With the U.S. economy mired in a recession, some small business owners are resigning themselves to the sales equivalent of a nuclear winter’s nap. On the contrary though, a slow economy is when senior management needs to be most alert, squeezing the most out of a weak business environment.

There are few businesses that are truly recession-proof, but there are steps you can take to reduce the impact of recession on your business. Some moves to recession-proof a business should be made when times are still good, whereas others are actions you can take after a downturn has already started. Here are some examples of each:

1. Minimize overhead. E-commerce solutions have made the “virtual business” a reality. Rather than expensive retail locations, with the right website design and promotion many businesses can be run with less physical overhead and yet with greater geographic reach. Other options for reducing overhead can include having employees work from their homes.
2. Outsource functions where your company does not add value. There are some functions that are central to your company’s unique position in the marketplace, and others that are tasks which could be better performed by outside specialists. For many businesses, HR Outsourcing, telemarketing and call center services are prominent examples of the latter. Consider increasing your financial flexibility by outsourcing tasks which fall outside of your organization’s core competencies.
3. Control financial leverage. During good times, it can be easy to grow through leverage, but during a downturn, even a slight disruption in revenues can have a disproportionate effect on earnings. Remember that most bankruptcies are caused by cash flow problems, so do not over-extend your reliance on debt. Why wait for a bank loan, if you process credit cards and have more than $5,000 a month in credit card sales you can get a business cash advance within 48-72 hours.
4. Diversify your customer base. Landing that big client is always a thrill, but if any one client represents too great a percentage of your revenues, you are always just one cancellation away from being out of business. Complement big accounts with plenty of rank-and-file clients by keeping your pipleine always full with qualified sales leads. The rank-and-file may be less profitable, but they also leave your business less vulnerable to sudden changes. Also, try to avoid having all your customers in one industry, because if that industry goes down the tubes, so does your business. In particular, seek out customers in relatively recession-proof sectors, such as health care, education, and government. You may not be able to choose a recession-proof line of business yourself, but if your clients are in such businesses, your vulnerability will be reduced.
5. Reprioritize investments. Some new projects may have to be deferred, in favor of those which are instrumental to keeping business coming in the door. So, for example, a new website design or technology upgrade could be put off to next year, while maintaining existing e-commerce and credit card processing solutions may be essential to continuing your operations without interruption.

While Managing Costs, Don’t Skimp On These Areas

While you look to cut costs wherever possible, just make sure you don’t skimp on the following three essential areas:

• Customers. Your customers are the most vulnerable during a downturn. They are probably hurting too, and are looking for ways to save money. Keeping up the service effort is one way to make sure your company isn’t one of their budget cuts.
• Sales. Of course, some competitors will make the mistake of cutting back on service during a downturn, so this is an excellent time to pick off their vulnerable customers. Never let up on the business leads. No matter how hard you try, you can’t avoid losing some business, and this may get worse during a recession. Therefore, it is imperative to keep business coming in to replace what you lose.
• Recruiting. There is no better time to recruit than during a recession. It is when more talent is looking for work, and willing to agree to reasonable employment terms. Look to add talent that you generally find scarce, and if you can’t afford to add headcount, consider ways to upgrade your existing staff.

Keeping a business strong during a downturn is not just a matter of survival. It is also a technique for picking up market share at the expense of weaker competitors, so you can benefit that much more during the next recovery.

Tags: small business

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