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I love the question - personally I don't think we are going into a recession, the fact is that we have been spoiled over the past couple of years with growth in the corporate sector. Exxon Mobile had profits, I will say it again, profits that were more than the gross domestic product of 45% of the rest of the world. People are up in arms because their profit may decline 10-15%. So instead of having profits larger than the GDP of 45% of the world they drop to 40% big deal.
I am not in a recession proof business but I am in a good space - I help sales forces sell more, so no matter what shape the economy is in, people always need good sales training.
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This is an extermely ambigious question. There are many things that a business owner SHOULD DO to make sure that the business is a viable entitiy no matter what the state of the economy. They are:
1. Control your debt to equity ratio.
2. Do not run up a lot of business revolving debt.
3. Maintain your personal credit rating by keping your personal debt low and manageable.
4. Have a good marketing and advertising plan and have money stashed to pay for it.
5. Build as much of a war chest with emergency lines of credit (at favorable rates) and cash as you can.
6. Don't use the company as your personal checking account.
7. Keep your bookkeeping methods at the accounting level. Use Quickbooks pro and have an established relationship with an accountant.
8. As the owner of the business be accountable...remember whatever goes wrong is your fault.....
9. Make a contingency plan...complete with financial projections showing reduced customers/revenue.
10. Make like a Boy Scout...BE PREPARED....
Let me try to narrow it down a bit.
Obviously, every business is different, but I think a business owner can anticpate changes in customers's/clients' behavioral patterns in a recession. For example, if you are selling gift baskets, do you think people will continue to buy them in a recession? Or, if you are providing payroll services, do you think small business payrolls will shrink? What will you do in a worst case scenario like that? Change your pricing, offer smaller baskets in the first case; expand your service offerings to make up for the payroll losses in the second?
What sells in a recession market? Stuff that make people FEEL BETTER. Its a fact of business that happy things sell really well when the economy is flat. Women will always spend money on skin care and foo foo....chocolate anything comes to mind....
Small businesses that have good solid business practices and are not overloaded with employees should have no reason to shrink payroll.
However, having the right products to sell in a flat economy does not one bit of good if all of the Boy Scout rules ;) are not adhered to. It seems to me that the scenarios you are proposing would be applicable to a larger business entity other than 'small business'.
I would like to know the reason behind the question(s) you are asking and the example(s) you are providing. There is a disparity there that defies logic.
I just explained my reasons in response to LUCKIEST.
I agree that solid business practices are important but by themselves they won't save you if your sales nose dive. The examples I gave were purely random - to elicit answers. My focus still is: do small buisieness owners see/feel a recession and how are they going to cope? Should they build up a reserve to buy good accounts from failing cometitors at a discount, rollout product/service offerings that deal with bancrupt businesses?
That is a GREAT question. Let me take out my crystal ball.1 of 1 people found this helpful
Feed my crystal ball some facts. What type of business are you in?? Are you worried about a recession??
My crystal ball shows a big QUESTION MARK ??
Businesses have lived with recessions in the past and have learned to live with ups and downs.
We have more service businesses than in the past. What service are you going to give up??
I am a stock trader, and I also sell investment/trading data on a subscription basis.
The market is suggesting we may be going into a recession. Since the stock market usually presages the real economy by 3-6 months, I am curious as to whether small business owners see/feel a recession coming at this point.
Since most people do not short stocks, I anticipate a certain number of subscription cancellations. I am polling my subscribers to see whether they plan to stay in cash, go short, or look for long opportunities, in order to adjust my offerings accordingly.
On the consumer side, I may be delaying some purchases in the expectation of a better deal down the road, when/if fire sales start. All it takes to send the economy into a recession is enough purchasers postponing buying decisions by 3-6 months. Small businesses as a group will survive the downturn, but many individual businesses won't. Since it's been dealing with the "ups" up to this point, I think it is vital to plan for a possible "down" - hense the question: how will you do that?
It seems to me that your subscrition service for investments/trades would be at a premium if you are providing accurate data and analysis.
On the consumer side....keep that paid off car...even if gas does go up you are still money ahead. If it gets worse...then the automakers offer zero percent! Now thats a deal. As a matter of fact I am so spoiled I will not buy a car unless its zero percent.
As far as planning for a 'down'. See my post above....you have to manage your money and your credit wisely. Stay out of the malls as well!
Oh, the subscription service is doing great. But, like I said, most people don't short, so in a downturn, particularly if they were slow to get out, they start cutting costs, and financial subscriptions are one of the first the first things to go. Happens several times a year, even with minor fluctuations. That's why I am looking to build up the short side of the business as there are a lot fewer good short subscription services.
I like the question and I am interested in hearing what others will say but at the same time DomainDiva's boy scout rule applies across the board.
For instance I use to work for ADP and got in to the sales training business because of the great training I received at the company. They even hired me as a consultant to help new reps. When I first started they were my biggest client and then they went through a period where payrolls were shrinking and of course when they were looking to cut costs, consultants were the first to go. When I lost them and other large businesses I was working for I had to adapt so I went after the small business market, which has worked out even better for me. I have 22 current clients, I typically work on site 1 or 2 days a week and spend the rest of my time at home developing modules to teach new sales reps.
DomainDiva and all the other tech folks on the board, I will be reaching out to you when I am ready to put up my web site. I think my training modules would sell even to businesses I don't consult for.
So again slavaret, DomainDiva's advice of always being prepared is your best bet!
OK, guys, I am not downplaying the importance of good business practices. I was just looking more for things like you, Ed, are talking about. Obviously, having 22 clients vs. 1 is more secure, as all 22 are not likely to fire you at the same time. Having online courseware is great. My first job in the US back in 1988 was a bank teller. Back then banks were just getting into sales, and we, tellers, were required to sell - with no training provided. I checked out some materials at the bank's resource library. Some were on selling bank products, others - on general sales practices: closes, referrals, etc. That basic info went a long way in my financial sales career! Having that kind of info online is even better. Again, when people lose their jobs or hours, they tend to join multilevel marketing organizations or try to sell something. They may need sales training. Or they may need an edge to keep their job. Any way you look at it, having generic sales courseware online would be a great way to recession proof your business.
Not sure my answer will directly respond but those of us in seasonal businesses like myself do this every year. Kinda like Ed said, I do my best to beef up my client base, I usually asked for referrals in the winter for clients I take care of during the spring and summer.
My accounting is different during the winter months, cash flow sometimes is an issue. I am usually down to one or two employees along with myself, where in the summer I am up to as much as an 8 man crew.
So for me recession proofing means, tightening your belt. Focusing on your current clients and having the good work you do for them, sell other people on your service.
Because my clients/customers are other businesses, I'd probably increase my base of clients in relatively "recession-proof" industries (like health care). Beyond that, as Diva suggests, it's just all the routine, common-sense things like ensuring a solid credit line, paying down debt, and building a reserve of cash. Also, I expect my firms to remain flexible enough to change any product, service, or process that is no longer working in order to take advantage of whatever new "opportunities" the market may be providing (whether those opportunities are due to a recession or something else).
Guess I sort of missed the point of the post. I do agree with all the posters - most smart small business owners are always recession proofing their businesses. DomainDiva's boy scout reference summed it up perfectly. Whether it is slow periods, natural disasters, theft, accidents, you've always got to be prepared!
You have gotten some great answers. My crystal ball told me to look at the front page of today's
New York Times. Market and Dollar Sink As Slowdown Fears Grow.
In the 5th down paragraph it says "others worry that the economy is headed for a substantial slowdown,
possibly even a recession".
You noted that "solid business practices are important but . . . they won't save you if your sales nose dive." I think at least a couple of us are saying that solid business practices are the key to ensuring that sales DON'T nose dive. Temporarily decrease, maybe -- but not nose dive. To borrow on a quote by columnist Sidney J. Harris, a "recession" is when you lose your customers, a "depression" is when I lose mine. Do I personally think we're facing the kind of economic downturn that might be labeled a recession? Yes I do, for whatever that's worth (and folks, it shouldn't be much, because while I have knowledge in many areas, macroeconomics isn't one of them!).
I am wondering if it would be appropritate/timely to revisit this topic?
Now that the media will actually say the word recession, people are actually having to dig their heads out of the sand and face the reality.
Since I'm a marketing analyst, it was very clear to me a year and a half ago that the economy was going to head in the direction it has. I sold my house in February 2007 and downsized so that I could shore up my business, reduce overhead, eliminate office costs and build reserves.
Unfortunately, I was right about my economic analysis, but trying to talk to average business owners about this topic well before consumer spending actually started tanking was nearly impossible. People did not want to entertain the thought, even for a second, that their lifestyle, future, children's future school, nest egg, business and general way of life would change or be threatened.
The climate is very different now. I had no problem, being ahead of the curve, negotiating out of my office contract by finding the office management a replacement tenant. It was less difficult to inform employees that my move would cause them to have to enter the job market to look for another job (the jobless rate was not astonomical at the time). Office machinery was easier to sell at a fair market value. Changing locations did not seem out of desperation.
What I see today is that business owners are still reluctant to adapt to change or downsize. They are unwilling to move to a home office and let their people telecommute. Believe me - it is possible to track everything your telecommuting staff is doing and they are SO much more productive working from home!
Why is it that business owners are reluctant to let go of their own perceptions and do business differently instead of allowing their business to go totally down the tubes?
I think that the Big 3 Car Companies illustrated this point very well during their first, haughty march to Congress. $20,000 one-way on private jets and walking down the ramp with their hand stretched out? Wow, it was so arrogant that it even made me feel embarrassed sitting in my own living room watching it on the news! Yet, they Big 3 Cheeses whined and begged for money, crawled back into their jets and blustered home. Another embarrassing and insulting incident involves the much-publicized AIG Billions-bailout and subsequent $500,000.00 party in the tropics.
These displays of arrogance and waste are enough to drive small business owners over the edge. Why do small businesses have to struggle, cut everything to the bone and be denied even the simplest of credit lines that would keep them afloat when bloated Corporate America gets in bed with Congress and are paid Billions "for their services" (sounds like the oldest profession in the book to me...).
Alas, we the small business owners are the wife of America. Corporate is the mistress.
I want a divorce...