The mere mention of the word incites panic for many. Our chests tighten, we feel our breath quicken. With the impact of coronavirus being felt worldwide, our politicians are warning us to brace for a recession.
Yes, it’s a good idea to be ready—always. As I always say, Prior Planning and Preparation Prevents Poor Performance and I’m here to tell you how you can be prepared but not panicked.
So, let’s take a deep breath and relax. Now is not the time to to build a bunker or stuff all your cash under your mattress.
Keep calm and be a Recession Buster.
What’s a Recession Buster? Someone who knows and acts from the belief that THEIR economy is more important than THE economy.
Here’s how you can make sure you’re a Recession Buster, whether one is coming or not.
What Is a Recession?
A recession happens when there’s a decline in economic activity spread across the economy, lasting for two consecutive quarters. This shrinking, measured by the gross domestic product (GDP), is otherwise known as all the goods and services made and produced by the economy.
In other words, a recession is just a big word to describe when the economy stops growing. And instead of things eventually hitting an upward swing, the economic growth continues to shrink for two quarters (that’s six months, folks).
How to Prepare for a Recession
We know talk of a recession on the rise can be scary. And with the economy taking a hit because of the coronavirus, a recession feels more real now than ever. Having concerns right now is valid. It’s logical. It makes sense.
But – and this is a BIG BUT – it’s important not to buy in to all the fear and drama out there. Instead focus your energy on making sure your own personal finances and business are where they need to be.
At the end of the day, to weather a recession, you must have your own house in order. That’s going to matter a lot more than what’s happening on the ASX or in Canberra.
Let’s start by reviewing the last six months in your business. Have your finances been in a recession of their own? If you’ve experienced a downturn, now is the time to really dig in and get serious. Get intentional about how you handle your business now.
Being a Recession Buster is simply ensuring you’re operating with sound business practices. Many business owners often become so busy with the business that they forget about the fundamental practices which are the foundation of a solid business operation. Recession or not, taking the time now to ensure you’re managing your business with these foundational principles in place will stand you in good stead no matter what’s around the corner.
1. Manage Your Cash Flow. Irrespective of the economy cash is always king. That means you must have more income coming into your business than you do going out.
With that said, do not put your energy and focus on your bank account. Put your energy and focus on the activity you need to do have a surplus in your bank account.
Keep abreast of debtors, minimise stock levels and manage them well, but most importantly go and find more work. The result will be more income.
2. Make the most of your current customers. I’ve always said that the best way to grow any business (ie get more money into your business) is to get the customers you’ve already got coming back to you more often and spending more money. They already know you. Are you 100% sure everyone of them knows everything that you do? Or is it possible they’re going to your competitors for products and/or services you already offer?
Now is the time to review how you look after your customers, how you put their needs first and educate them on how what you do is better or different than anyone else.
3. Focus on your core competencies. What do you do best? Are you trying to be all things to all people? The analogy I use is that your market place is like a dart board, with many segments. A lot of people in business try to target everyone in their market, rather than determining which area of the dart board they want to focus on and aiming to “hit” that.
4. Improve your education. Albert Einstein says “the definition of insanity is doing the same thing over and over and expecting different results”. The market place has changed. How you’ve done business prior to COVID-19, is likely irrelevant to some degree. As a result, you need to learn to do things differently. This is where investing to have a coach in your corner is highly advantageous. More than ever you need someone who challenges your thinking, asks you the hard questions and doesn’t let you settle for second-best. Be aware, many accountants / business advisers will say this spend goes against your operating expenses and won’t look upon it as an investment in your recession proof-ness.
For example, if one of our clients had listened to their auditor, they would have closed operations for three months while this ‘covid-thing’ blew over. Fortunately, they had us in their corner and achieved a near record-breaking month in income.
5. Keep on marketing. As with your education though how you marketed in the past may no longer work in the new economy. Several of our clients have had to change how they win work. Business owners are having to educate their marketplace so much more than they ever have before.
6. Know your numbers, inside out. Yes, know your “final scores” – income, gross profit, net profit, equity, cash in the bank. More importantly know the numbers that impact those numbers. For example, lead generation numbers and conversion rate numbers impact on your revenue. If you focus on revenue only you will most likely not win the battle against the recession. However if you know where your leads are coming from, what your conversion rate from lead to quote, quote to sale etc, you will know where your sales process is letting you down and what you need to focus on in fixing it.
7. Have the best team, the right people who are going to help you move forward. Now is not the time to carry on your bus the people who don’t have the energy, passion, and skill to help you achieve what you want to achieve. Under-performing, unproductive team members are a huge cost to the business. As an example, one of our clients, after many months of accepting poor performance from a team member, finally exited them from the business. Productivity went up 200% overnight – it literally doubled the next day with him not being there to pull everybody else down. If you’d like some guidance in this area, Rob and I are certainly happy to help.
There you go. Seven ways to recession-proof your business. If you’d like to know how Rob and I could work with you to ensure have the mindset and the business of a Recession Buster, reach out. We’d love to work with you to help you achieve the business and the lifestyle you want for you and your family.
What does it take to actually remove yourself from the day-to-day grind of business? Learn from our panel of Business Owners who've Been There, Done That.