In this article we will look at doing business during a recession; how you can minimise the risks and perhaps even spot opportunities.
Doing business in a recession.
Global recession. International recession. Double-dip recession.
Look on the news and search on the web and you will be in no doubt that the world economy is experiencing a recession. That isn’t going to cheer you up but it should remind you of one thing.
Everyone is in the same boat.
The wet leisure industry, sadly, isn’t recession proof and much as we like the products and services that we sell it would be a brave man that decided pools, saunas and hot-tubs count among the necessities of life. However, even during a recession people won’t stop wanting those things and they won’t all stop buying them.
In fact, over the course of time, you can see that businesses that have worked through a recession and survived it have come out stronger and better than those who haven’t.
Tougher times make people and businesses work smarter; those that step up to that challenge will develop stronger and more sustainable companies.
The areas that really come under scrutiny in times like these seem to fall into two areas. How efficient is your business and how effective is your marketing.
Get your figures in good shape.
One of the worst things that happen in a recession is that people can sometimes feel powerless. They say, ‘There’s a recession on, what can I do about it?’ and bury their head in the sand.
Well, there are things you can do about it.
The first thing to remember amidst all the doom and gloom is that the UK is still a very rich country. There is money out there and there is business out there. You just have to work that bit smarter to get it.
A damaged cashflow is the most obvious symptom of a business operating in a recession so looking at your books and how and when you invoice customers is a good place to start.
Bill early and bill often. Now isn’t the time to be offering people credit so get your invoice in as soon as the job is done. If it’s a big project then ask for part of the money up front or invoice stage payments at key points in the projects timeline.
Look at your prices and your margins. It may seem counter intuitive to be putting prices up during a recession but your profits are what keeps your business afloat. It’s quite common to find that one aspect of a business is actually funding a much less profitable side. It might be time to rationalise your business structure and let that less profitable work go.
Make sure that you aren’t carrying too much stock. Empty showrooms aren’t going to encourage your customers but a warehouse full of stock just represents money that isn’t working for you. Order less but order more often if that’s what it takes to keep stock levels lean.
Of course, you’ll want to know that your suppliers can deliver quickly as and when an order comes in to you, and that they can provide the technical backup and support to help you keep your customers happy.
Look at the fixed costs that your business carries; your phone bills, power, insurance, heating and even your premises. Shop around to see if you find cheaper providers or re-negotiate your existing contracts.
Some don’t just survive, they thrive.
A recession isn’t a plague. It’s a set of economic conditions that some companies actually thrive in.
We’ve talked about cutting fixed costs and protecting your cash flow but there is one area of expenditure that you should try not to cut and that is your marketing budget.
The simple reason for that is that everyone else does.
If your competitors cut back on their advertising and marketing and you keep yours at the same level you immediately get an increased ‘share of voice’. In a nutshell that means that of all the businesses talking about pools or saunas or spas, more people are going to be hearing what you have to say. And in time, an increased share of voice becomes an increased share of the market.
Having said that, a ‘business as usual’ attitude won’t serve you best either. As we’ve said, you have to make your budget work smarter.
Cutting your prices and telling people about that might look like an appealing option but what you are cutting is your margin, and your margin is your life blood, and what you are telling people is that you are cheap.
Offers and promotions that add value from your customer’s point of view will generate new business just as well. And your existing customers are the best place to get that new business from.
Up-selling and cross-selling work well here. If one of your customers has a sauna then perhaps they would like to upgrade it with one of the new fibre-optic lighting kits? Could changing to a more eco-friendly, economical pool pump save one of your customers’ money in the long term? What about putting a hot-tub next to their existing pool?
The thing about existing customers is that you know who they are and what they like. You can contact them by direct mail or email or using social media.
When you are looking for new customers, they might come from slightly different social groups and be attracted by different things. People in their fifties and sixties often remain fairly affluent and they are a growing sector of our population. The health aspects of pools, saunas and spas will appeal to them strongly and they are also likely to be eco-friendly and environmentally aware.
We’d all like our businesses to be more efficient and marketing savvy. This economic climate means we have to be just that.
The economy will pick up again and what we learn in this recession will leave us well placed to take the best possible advantage of that.