Weathering Economic Declines

It is no secret that our nation is in a recession. While I do not believe that it is as bad as the media portrays it, I see and hear about how this recession is affecting business in different areas of the country.

Cash is king right now. If you do not have it and your sales are down, you may have taken up nail-biting, or even drinking. During a recession, you want to save as much money as possible – I should say, as much cash as possible. Cash is the best floatation device a company can have.

Many financial gurus suggest to individuals that they have 3-6 months of expenses in savings for an emergency. Why should businesses act any different? Make it a plan to reserve as much cash as possible until you have 3 months or more in the bank in case sales dry up before this economic situation is over.

Did you ever see Mr. Mom with Michael Keaton? At the end of the movie, which took place during an economic downturn in the auto industry, Teri Garr convinced her boss to lower the price of their product for a limited time. The marketing around this announcement was fantastic! The boss himself appeared on the TV commercial in patriotic colors and explained that they were reducing the cost of their product during these troubled times, and that they would return to normal pricing when the economy gets better.

This is a risky move – I hear ya! We do not know how long this recession will last! So, why don’t we put a spin on this and give discounts to cash customers and larger discounts to pre-paid customers? If cash is king, this is a great way to get cash.

This last idea is a difficult one for me to discuss because I do not have a lot of experience with employees – easier said than done moment. If it comes down to it, you can have an employee meeting and share any situations and the short-term future of the company. Notify employees now if you are expecting a drop in sales. Tell them that until the economy gets better, there will be no raises.

If your situation is dire enough, you may need to devise a temporary wage reduction or “savings” program. This program would ask employees to take lower pay in exchange for continued hours.

Another idea is an employee investment savings program where your employees pledge up to 20% of their paychecks to remain in the company. The company uses that money to float and, in return, the company gives them 2% interest on the money they let the company “borrow”. You will not get a loan rate that low, they will not get an interest rate that high – you both win.
A recession can be extremely scary to business owners. I hope that these ideas have helped or generated new ideas for you and your business. What other ideas do you have?