How your business can prepare for the recession

No one wants to be the bearer of bad news, especially at the start of a decade that is already riddled with it. We'll let The New York Times do that. This week they asked, "How likely is a recession?" The response from economists, analysts and strategists has been blunt: the odds are “uncomfortably high”.

Has the recession already started? Will it start next month? Will it start next year? We don't know everything. But the answer to one of these questions is yes. And a better question is, what can we do today?

We can take comfort in knowing that this one will be different from the previous one; few saw the pandemic crisis and its economic ramifications coming. Business leaders were understandably ill-prepared. But right now, those same business leaders have a valuable opportunity. There is still time.

The first step is to accept the reality of the forecast: no excuse for a lack of preparation. Look at the main economic indicators:

The stock market is clearly in bearish territory, with no indication of a change in direction Inflation is rising at a record pace, pushing up interest rates US Debt Levels Are at All-Time Highs Retail sales began to fall, with giants like Target and Walmart dropping precipitously

Next, don't panic. Besides, make sure your employees don't panic. Demonstrate your control of the situation by listening to them. Don't underestimate their level of concern - they probably have less financial reserve than you do. Imagine a kitchen table bringing the family together on the farm, during a difficult harvest year. Weaker resources often foster an environment of individualism, so this is a time to be thoughtful, generous, and outspoken. It's time to clearly communicate the challenges and get everyone pulling in the same direction.

Every employee's focus must shift from the income statement to the balance sheet, or more specifically, from profit generation to cash flow. You want your whole team to think about ways to conserve or generate cash. (Lack of money is the most common way private companies fail.) The game is over when you don't have enough money to payroll.

You will need to generate your own list, but items in it may include:

Sort your customers by profitability. Focus your efforts wholeheartedly on the customers at the top of the list. Chances are you will eventually need to compete more aggressively for all customer business and having higher profit margins will allow you to lower prices while still generating cash. This Inc. the article may be useful: "Finding the profitable objective of your business" Make it clear to employees that your priority, and theirs, is to weather the recession without layoffs. If you don't sincerely mean it, don't say it. But it's not only the right thing to do, it's the most profitable thing to do. Companies that commit to their employees in difficult times have a level of loyalty and ongoing commitment that competitors can only dream of. Three good examples can be found in this HBR article, Run Your Business So You Never Need Layoffs. We know that quality, engaged workers improve outcomes such as profits and sales, reduce costly turnover, and drive repeat and referral business. In other words, they improve the economics of the business again and again. Limit purchases to those essential to keep the business alive. Prices for everything have gone up, but they will probably be lower in a few months. Wait. Question and minimize anything that consumes money, including inventory, repairs, expansion plans, acquisitions, etc. It won't be easy, but even a little money could make a difference. As your market crashes and your orders dwindle, keep things in perspective. Do you remember the story of the two men in the woods? When a hungry bear arrives at camp, a man laces up his boots and prepares to leave the tent. Lying on his cot, his friend said, “You can't outrun a bear. The first man turns to leave, remarking, "All I have to do is outrun you." You and your team will need to lace up your boots, but you don't have to outrun the bear. Identify your strongest competitors and determine what you can...