by Ray Silverstein

Are we really headed for a recession, as the pundits predict? The truth is, we have no idea. However, we do know there’s an upside to everything. For entrepreneurs, a soft economy offers certain unique opportunities.

Instead of wringing your hands about things you can’t change, be poised to take advantage of them. Get ready to turn lemons into lemonade—here’s how.

Maximize Vendor Concessions

When times are lean, it’s time to renegotiate with vendors. Offer to lock-in a longer-term property lease, using concessions as a trade off. Or, negotiate long-term supply contracts. If you can pay promptly, leverage it to obtain price discounts, promotional allowances, etc.

Upgrade Your Talent Pool

When the economy dips, strong candidates are easier to find. If you’re less than satisfied with your staff, don’t settle for mediocrity. Remember, non-performers weaken your business, and right now you need to be especially strong. 

Woo Your Competitors’ Customers

Are your competitors struggling? Then target their customers. When customers fear a disruption in the supply chain, they’re more willing to make changes.
Or, if it’s feasible and makes strategic sense, consider acquiring a competitor in its entirely. (Will you ever get a better chance?)   

Ramp Up Your Marketing

Don’t make the mistake of reducing marketing programs; it’s not a smart way to tighten your belt. For one thing, marketing firms are hungrier for business now, so you’ll get more for your dollars. For another, research indicates that when firms maintain their marketing efforts during a soft economy, they enjoy larger sales increases later. 

In addition, here are some steps you can take to “recession-proof” your business:

Review Staff Compensation
 
In most small firms, employee compensation is the largest expense. If your compensation formula isn’t tied to performance, fix it. Do you have performance measurements in place? Can you reduce base salaries, while boosting performance-based bonuses? (Guess what? Your employees may welcome it!)

Increase Throughput

During economic downturns, customers like to purchase in smaller quantities. Instead of turning them down, ramp up to accommodate them. Find ways to shorten lead times and handle shorter runs.

Improve Your Work Processes

You can’t afford inefficiencies now, so squeeze those excess costs out of your work flows. If you haven’t tried TQM (Total Quality Management) or a comparable method, now’s the time to investigate.

Retool Your Sales Strategy

Review your customers: who’s profitable? Who’s not? Be ready to “fire” unprofitable accounts, or at least raise their rates. Make sure your sales team is selling your most profitable products and services.

Create Strategic Alliances

Partnerships can reduce expenses, so court them. Look into buying pools, rent sharing, equipment sharing, etc. Find out if manufacturers’ reps and export agents can benefit your business.

Finally, keep your eyes open for fresh ideas. Read the hot business books. Attend seminars. Join a group advisory board. Learn how other entrepreneurs are getting through this and how you can build on their strategies.

Survival is all about adaptation. If you’re agile, smart, and willing to change, you can not only survive a potential recession, but emerge from it even leaner and stronger.

By the way, I have developed an easy-to-use checklist that can measure whether you’re dreaming or doing. I am happy to share my 100-point plan, so send me an email at Ray@propres.com and I’ll send it to you. In fact, give yourself a point for asking!

Ray Silverstein is president of PRO:  President’s Resource Organization, a group of small business peer group advisory boardsin Chicago and Phoenix.  He is also the author of The Best Secrets of Great Small Businesses.  He can be reached at 312-337-3658.  www.propres.com