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Recession Proofing Your Business for Good Times or Bad

Financial

Recession Proofing Your Business for Good Times or Bad

By Mark E. Battersby / Published April 2020

Photo by iStockphoto.com/CDC1968

Editor’s Note: This article was written before the recent U.S financial market jitters caused in part by fears of a possible global coronavirus pandemic.


Many financial experts and economists are predicting the next economic recession is just around the corner. An equal number, if not more, say that there will be no economic downturn in the months ahead. Regardless of who is right, “recession proofing” the pressure cleaning business can ensure survival if tough times occur—and a better bottom line if they don’t.

In fact, there are steps that every business owner and manager can take that will ensure their business is prepared, survives, and, perhaps, profits.  Preparing for a recession means paying attention to the operation’s numbers now—like saving on costs or getting out of debt—to ensure that the operation is in good shape later on.

Planning Ahead

During a recession, every business is constantly under financial attack from all sides with dwindling income, increasing expenses, and customer and employee retention problems, making advance preparation vital. This does not mean hunkering down too soon but, rather, employing strategies to help prepare for a recession and creating a contingency plan to help the business act faster and smarter.

While big changes, such as postponing capital spending, should not be implemented until it is clear a downturn is occurring, other changes make sense even if a recession never comes.  That can mean shoring up the pressure cleaning business and its cash reserves while the economy is still booming.

In the middle of an economic downturn, the operation may find itself forced to quickly cut costs, leading to hasty decisions. After all, a recession is not the right time to discover what is and isn’t profitable and/or cost effective. 

Operations that are weak going into a recession spend their time putting out fires, playing defense, and simply trying to keep their heads above water.  Successful businesses do more than keep the wheels on the bus; they have planned their long-
run strategies.

Coping With Reality

Every pressure washing business owner and manager should have a plan for periods of tight cash flow, upcoming projects, and financing needs. With that in mind, it is no surprise that the best-performing businesses in past downturns had strong balance sheets and were even taking on additional debt to purchase more assets, expand, or even acquire competitors—all relatively inexpensively.

Among the strategies everyone can employ that are equally valuable with or without an upcoming recession are the following:

Grow Your Customer Base

The importance of increasing the number of customers the pressure washing operation has can’t be overemphasized. After all, the unexpected loss of a big customer or contract can impact even the most financially stable business.

Make The Most of Current Customers and Clients

It is unfortunate that long-time customers are sometimes lost during tough economic times. An economic downturn or recession on the horizon means that now is the time to take care of loyal customers, since they could also bring new customers to the business. Telling customers how much their business is appreciated or rewarding them through discounts, loyalty cards, and gift certificates can reap big dividends.

Win A Competitor’s Customers

Any business hoping to prosper in tough times must continue to expand their customer base, which often means drawing customers away from the competition. This can be accomplished by offering more products or services or something different from the competition. Providing better customer service is often viewed as one of the easiest ways to outdistance the competition.

Pursue Better and More Aggressive Marketing

In tough economic times, many businesses make the mistake of cutting their marketing budget or even eliminating it entirely. Lean times are, however, exactly the time when the pressure cleaning business needs marketing. Customers are restless and make changes in their buying decisions. Clearly this is a time to help them find your products or services, meaning the operation should become aggressive in marketing.

Prospective customers, who could also be feeling the same economic pinch, will likely be on the lookout for special offers and freebees that can provide them some financial relief.  Developing special offers and discounts, while limiting them to a specific time frame (i.e., for a limited time only), will create a sense of urgency and produce some quick cash.

Review Inventory Practices

What can be done to reduce those inventory costs without sacrificing the quality of goods or inconveniencing customers?  Can supplies be purchased elsewhere at a better price?  Just because the operation has always used a particular vendor doesn’t mean it must continue on the same path, especially when another supplier or ordering process might reduce costs.

Reduce Debt

Many businesses need to go into debt in order to finance their operations, whether by borrowing money or charging expenses to a credit card.  Now might be the time for a pressure cleaning business owing money to make an aggressive plan to pay it off as soon as possible. If a recession or any economic downturn does materialize, and if the operation is maxed out on debt, there will most likely be only limited access to badly needed cash.

On The Other Hand, Some Debt May Be Good

Many experts advise freeing the operation from debt before a recession hits and, then, avoiding taking on anymore unless absolutely necessary.  However, if the pressure cleaning operation is thriving, this might be a good time to line up financing that might be needed later. 

Good times or bad, a “rainy day fund” is almost a necessity. Whether an emergency savings fund or a line of credit, planning ahead means having a ready source of cash if or when it might be needed. 

A line of credit is far easier to establish before the business begins struggling. A line of credit is extended by a bank or other financial institution to a business and enables the operation to draw on the funds when needed.

Keep Your Personal Credit In Good Shape

Hard times make it more difficult to borrow.  Small business loans are among the first to disappear. However, with good personal credit, a pressure cleaning contractor or an equipment dealer or distributor will stand a much better chance of being able to borrow the money needed to keep the business afloat, if necessary. 

Recession-proofing a small business often means keeping tabs on the owner, partner, or shareholder’s personal credit rating as well as that of the business—and doing whatever is necessary to keep all those credit ratings in good shape.

Diversify…Or Not

Merely adding other products or services is not diversification. At best, it’s a waste of time and money. Worse, it can damage the pressure cleaning operation’s core business by taking time and money away from what the business does best. In other words, drop the extras and focus on what the pressure washing operation or business does best and most profitably to recession-proof the operation.

Motivate The Workers

During any economic downturn, the pressure cleaning operation’s employees, if any, will have financial problems of their own. That means their first priority will usually be to take care of their families, either with a raise from the operation or from a job change to one of the business’s competitors.

Losing well-trained, quality workers is something no business, large or small, can afford to let happen. Employees, if any, should always get fair compensation for doing their jobs.  When they go above and beyond, however, they should be rewarded through a formal, tied-to-profit, pay-for-performance plan. This means developing a pay-for-performance plan tied to profit for each key individual and involving the worker in the planning process.

Use Technology

There is no better money-saver than modern technology.  This means computerizing the pressure cleaning operation to the fullest, using accounting and inventory software and thus spending less time balancing the books. An online business should install hit counters on their website to know how many visitors they’re getting and where they are coming from.  Motion sensors, which shut off lights in rooms where nobody is present, can also be installed to lower utility bills.

Finally, Maybe

Despite the uncertainty over whether a recession may be on the horizon, preparing now may help every pressure cleaning business not only survive but also gain market share and grow.  That’s why it’s important to review the various scenarios now, including how the operation would handle a sharp drop in sales. 

While the last recession proved there are some circumstances that simply can’t be foreseen, a few steps might lesson the potential impact. To survive a recession, take these steps:

  • Develop 30-day sales goals.
  • Do cut expenses and track cash carefully.
  • Keep marketing. Don’t be tempted to cut or eliminate marketing activities.
  • Improve communications with customers.
  • Add value, not price.
  • Promise realistically and meet or exceed expectations.

Unfortunately, there is nothing that will make any pressure cleaning business 100 percent recession-proof.  However, implementing some of the strategies already outlined can help ensure the operation survives tough times and, perhaps, even enable it to profit during them. 

 

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