Preparing for the Next Recession

By Mark Mitchell

I’m not an economist, and I’m not even sure economists can tell us exactly where we’re heading. One thing I do know, however, is that no matter how well the economy is doing, it always slows down eventually. Hopefully, our next slowdown won’t be as challenging as the last one. Either way, it pays to be prepared, and when things are going well is the time to make those preparations.You might be wondering what being prepared looks like for your company. As a consultant to the building materials industry for more than 40 years, I have seen many downturns come and go. I have also seen what some of the strongest and most successful companies have done to deal with them, and there are some things you can do to get ready for that next one, whenever it may come.

Successfully making it through a slowdown often has more to do with what you did before it than what you do during it. Entering an economic downturn in a position of strength is one of the best ways to insure you’ll still be standing once the market picks up again.

Seven Things You Should Assess Now

Here are seven aspects of your company you should be looking at now to make sure you’ll be prepared for whatever comes:

1. Balance Sheet — It’s easy for companies to get complacent about certain things when business is good. The balance sheet is one of them. If you’re like most companies, when business is good you probably tend to focus on investing in growth and sales volume more than profit margins. Growth is good, of course, but it can negatively affect your financial statements. Take some time to review your financial statements with your advisers. If your sales declined, would your business survive?

 2. Customers — The health of your business should not be your only concern. How well your current customers would do during an economic downturn matters, too. When you feel the market is about to slow down, you may want to reconsider how much business you handle for customers who have trouble paying or who simply don’t run their businesses very well. Dealing less with those customers will free up some time and resources. Use them to put a renewed effort into going after the best customers in your market.

 3. Employees – Good labor is hard to find, but that shouldn’t be an excuse for keeping poor performers on your team. You simply can’t afford them. You don’t have to settle for mediocre staff even if you’re a small player and don’t have the same resources as some of your competitors. Take steps to improve the reputation of your company and strengthen your company culture. You’ll be able to get great talent if you’re known as the best place to work in your market. It’s not about paying more. Pay extra attention to the attitudes of everyone who comes into contact with the customer. Don’t let difficult staff cost you business.

4. Marketing — Review your website, social media, ads and other marketing. How can they be strengthened? Do you know why you’re doing what you’re doing with your marketing? Measure the ROI of your marketing and focus on the things that actually work.

5. Diversity – We talk about slowdowns like they have an equal blanket effect on the entire economy. It’s true that they tend to depress all markets, but not all markets decline as sharply. If you’re strong in either the residential or commercial market, you might consider making inroads into the other to reduce your risk if one declines more. If you want to make this move, start with small customers to learn the differences between the two markets. The same is true of other routes to market. When new construction drops off, remodeling may be more stable, etc.

6. Change the Game – You and your competitors are probably playing a different game than your customers. You may be trying to improve your performance, but doing business the same way you’ve done it in the past. Your customers want to work with innovative companies, not those who are really good at playing the old game. In new construction, for instance, customers are now forced to significantly reduce waste and inefficiency. They’re looking for suppliers who can help them become more productive. This should be you!

7. Be the Guide – Your customers don’t want countertops. They want to be more successful. They want to make better decisions. They are looking for trusted experts who can guide them. You should become that trusted expert. Home builders, architects and homeowners are not experts in surfaces. You are. So act like it!

Be Prepared

 When the next recession comes, some of you will go out of business. Some of your customers will go out of business. The business will change and, in the end, the survivors will be stronger. So, take action now to help insure you are prepared.

About the Author

Mark Mitchell of Whizard Strategy is a sales and marketing consultant to building materials companies. He is also the author of two books, including Building Materials Channel Marketing. Mark publishes a weekly newsletter, a blog, a podcast, webinars videos and workshops. He is also a speaker at many company and industry events. Learn more about him and his expertise at www.seethewhizard.com.