An approaching recession can feel like the end times for businesses. But if you take the proper measures to prepare for a recession, it doesn’t have to be all doom and gloom. When you prepare adequately, you will have an advantage over those who didn’t, meaning you won’t just be surviving, you’ll be thriving.
In many ways, preparing for a recession will have you feeling like a doomsday prepper. Now, we’re not saying you must build a bunker or stockpile toilet paper and canned goods. We’re simply saying we can learn a lot from these people to prepare your business for a recession.
“During the pandemic, the #1 reason we kept over 80% of our clients was because we helped them think through the risks and plan accordingly. As a result, our clients thrived during the pandemic while other businesses struggled.” – Stacey McKibbin, CEO at Consilio.
How Businesses Can Prepare For A Recession
So, like doomsday preppers, you’ve seen the signs. Now is when preparation matters most. From stockpiling cash to reinforcing your creditworthiness to maintaining relationships, here’s what we can do to prepare for a recession:
Stockpile Goods (Cash Reserves and Cash Flow)
Any prepper knows there are essentials you need. Food, water, and shelter are all non-negotiable and necessary for survival. Before a recession, you want to stockpile cash. If ever there was a rainy day to save for, this is it.
A clean financial bill of health and optimal cash flow will be like your shelter and offer refuge. As a manager, you must set the tone and start stockpiling cash ASAP, and your team can be a huge asset.
“Revenue hides all sins, and recessions expose all sins and bad habits. We teach a budgeting philosophy called minding the pennies. If everyone’s budget-conscious when they start working for you, your profitability remains strong, no matter the economic times.” – Stacey.
In the end, transparency and open communication are key. In the absence of information, people make it up. When revenue is abundant like it has been in recent years, employees see and hear all the numbers and start stepping over pennies to pick up dollars.
In our training, we coach how to convey this and use your core values to create exceptions around how to be thrifty. How do you keep an effective balance? You never want to cut your nose off to spite your face.
One of the most common reasons companies fail is because they mismanaged their cash flow. Follow up on outstanding invoices from clients, create an emergency reserve of cash, manage your receivables, and have legal contracts in place to reduce risk.
“In uncertain times, you have to create your shelter and security. We advise collecting deposits to reduce risk. Don’t let clients get away with falling months behind on payments. No matter how loyal they may be. Build a reserve that can cover 6 to 12 months of operating costs.” – Stacey.
Get Tools (Creditworthiness and Financing)
No prepper worth their salt would be happy with simply stockpiling goods. Survival requires tools to acquire more resources. Imagine running out of food with no tools to hunt.
Without financing, that’s what it’s like for your business when you run low on capital. To prepare for a recession, secure financing before you need it and maintain optimal creditworthiness. You’re more likely to be approved for credit when business is humming.
“It’s frustrating, but banks want to lend to you when business is humming, and you don’t need it, and deny you when you need it most. Financing will give you and your company crucial flexibility to endure economic turbulence and adapt to changing conditions. After all, adaptation is the key to survival.” – Stacey.
Maintaining strong creditworthiness for financing requires evaluating banking and lending relationships. The stronger the relationship, the more likely you are to get the support you need. We coach clients to give relationships a score on a scale of 1-4:
- Barely know each other
- Transactional (we’ve done one or two things together)
- We’ve done more than a few transactions and know each other personally
- We both know where the bodies are buried
How would you rate your relationship with your banker or SBA? If it’s not a 4, it needs work. And we can help build those relationships.
Managing cash flow and maintaining creditworthiness also enables you to capitalize on opportunities. A downturn is a buyer’s market. There will be plenty of opportunities that will help you and your company flourish and emerge from the recession stronger than ever.
Imagine you run out of water and find a lake. Without a filtration system, it’s as good as non-existent. But with the right tools, you can take full advantage and quench your thirst.
Hunting and Farming (Training and Marketing)
Your team’s skills and marketing fuel your business. Sustainable success requires honing your people’s sales skills and investing in marketing to harvest and bring in profits.
When the economy was strong, companies got fat off the land, causing their skills to atrophy. In a recession, sales cycles extend, price shopping is more prevalent, and prospects drop off. What took 3 follow-ups last year now takes 7-10.
If you were contemplating pulling back on your marketing spending, this is when you need it most. That should be non-negotiable. Trimming the budget is OK, but don’t eliminate it. This is an opportunity to flourish and stake your claim on coveted market share.
“When the economy is soft and revenue is seemingly abundant, double down on sales and marketing. A lot of our clients bring us in for sales training because, for the last 2 years, it has been raining revenue. It’s been like shooting fish in a barrel and more like order-taking. Now, when times are tougher, your sales reps need to dust off their hunting and farming skills.” – Stacey.
Maybe getting fat off the land isn’t possible, but this is how you ensure you will never go hungry.
Hope (Morale and Personnel)
Human beings throughout history have endured unimaginable conditions because they had two tools at their disposal: hope and connectivity. After all, preppers are prepping for a reason: they believe they can survive. This is the power of your people and relationships.
Engaging your team is recession-proofing your business. The sooner you get them involved in thinking of ways to save money, convert more clients, and generate more leads, the better your company will be, and the less likely you need to make layoffs.
Your employees are adults. If you treat them like adults, everyone feels responsible to help. Have 1:1 convos with the Nervous Nellies in your organization. In our leadership lab, we dive into how to have difficult conversations so your people feel safe.
Without psychological safety, people will shop their resume or stay on board but remain preoccupied all day worrying about their livelihood. Still, reevaluate your team. Start by:
- Ensuring the right people are in the right seats
- Doing what you can to retain top talent
- Investing in training
- Asking for employee input
- Maintaining strong (open) communication channels
- Considering wellness programs
- Supporting innovation
“When it feels like the world is ending, you and your people need each other more than ever, and hope will be what sustains you. Reducing your staff too much, making rash decisions, and letting people go hurts morale and causes your people to lose hope.” – Stacey.
To prepare for a recession, reaffirm your vision and values, and make your employees feel appreciated, engaged, and connected to your company. Feeling connected to a larger purpose helps people survive, no matter the circumstances.
Manager Training Programs to Prepare For a Recession
An economic downturn doesn’t have to mean the world is ending or the sky is falling. If you adequately prepare for a recession, you, your company, and your people will enter it ready to weather whatever twists and turns the looming economic uncertainty might throw at them. At Consilio, we provide the premier manager coaching that can help you and your business persevere through hard times and emerge stronger than ever.
If you are ready to create success on purpose and stay a few steps ahead of the changing world, schedule a consultation.