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Category: Brand · 4 min read

6 Tips to be Prepared for a Recession

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on December 12, 2019

author profile photo

on December 12, 2019

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Our market and economy operate in a circular fashion. They go up and down, and then up and down again. Always moving, always fluctuating, but always repeating. For a while now, we’ve been experiencing an economic boom. There hasn’t been a major recession since 2008, but lately there’s been some chatter about one coming soon.  

Depending on where you get your news and industry updates, talk of when a recession might be coming can vary. Some say as early as next year, others say it’s a few years out, and contrarians say it’s not going to happen at all.  

Whether or not you believe a recession is coming, there are some things you can do today to help make sure your business is prepared for a recession, if it ever does happen. Let’s take a look at six things you can implement right away.  

 

1. Monitor Your Cash Flow 

Cash flow is money that is coming into your business in the form of client commissions, retainer fees, or billable hours and going out as monthly payments for rent, payroll expenses, or one-time purchases. Cash flow takes into account more than just your overall profits and losses, and is more about understanding the inherent timing of cash coming in and out. It’s a good idea to monitor it and make sure you have cash flowing.  

If you have more money coming in than out, then you’re in a good spot. But it’s also possible for your business to make a profit, but not have any cash flowing. Sometimes you can have revenue you have billed and recognized as revenue on your profit and loss statement, but have not actually received yet. That’s why cash flow is so important. It can make or break your business and put you in debt if you’re not careful. 

To see how much cash you have moving right now, run a cash flow analysis. One way to do this is to compare your total unpaid purchases to the total sales due at the end of the month. If your total unpaid purchases are more than the total sales due, then you have a cash flow issue and you’ll have to spend more cash than you get the next month. It’s a good idea to do this on a regular basis, every month or every other month, to make sure you’re staying on the right track.   

 

2. Reduce as Much as Possible 

Are there any expenses that you can reduce? Do a quick inventory of your costs, and identify a few areas where you could cut that don’t interfere with your client’s experience. Maybe there’s a different vendor that’s cheaper than the one you use now. Or maybe you don’t have to order as many of an item. You don’t have to cut back today, but having a plan in place for what you would is all that you need right now.  

 

3. Retain Your Clients 

Did you know it can cost five to 25 times more to acquire a new client than retain an existing one?1 Focus on the clients you have, and regularly connect with them to see how they’re doing.  

It may help to have a consistent schedule, where you check in some way every month, or at least once a quarter. Phone calls, texts, emails, and letters are all great ways to keep in touch, and keep your existing clients engaged. If a recession does come, keeping your current clients is a good way to keep your business running.  

 

4. Focus on What You do Best 

When times get tough, there can be a tendency to expand the services and products offered. But there’s something to doing the opposite, and focusing on what you are really good at. Learning a new product, promoting it, and explaining it to your clients can be risky, especially when you can’t afford them to say no. So, identify what you do really well. What comes naturally? Where do you have the most success? Double down on those areas, and rely on those strengths.   

 

5. Keep Your Credit Up 

Small business loans are often one of the first things to become a rarity when hard times hit. So, make sure your credit score is buttoned up and in good shape. Keep track of your business and personal credit scores, just in case a loan is necessary at some point.  

 

6. Make Your Marketing Matter 

When money gets tight, your marketing budget may be one of the first things that gets cut or eliminated. Do whatever you can to not let this happen. But times like recessions are when marketing becomes even more important. Getting the word out about your business and services becomes necessary to your business growth, and the competition may get leaner during times like these. So, keep promoting your business. And, if you can, market even more.  

Nothing can truly recession-proof your business, but you can be prepared for it. Staying in control of your cash flow, marketing, and services can help you be in a good position if a recession does come our way.

 

Source: 

1. Redbord, Michael. “The Hard Truth About Acquisition Costs (and How Your Customers Can Save You).” HubSpot Research. 2018. https://blog.hubspot.com/news-trends/customer-acquisition-study#LINK3 

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Written By

Mark Williams

President and CEO

Mark Williams is the President/CEO of Brokers International. Over his more than 25 years of financial services experience, Mark has been both a producing independent agent in the field and a home office leader consulting to agencies and field marketing organizations. Currently, Mark is focused on the future of the insurance industry, from the disruptions of InsurTech and robo-advisors to the changing demographics and needs of customers. He also is an avid mentor, helping financial professionals navigate the industry.

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