How Do You Recession-Proof Your Business?

Trying to recession-proof your business is like hurricane-proofing your house. Now, we don’t get many (actually, any) hurricanes in Central Texas, but I’ve got friends in Florida who tell me all about it.

They tell me the hurricane-prep is almost comical to watch: Five days before a major hurricane will make landfall, all the people who waited until then to start preparing suddenly leap into action. People swarm all over the grocery stores like a plague of locusts, buying up all the bottled water, bread, and eggs.

Empty shelves at a grocery store in Florida. Trying to recession-proof your business is like hurricane preparedness.Then they swarm all over the home improvement stores, buying up all the plywood and generators. And once the hurricane is over (especially if it didn’t hit), people return their unused generators. It’s gotten so bad that a lot of the stores will no longer accept generator returns after a hurricane.

Of course, this is the wrong way to go about hurricane preparation. Proper hurricane preparation should start long before hurricane season even starts — June 1 through November 30.

That means real preparations for the next hurricane season should start on December 1.

You buy your plywood in advance, and pre-fit it to the windows and store it. Buy your generator on sale or from one of the people who couldn’t return theirs, and learn how to install and use it. And buy water coolers instead of bottled water, and fill those 24 hours before the hurricane makes landfall.

How Recession Proofing is Like Hurricane Proofing

The best way I’ve found to recession-proof a business is to drive the living daylights out of productivity, and make sure your company is as easy as possible to do business with. It may go against the grain of the work-life balance, but in a recession, you have to do a lot more with a hell of a lot less, so it’s better to streamline now when it’s less painful.

The first thing you need to do is change your business philosophy. Commit to Continuous, Consistent Improvement at all times. That means working to improve production and other goals during good times and bad. You can’t just wait for things to turn sour before you start looking for solutions. It may be too late by then.

Next, start measuring your output, your efficiencies, your errors, and anything else that affects your bottom line. This goes for your back office as well — even measuring your HR or accounts payable office could help you find problem areas.

Run lean where people are concerned. This may not be a popular thing today but running a lean operation means you’ve identified problem areas, less-than-capable employees, and even automation opportunities, and made changes. Now, all of your production is geared around having a streamlined operation. You can save money, give overtime as it’s available, and sock money away for the lean times. Otherwise, if you just start slashing the headcount, you’ll get rid of people who are actually essential to the operation, and their absence will create bigger problems than those you solved.

Running lean will push you toward Continuous, Consistent Improvements, as well as afford the people who were there, when things are more busy, more overtime. This way, the (hopefully) worst that can happen is that those associates would lose some of their overtime, but they wouldn’t lose their job or their benefits.

“I waited too long. What do I do now?”

If someone called me today and said, “I waited too long. What do I do now?” there are a few things I would tell them.

First, go through your organization chart and eliminate the under-performers. Period. Do it overnight, all at once. And not just on the floor, but your back office as well. If there are people who can’t meet the performance standards you’ve set for them, then they need to go, because they’re only serving as negative pressure on your productivity and overhead. That also goes for your executives. There are no sacred cows — when the cows are running out of milk, there are no sacred cows.

Do this with your product lines as well. A simple ABC analysis on your products will reveal those that aren’t making you any money, or may even be losing you money. Chances are, your top 10% of performers (your A performers) are making plenty of money, while the bottom 20% (the C performers) aren’t selling, and are only distracting from your overall purpose.

Look at who potentially deserves to be promoted. The cream will invariably rise to the top in a downturn. The people who are emotionally and intellectually engaged in the business will fight to keep it running. So reward them heavily. Reward them after the recession is over and recovery is on the way.

Finally, institute a culture of Continuous, Consistent Improvement. If you starting finding your improvements, you may identify some process issues that will fix some major problems quickly.

And once you have this system in place, you’ll be more easily able to assume a lean philosophy during the recovery, which will make the next recession less painful and easier to handle. You’ll find you don’t have to go through the roller coaster of bad morale and the hardship of hurting families.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: Andrew Heneen (Wikimedia Commons, Creative Commons 4.0)

Author: David Marshall
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.