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Episode 31 – Recession-proofing
Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.
It was Benjamin Franklin who said “In this world, nothing is certain but death and taxes”. More than two hundred years later, you can add at least one thing to Franklin’s list of inevitable occurrences, and it is not a pleasant thought either, it’s recession. Recession is always on its way, it is just a question of when. There has been a lot of talk lately about recession and whether or not various regions or the country as a whole will fall into a recession and how soon. But no matter what the answers, it is always best to be prepared and that is why this episode of the Business Coach Podcast is dedicated to recession proofing. Here is to share his tips and tactics for doing better through any downturn is Mark Wardell, the founder and president of Wardell Professional Development of Vancouver-based management consulting firm. Mark welcome to the Business Coach.
Mark: Pleasure to be here.
Ian: Now, you’re out there in Vancouver. How optimistic are the entrepreneurs that you’re dealing with?
Mark: Well, I am in Vancouver, so a little more optimistic perhaps than on the other side of the country. Now, the people I am worried about I guess are the ones that are less prepared for something like this.
Ian: So what’s the first step in successful recession proofing. Do you start with, say, streamlining operations, building your sales funnel, signing customers to long-term contracts? What.
Mark: Most important thing really is cash. We start with making sure the business is well-capitalized. You have to have enough cash to fight the potential storm coming your way. Typically, a recession is going to last between and historically let’s say, eight to eighteen months. You want to make sure that people have enough money to be able to get through that king of time period. So once we’ve maybe taken care of that, then we want to make sure we are maximizing our cash flow as well. Resolve overdue, receivable issues, shorten up receivables, push back the payables, that sort of thing. And often lots of opportunity for renegotiating with vendors as well making sure you get the best deal is really really important. Once thing we like to do with our clients is take a look at their chartered accounts, take a look at the expenses and it’s kind of a fun thing to just go through the list and see if you can pick one strategy for each one of the line items that is going to help you to reduce your expenses in that part of the company. You would be amazed actually at what people can pull out. You have utility bills reduced, phone bills reduced, all kinds of stuff. If you just think about it and give it a shot.
Ian: Now what about operational efficiencies. A lot of companies will try to tighten their belts and squeeze every possible cost out of the system and get every drop of productivity out of every dollar, is that high on the list of things you need to do to recession proof?
Mark: Sure, that is the next thing you want to begin to actually doing. The whole thing is trying to fight to protect and even if possible grow your margin. The margin is sacred, look at it from that perspective. So, if we can improve processes and workflow and eliminate bottle-necks, there is all kinds of experts out that can help you do that sort of thing. If you can afford it, that’s when the cash flow comes in, automation is a great tool. And often overlooked is people, I mean, getting the right people in the right positions is so critical. A good solid team with a really strong culture, people are going to go to the mat for you and help you when times get tough. And it really is, I think, an under-utilized strategy.
Ian: And it is probably a pretty bad thing to experience a lot of staff turnover during a downturn because that’s productivity you just can’t afford to loose.
Mark: Absolutely. And training your people, right. People love to be trained, they enjoy being trained, they want to be trained and the more you train them, the more they can understand the efficiencies of your company and help you to eliminate waste and improve your productivity. So it is a win-win situation when you focus on your people.
Ian: Let’s talk a bit about marketing. The first thing that many companies cut when a recession hits is their advertising and marketing budget. Is this a good idea?
Mark: It seems like an easy strategy but no. I mean, I typically think it is a bad strategy. What you do want to do is pay attention to the return on investment of your marketing dollar. So you want your marketing dollar to go far but you don’t want to market less. If anything in fact, you want to market more. Again, everything always flows back to cash flow and all flows back to efficiency. If you can have a very efficient, lean functioning machine, then you can invest and be more aggressive with your marketing efforts and that’s what you want to do during a downturn.
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