recession. Stick to these products and services, and scale back on less profitable, weaker areas. Wasting money on areas with lower margins or lesser demand puts you at risk for lowering cash on hand to outlast a downturn. Focusing on what you do best can also lower inventory costs. Don’t tie up cash in inventory on products that don’t align with the biggest share of your business. Lower your inventory so you have what you need when it comes to best sellers, but don’t overstock less used products. Also look at increasing the number of deliveries so your operation is based more on just-in-time shipments. If you’re leasing your building, talk to your landlord to see if you can get a lower payment. This may require signing a longer lease, but could be worth it. During a recession, a landlord would likely rather you stay at a lower payment than have to try to find a new renter. Seek to extend terms on other payables, or negotiate discounts on faster payments. Talk to your vendors, who may also be struggling, to see if they can extend your terms. The extra cash on hand could be key to survival. If they’re not able to extend payment terms, maybe they’ll give you a discount for paying quicker. Even 2 to 4 percent can add up to significant savings over a year. If your vendors won’t work with you, talk to alternative suppliers to see if they’ll offer incentives. At the very least, avoid paying until the due date to keep more cash on hand. Talk to utility companies to see if there are discounts available. Sometimes a call is all it takes. For those companies that won’t work with you, talk to their competitors to see if they have incentives for switching service. Many companies will offer discounts for the first year, which can make a big difference when it comes to outlasting a downturn. After cutting expenses, work to increase the speed of receivables. When business is good, collections often become lax, so become more aggressive collecting, while avoiding hostile techniques that could kill good business. Being the squeaky wheel, albeit friendly and understanding, can help keep you a top priority for them. You may also want to consider small (1 or 2 percent) discounts for customers that pay within 10 days to keep inflows steady. While you may be giving up a small bit of profit, if your team is spending more time trying to collect, it likely is costing you more than you lose. While you may want to strengthen your relationships with lenders, most experts agree that you should avoid asking for additional credit unless absolutely necessary. Instead show your bank the changes you’ve made to improve your financial position, just in case. Overall, you are better off taking advantage of government assistance programs (the sooner the better) or applying for small business grants. Recession S u r vival TIPS

By Kevin Cole, ISFA Director of Communications For the most part, countertop/surfacing businesses were declared “essential” as part of the construction industry, but there’s no doubt the overall economy is already in a recession. Knowing for how long is difficult to answer. Thankfully, with a mild winter, the first two months of the year fared well. However, in March, things stalled out, with many states going into lock-down mode and people being forced to focus on their health instead of their economic welfare. Most economists have said that barring further disasters we’re facing a short-term recession, and things will be better by the end of the year and much healthier by the end of 2021. That said, it’s critical businesses take a level and strategic approach to staying stable during challenging times. Now that most states are beginning to reopen, more people are returning to work, which will put money back into the economy and shorten the length of the downturn. But, there are some critical things to do to ensure a solid future.

People are an expensive part of running a business, but also provide a lot of the value. Increasing productivity while cutting labor costs is tricky. After coming off of record lows in unemployment, the last thing you want to do is get rid of employees you worked so hard to get and train, so if possible avoid layoffs.

Be honest with your staff, let them know they are important and you are in this together. Transparency with the financial overview of the business can go a long way in developing a team culture and motivating them to work harder. No one wants to lose their job in uncertain times.

Also, make sure to involve them when developing solutions to problems that arise. This helps emphasize their importance and creates a team spirit. You may find you have some previously undiscovered and creative leaders. Also, it keeps you away from overly authoritative management styles and encourages workers to contribute their expertise, becoming part of the solution. The knowledge of their roles in the company may lead to innovations that can’t be seen by higher level managers, and acknowledging their value can improve both morale and productivity.

Employees should be involved in policy choices, tactics and implementation. If work cutbacks are unavoidable, having employees take a role in developing a solution will make it easier for them to accept and may yield alternatives you hadn’t considered.

Generally speaking, it’s a good idea to reduce hours before cutting pay. This should start with overtime. Beyond that, if you ask employees to work the same hours for less pay, they will likely feel shorted and it could lessen their productivity. If you cut their hours instead, you’ll save the same amount of money, but have a better chance to keep their productivity up.

Another thing to consider is cutting your own salary before cutting those of your staff. When you are sacrificing as much as they are, they are less likely to focus on their losses and more impressed that you are doing everything you can to keep them employed.

Marketing

Many companies cut advertising budgets rather than fixed costs during downturns. However, studies show that those who maintain or even increase marketing during slowdowns end up outselling rivals who cut back. During a recession, it’s critical to stay in front of customers. If competitors are cutting marketing, seriously consider increasing yours to capture a larger market share.

Consumers spend differently in a recession. They want more value out of their purchases. Position yourself as a great value, but remember that value does not equal lowering prices, which is not a sustainable practice. Someone else will always be willing to undercut you in a race to the bottom. Instead, market the advantages of your quality products/services to convince potential customers you are a smart investment.

Networking

Connecting with peers, and clients is critical during downturns. Other businesses facing the same problems as you can offer insight as to how they are overcoming issues. This is particularly critical during times such as the current pandemic when the entire industry is threatened. Turn to associations and trade groups as well as expert sources to make these connections

Reducing training is another mistake often made during downturns. Slow times offer opportunities for cross training employees to be more versatile, and currently there are numerous free or low-cost training programs available online.

Companies often go too far in cutting spending during recessions which makes it even more difficult to land new customers. That’s why it is so critical to invest in the customers you already have, Take time to build real relationships with your customers and show them you value their patronage. Helping customers push through difficult times can build real loyalty, so come up with ways to positively impact their businesses.

Now is the time to remind clients why they chose your company. Reinforce the value you offer, and keep in mind that it’s not always about the price, even during a recession.

Make sure your best customers know you appreciate their loyalty and patronage. Spend personal time with them and find out if they have any concerns, then be willing to make changes to keep their business. It is much more difficult for clients to pull away their business when they feel you are a concerned partner and not just another bill they are receiving.

Planning

While you may have your hands full adjusting your business, you should make time to plan for the future. If you’ve been holding off on a new product or service, make sure you are ready to launch it when the market stabilizes. Coming out of the gate at just the right time can be a quick way to offset losses you may have taken during the downturn. Remember the lessons of the past. Recessions happen regularly. While few had a pandemic in mind as the thing that would kick off a recession, the cause isn’t as important as understanding that ups and downs are going to happen. When you get to the other side, you can’t rest on your laurels and go back to “business as usual.” Don’t let things slide into complacency, or you set yourself up to face problems the next time there is a slowdown.

Think long-term and put together plans for future problems. Planning ahead can help to eliminate future unknowns. Give your team the necessary skills, particularly in terms of communication and training, to see problems coming and deal with them well before they are crippling.

Understanding the metrics needed to measure the health of your business and checking them regularly will allow you build a plan to take on future challenges. This means developing efficient teams and promoting good leadership that are proactive rather than reactive. Investment in measuring and planning will help your business and your employees over the long term.

By looking at the possibilities and having a plan to deal with a variety of problems, you can take the thought of giving up completely off the table.