After surviving the pandemic, now all we hear on the news is an economic downturn. If it is true, businesses must be prepared to face uncertainty and change. A slowing economy can have a significant impact on businesses, with reduced consumer spending, decreased profits, and increased competition. However, with the right strategies in place, businesses can not only weather the storm but also thrive during tough times. In this article, we’ll explore the key steps organizations can take to navigate a slowing economy and come out ahead. From optimizing operations to reducing costs and investing in innovation, we’ll provide practical advice to help you prepare your business for economic headwinds and position it for long-term success.
1. Review Financial Statements
One effective way to prepare your business for a slowing economy is to review your financial statements and identify areas where you can make cost cuts without sacrificing the quality of your products or services. We have had so many profitable years that we may have got lazy in this area. And there were expenses that in hindsight were not good long-term expenditures. By analyzing your expenses and revenue, you can gain a better understanding of where your money is going and identify any unnecessary expenses. This can include reducing office space, negotiating with suppliers for better pricing, or eliminating low-margin products or services. By making targeted cost cuts, you can improve your bottom line and better position your business for a slowing economy. However, it’s essential to ensure that any cost-cutting measures you take do not compromise the quality of your products or services, as this can have a negative impact on customer satisfaction and long-term growth.
Don’t forget who you are as an organization and why you exist. And don’t forget your longer-term goals. In times of economic uncertainty, it can be easy to lose sight of your business’s mission and goals. However, it’s crucial to refocus on these key elements to stay on track and maintain a clear sense of purpose. Revisiting your mission statement can help you identify your core values and the unique value proposition that sets you apart from competitors. This can help guide your decision-making process and ensure that your business is staying true to its core principles. Additionally, revisiting your goals can help you adjust your strategy to align with changing economic conditions. By setting realistic and achievable goals, you can better position your business for success and stay on track during challenging times. By re-focusing on your mission and goals, you can maintain a clear sense of direction and purpose, even when the economic climate is uncertain.
3. Invest in Technology and Automation
What invest? Shouldn’t I be looking at cutting costs, not incurring them if a recession is coming? Investing in technology and automation can be a smart strategy to prepare your business for a slowing economy. By introducing new technology and automation tools, you can increase efficiency, reduce labor costs, and streamline operations. This can help your business stay competitive and improve its bottom line, even during challenging economic times. For example, you could invest in software that automates routine tasks, reducing the need for manual labor and freeing up resources for more value-added activities. Additionally, you could consider implementing digital tools to enhance customer experiences, such as chatbots or mobile apps. By embracing technology and automation, you can position your business for long-term success and maintain a competitive edge in a changing economic landscape.
Many of our organizations that were using technology and automation effectively we in a good position when covid-19 pandemic hit. For example, Minnesota Valley Community Action has been using Laserfiche ECM to automate its energy assistance approval process using Laserfiche Workflow. When they were forced to work from home, they were agile enough to continue processing applications without losing productivity. This was important because their low-income clients can’t pay their heating bills without their help.
4. Invest in Employee Training
This is another thing that may be counterintuitive. Opportunistically investing in employee training and development is a key strategy that great companies use to think long-term and succeed in any economic environment. What spending money on training? Not cracking the whip and pushing your staff to get more work done?
While it may be tempting to cut back on employee training during periods of economic uncertainty, the most successful companies decide to do things differently. By investing in their workforce, these companies can increase productivity and improve the quality of their products or services. This can result in a competitive advantage that positions them for long-term success. Moreover, during a slowing economy, investing in employee training can help keep your workforce motivated and engaged, and reduce the risk of turnover. In good economic times, staff are often too busy to focus on training. And skills may suffer.
Steven Coven in his book Seven Habits of Highly Effective People, says that “sharpening the saw” is important to preserve and enhance the greatest asset you have, your team. By taking a long-term approach to employee development, you can build a stronger, more skilled workforce that can adapt to changing economic conditions and help your business thrive, even in tough times.
5. Start Diversifying Your Revenue Streams
Diversifying your revenue streams is an essential strategy to prepare your business for a slowing economy. One way to achieve this is by exploring new markets or introducing new product lines. This can help you expand your customer base and reduce your dependence on a single market or product. However, it’s important to approach this strategy with careful consideration and a long-term perspective. This can involve conducting market research to identify new opportunities or investing in product development to ensure that your new offerings meet customer needs. By taking a proactive approach to diversifying your revenue streams, you can position your business for long-term success and weather any economic challenges that may arise.
If you are a non-profit, maybe it is a good time to look for other sources of grant money. And to sharpen your grant writing skills. There may be more competition for the grant dollars during this time. But, whatever you do, don’t put less effort in during this time.
6. Reassess Your Marketing Budget
During a slowing economy, it’s important to reassess your marketing budget to ensure that you’re getting the most bang for your buck. This is not a time to waste those important dollars in your budget. This involves identifying your most profitable customer and/or products. And focusing your marketing efforts on campaigns that are both cost-effective and targeted to those segments. By doing so, you can improve the efficiency and effectiveness of your marketing spend. While also increasing your chances of attracting and retaining high-value customers. This may involve shifting your focus to digital marketing channels, such as social media or email marketing. Which tends to be more cost-effective than traditional advertising. Additionally, you may want to explore opportunities for partnerships or collaborations that can help you reach new audiences without breaking the bank. By adopting a strategic and targeted approach to marketing during a slowing economy, you can position your business for success and improve your chances of weathering any economic challenges that come your way. And maybe even grow your revenue during tough times.
7. Improve Cash Flow
Improving cash flow is crucial for businesses to survive and thrive during a slowing economy. One way to do this is by accelerating collections and negotiating better payment terms with vendors and suppliers. This can involve implementing more efficient invoicing and payment processes, offering incentives for early payment, and establishing clear payment terms upfront. Additionally, managing inventory levels can help free up cash that may be tied up in excess inventory, while also minimizing the risk of overstocking or stockouts. By taking a proactive approach to cash flow management, you can improve your financial position and position your business for long-term success. This can involve working closely with your finance team or seeking the advice of financial experts to identify opportunities for improvement and implement effective strategies. By focusing on cash flow management, you can increase your financial resilience and improve your chances of weathering any economic challenges that come your way.
Our customers have found that if you automate your accounts payable, you can save money by eliminating duplicate invoices and making sure you get charged the price that you were quoted.
In our Laserfiche workflows, we carefully check to see that duplicate invoices were not submitted and paid. Also, by saving time in the AP process, your accounting teams have more time to focus find discounts from vendors and checkout out other suppliers.
Taking steps to improve cash flow will make your business sail through tough economic times. And positions you to expand when the end of the recession happens. And if the news is completely wrong and there is no recession, your company is in better shape financially.
8. Reduce Costs
During a slowing economy, businesses need to look for every opportunity to reduce costs and improve their bottom line. One strategy to consider is renegotiating contracts and agreements with suppliers, landlords, and service providers to secure better terms and lower costs. This can involve exploring alternative suppliers or negotiating volume discounts, as well as reviewing lease agreements and service contracts to identify opportunities for cost savings. While it may require some negotiation and compromise, renegotiating contracts and agreements can help you reduce costs and improve your financial position over the long term. It’s important to approach these conversations with a clear understanding of your needs and a willingness to work collaboratively with your partners to find mutually beneficial solutions. By adopting a proactive and strategic approach to renegotiating contracts and agreements, you can position your business for success and ensure that you’re getting the most out of every dollar you spend.
- Insurance cost
- Legal fees
- Accounting and tax preparation fees
- Banking fees
- Maintenance and repairs
- Company-owned vehicle expense
- Office Supplies
- Telephone – switching to a hosted VOIP provider can result in big savings
- Internet provider monthly fee – this cost can go down significantly
- Travel expenses
- Business Meals
- Unnecessary subscriptions
In busy, booming economies we don’t take the time to check these expenses and they slowly creep up year after year. Sometimes, by just asking, your vendors will reduce their prices. And other times, by shopping around to other vendors, you find greater savings.
And even if we don’t have an economic slowdown, getting the best prices for your goods and services, is never a bad thing.
9. Be Creative in Sales and Customer Retention
During a slowing economy, businesses need to be creative in their approach to sales and customer retention. Offering discounts or promotions can be an effective strategy for encouraging sales and fostering customer loyalty. This can involve targeted promotions for specific products or services, as well as discounts for loyal customers or bulk purchases. While discounts and promotions may impact your profit margins in the short term, they can help drive sales and generate repeat business over the long term. It’s important to carefully consider your pricing strategy and ensure that any discounts or promotions align with your overall business goals. This can involve tracking the performance of specific promotions and adjusting your approach based on what works best for your business and your customers. By offering targeted discounts and promotions, you can incentivize sales and build a loyal customer base that will help you weather any economic challenges that come your way.
Remember, your clients could be in a save money at any cost mindset. It is important to be in touch with them reassuring them and reminding them how valuable your service is.
10. Build Strong Relationships with Vendors and Lenders
Building strong relationships with vendors and lenders is crucial for businesses during a slowing economy. Vendors and lenders can be important partners who can help your business navigate difficult times by providing access to resources and support when you need it most. This can involve negotiating better payment terms or exploring new financing options, as well as building a network of trusted partners who can help you overcome any challenges that arise.
By investing in these relationships and maintaining open lines of communication, you can position your business to succeed even in the toughest economic conditions. Of course, building these relationships takes time and effort, and requires a proactive and strategic approach to networking and relationship-building. But by focusing on developing meaningful connections with your vendors and lenders, you can ensure that you have the resources and support you need to thrive in any economic environment.
Many years ago I had a client that paid invoices within a day of receiving them no matter what the due date was. I thought that was unusual so I asked the owner. He said that it was his insurance for the future. If there is ever a shortage of materials, I am pretty sure I will be on the top of my vendor’s list. And if there is a bad economy, I know my bankers and vendors will be there for me when I need them. I am making a recession-proof, supply-chain shortage-proof company. And I know no matter what the financial times are like, my vendors and bankers will have my back.
I thought that was very wise and so unusual in business. I think this type of attitude and action will help companies and business leaders in any economic cycle.
11. Find Ways To Improve
In tough economic times, it’s more important than ever for you to stay ahead of the curve and find new ways to improve. One way is by developing a culture of innovation and experimentation. Encourage employees to ask why we do it this way. Don’t frown on them if they come up with changes to current processes.
This means creating an environment where creativity is encouraged, new ideas are welcomed, and experimentation is seen as a positive thing. By fostering a culture of innovation, you can create a workplace where employees feel empowered to take risks, try new things, and explore new possibilities for growth and improvement. This can lead to breakthroughs in efficiency, productivity, and profitability, and help you stay ahead of the competition. Of course, building a culture of innovation takes time and effort, and requires a commitment from the top down to support and encourage new ideas and experimentation. But by investing in this approach, you can position your business to thrive in any economic environment and come out on top.
After going through the covid pandemic and the work-from-home mandates, a young staff member at Community Action Partnership of Ramsey Washington thought of ways to improve their weatherization process. With his supervisor’s approval, Hans was able to revamp their process and we tweaked their Laserfiche Workflow. As a result, they were able to save many hours each month and more quickly offer help to the low-income families that needed their help.
12. Be Positive
In a slowing economy, it’s easy to get bogged down by the challenges and difficulties of the situation. You can get fearful and negative. However, it’s important to stay positive and maintain a can-do attitude. Instead of focusing solely on the negative aspects of the economic environment, try to look for opportunities and areas where your business can thrive. This might involve finding new markets to enter, exploring new product or service offerings, or building strategic partnerships with other businesses in your industry. And for me, not spending too much time watching the news.
By keeping an open mind and staying optimistic, you can position your business for success even in the toughest of times. Remember, great companies are often born during periods of economic uncertainty, and those that are willing to think outside the box and do things differently are the ones that come out on top. So stay positive, keep an eye out for opportunities, and don’t be afraid to take risks and try new things.
Here are some things that were invented or created during the Great Depression:
- Nylon – invented by DuPont in 1935
- Polaroid Camera – invented by Edwin Land in 1934
- Jet engine – invented by Sir Frank Whittle in 1930
- Electric razor – invented by Jacob Schick in 1930
- Photocopier – invented by Chester Carlson in 1937
- Scotch tape – invented by Richard Drew in 1930
- Parking meter – invented by Carl C. Magee in 1935
- Electric guitar – invented by Rickenbacker in 1931
- First drive-in movie theater – opened by Richard Hollingshead in 1933
- FM radio – invented by Edwin Armstrong in 1933
- First supermarket – opened by Michael J. Cullen in 1930
- Board game Monopoly – created by Charles Darrow in 1935
- Photovoltaic cell (solar cell) – invented by Russell Ohl in 1939
- Electric blanket – invented by George Crowley in 1936
- Jeep – developed by the U.S. Army in 1940, but prototypes were created during the Depression years
- TV dinner – invented by Gerry Thomas in 1953, but frozen food technology was developed during the Depression
- Bubble gum – invented by Walter Diemer in 1928, but gained popularity during the Depression
- Synthetic diamond – invented by General Electric in 1937
- The first self-winding watch – invented by John Harwood in 1928, but became popular during the Depression
- Ballpoint pen – invented by László Bíró in 1938
- And last but not least, SPAM. Hormel Corporation unleashed the product in 1937; it’s currently available in 44 countries throughout the world. And a delicacy in Hawaii. This is especially important because Hormels is in Austin MN, my birthplace. and it is the company where my daughter-in-law works
All this talk about how to prepare for a recession can be discouraging. My motive is not to depress you but to encourage you to be proactive and look for creative ways to succeed. You don’t have to let difficult economic times get you down. Focus on getting new customers, improving your business processes, and finding ways to cut costs and ways to save. And find creative ways to generate revenue and develop new products and services. And if a recession does not hit, you will be ready for the next recession or next boom. If you follow these tips, you will be a recession-proof, growing company with a solid future.
Good luck, if you need some assistance in helping you streamline and automate your business process, I would be happy to help you.
Just contact me: