Here are five steps you can take to prepare for a downturn
At Rea & Associates, we were writing about ways to recession-proof your businesses in January of 2020, months before the COVID-19 Pandemic caused economic slowdowns in the United States.
We continue to take recession preparedness seriously and are here to help you weather any economic storm. To that end, here are five steps you can take to prepare for a downturn.
Learn From the Last Recession
They say that those who don’t study history are doomed to repeat it, and when it comes to recessions, we could not agree more. We recommend business owners use history as a guide and ask themselves questions like, “how was our business affected by the last recession?”
Last year we began to ask ourselves this same question. We recalled that in the previous recession, we lost a significant amount of revenue and, to survive, let go of many workers, which resulted in a talent gap within some areas of the firm. Learning from this lesson, we developed a plan to meet any future recession head-on to avoid letting more employees than necessary go.
Proactively Prepare For Economic Uncertainty
Preparedness is everything in a recession. While it may feel like the recession has already begun, the truth is that there is no better time to ready your business for an economic downturn than right now.
Building on the lessons from 2008, our leadership team began to prepare a recession readiness plan in our own firm that would directly support our primary objective of ensuring that Rea & Associates would always be able to take care of our clients and employees.
When preparing your recession readiness plan in your business, we recommend asking yourself these questions:
- How did the last recession affect the different industry types that we serve?
- How does the last recession affect our governments, our medical infrastructures, and manufacturing?
- Which parts of our business did the last recession affect first?
- Which of our services are non-compulsory and the most likely to be affected by an economic downturn?
Define Your Goals
While your first and most obvious objective is to make sure your business makes it through the downturn, you also have to define why you’re trying to accomplish that. Are you trying to protect certain products that you’re manufacturing? Are you trying to keep the owner comp at a certain level?
At Rea & Associates, our number one objective is to retain strong talent. With that knowledge in mind, we created a recession readiness plan that aligns with our goals and our belief that our team is what makes our company strong.
Be A Proactive Manager
If you’re reading this article, you’re already taking action to ensure your business’ success. Jeremy Senften, the chief operating officer at Rea & Associates, explains that “The best time to make a plan is before you’re in the middle of the fire.”
We recommend speaking with an accountant or Rea consultant if you need help in the planning process, in addition to taking the following steps:
- Check your income statements and look for any excess.
- Speak to your suppliers, vendors, etc.
- Find out how you can renegotiate with your bank, management companies, and other partners.
Create A Plan To Pivot
Doug Houser, Director of Construction and Real Estate Services at Rea & Associates, explains that “if you’re managing in crisis mode, you’re not thinking about capturing the opportunities that are present.”
Consider these questions:
- Will certain parts of your business be in-demand during a recession?
- Which parts of your business will be less profitable in an economic slowdown?
As a part of the recession planning at Rea & Associates, we listed out 50 things we could do differently in a recession. What are the different revenue streams you could pursue? What are other things you could cut back on? With these items in mind, we then mapped out where they fit into a recession plan and, if enacted, when they would occur.
For more on identifying opportunities amid a recession, check out our webinar, “Managing Business Growth & Profitability In A COVID-19 World.”