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7 Tips to Prepare for Potential Recession

Lessons from Past Recessions

As reports of looming recession cross my desk, fill the airwaves, and are topic of executive roundtables, I have resurrected an old blogpost for the third time! Back in 2010 the Harvard Business Review did an article called Roaring Out of Recession. They studied three previous recessions to identify trends and determine best practices for preparing for recession so you can survive and thrive after recession.

The trends are clear and the messages are consistent:

  • 17% of companies do not survive recession (fail, merge or sold)
  • Firms that cut costs the fastest have the lowest probability of getting ahead of the competition after recession (21%)
  • 85% of firms that are growth leaders before the recession, are no longer growth leaders after recession.
  • Firms that deploy a specific combination of defensive and offensive moves has the highest probability—37%—of breaking away from the pack.
Challenges Ahead - Prepare for Recession!

Four Responses to a Slowdown


Making defensive moves to avoid losses and minimize risks. Often viewed as crisis mode!


Investing in actions such as new markets, offerings, etc. Doubling down on things that work


Looking to maintain balance between offensive and defensive moves.


Searching for the optimal combination of offensive and defensive, minimizing

Taking Action with 7 Tips

The obvious answer on how to prepare for recession is almost always a combination of prevention and promotion. The question of how to find the balance is more difficult. Experience shows that selective cost cutting to improve operational efficiency while investing strategically is the best course of action. Take advantage of depressed prices during recession while improving operational posture to be in the best position post recession.

1. Increase Customer Value

When customers are tightening their belt, they are more likely to spend less.  You would like them to spend the same or more, so you have to provide something to entice them to continue spending.  This could be bundling products or adding a service such as delivery, carry away, or some level of installation.  Value is always in the eye of the customer, and sometimes just simply asking them what would be of benefit to them during these hard times gets you the information you need to serve them and the competition’s customers as well.

2. Opportunistic Marketing

In a recession you need to focus on those customers or prospective customers who are not loyal to your competition to preserve funds for areas of opportunity. In many industries our targets are well defined, and their preferences are known.  People who drink Coke will likely not switch to Pepsi in a recession, but people who have no preference might buy either product.  Pinpoint expenditures rather than casting a wide net and hoping you catch something.

3. Integrate and Automate

Eliminating duplicate data entry and enabling remote customer access are great recession investments. Now, and in the future, improving the ease for customers to work with you will make you a preferred vendor.  If you don’t already have an eCommerce site, consider building one. If you have an established site, and you are generating 20 or more orders per day, integrating with your business management software eliminates errors and cost of entry.

4. Optimize Core Processes

For distributors, procurement, warehouse management and order fulfilment are the key to success.  Although most distributors pride themselves on these processes, new technology can often quickly generate positive ROI. Bar code scanners, advanced MRP and statistical tools can lower inventory while maintaining fill rates.

5. Cutout Bad Costs

Not all cost is bad.  If your unique value proposition is customer service or quality installation, reducing related costs will only make you more like the competitors you want to differentiate from.  A bad cost is one which adds no value to the customer.  How do you know if a cost adds value? Ask the customer! Often, “we have always done it that way” does not mean we should!

6. Optimize Remote Working

The new opportunity is optimizing the remote and in office time to create the most efficiency. Some studies show 2-3 days in office increases efficiency through greater collaboration, focus and socialization. Every company’s situation is unique, but finding your specific balance can increase efficiency.

7. Invest Wisely with Other People’s Money

Although interest rates are rising, they are still at historically relatively low levels.  If you can make investments that provide a high probability to produce a return on investment within the loan timeframe, take advantage of financing opportunities to preserve your cash on hand.  We often work with customers which have outgrown QuickBooks and use holistic business management software to automate business processes to cut costs and/or enable growth.   Now with subscription pricing, the cost of upgrading and automating has never been lower or smarter.   If you think you could benefit from a modern Enterprise Resource Planning (ERP) download our 6 Point Analyzer to determine if you could benefit from a change.

When Should Your Prepare for Recession?

The best time to prepare for recession is before the recession!  Simply cutting costs is never a strategy for growing or improving your business! In a recession you must focus on both top and bottom lines.  Smart marketing, customer focused promotion, turning slow moving or obsolete inventory to cash and increasing efficiency of operations create a complete strategy for success during a down economy. The good news is, these steps can help even in a good economy!

If you are interested in Digital Transformation as a strategy complete a Digital Transformation Consult request. If you are a distributor looking to upgrade from QuickBooks and implement distribution best practices, check out the Outgrowing QuickBooks Self-Analyzer. The analyzer will help you evaluate your existing capabilities and point out where you may need a system tune up to help power your growth.  To find out more about how to prepare for recession with a general business consultation, complete the Contact Us from.

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