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How To Create A Recession Proof Business

WASHINGTON – JULY 29: (AFP OUT) U.S. President Barack Obama makes a statement in the Diplomatic Reception Room of the White House July 29, 2011 in Washington, DC. Obama spoke about progress with congressional leadership regarding the ongoing debt ceiling talks. (Photo by Martin H. Simon-Pool/Getty Images)

In February of 2008 Congress passed the $333 billion Emergency Spending Bill followed later that year with another $152 billion in tax relief. Remember that cool $600.00 you got? In November of 2008 Congress requested another $300 billion for a second stimulus plan that was signed into law and then somehow expanded slightly to $787 billion. And of course, GM and Chrysler needed another $22 billion. Another debt ceiling vote, another fiscal cliff? Does it sound like we’re going down this same road in 2013? I don’t see much change from 2008 other than being deeper in debt.

At the same time China, unrestricted by things like clean air and water and any kind of labor laws, passed their own stimulus bill to the tune of $586 billion. I feel so much better…how bout you??

The question of the month is – do you think any of this money will cross your threshold? Assuming your answer to that question would be in the negative then you have a decision to make. “Am I going to wait for a federal bailout; or will I bail myself out?” I would like to offer some suggestions for the latter.

Recession Beating Tips

Cold hard cash makes the world go round and you should always have a little on hand. Are there any assets, equipment, unneeded fixtures, or old inventory you can eliminate? If you are investing look for stocks of companies that traditionally do well in recessions.

Cut waste. It’s easier to increase profits 2% cutting waste than increasing sales by the same amount. In slow times look for ways to cut costs. Reward employees for any wasteful procedures they find.

Your business records are the lifeblood of your business. They are your vital signs. Pay closer attention to things like your average sale, your salespeople’s closing ratios, and the return on investment from your advertising. Look for red flags and stop the small cuts before they hemorrhage.

Banks are looking for all the business they can get, so if all your eggs are in one bank it might not be a bad idea to have a back up bank, just in case. Some banks are more solvent than others and you can’t always tell which is which. If your bank should go under or refuse to extend you further credit what are your alternatives? There’s no question that loans are becoming harder to get so it’s even more critical to manage your money closely and do everything you can to improve your credit score.

Many businesses have one or more outstanding loans going. I am not a big fan of debt consolidation but desperate times call for desperate measures. Before you go that route try for interest rate adjustments or longer payment terms. Many bankers will be willing to work with you during these turbulent times.

If things are slow with your business then chances are they are slow with your suppliers too. This is the time for tough negotiation. Extended payment terms and quicker delivery times will help keep inventory manageable. You will never get it if you don’t ask.

Get tougher with collections. A good customer who consistently pays late is not a good customer. It’s not easy to move their business to someone else and re-establish credit and terms. Be nice, but be firm. Remember this rule… its business, it’s not personal.

Do not cut your marketing budget. Studies over the last 60 years and nine recessions clearly show that companies that continue to market and advertise fare far better during a recession than those that cut back. They take market share from weaker competitors and keep it when the recession ends. They also get more of the day-to-day business than competitors that curtail advertising. Be smarter about where and what you advertise. Think in the back of your mind, every dollar spent on advertising should produce a minimum of $20 in revenue.

Every minute of every day someone, somewhere is looking for your product or service. If they don’t see your name how are they expected to do business with you? Get more aggressive with your advertising. Key your ads by asking customers to bring the ad in to receive your offer. If you are doing radio or TV, have them mention the show or station for the offer.

Some Final Thoughts

If your ads are not producing customers, then either you are making an ineffective offer, or you are advertising in the wrong medium. You need to find out which. Ask every single customer what brought them in. Ask each phone caller how they found you. They are calling you, or coming in your business, for a reason. You must make the most of every single customer if you are going to beat slow economic times.

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