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Recession-Proof Your Business
Communication, planning and networking keys to weathering cyclical storm
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Business New Haven
10/15/2001
By: Mimi Houston
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Whether you sell hot dogs on Elm Street or provide professional services to a select client base, you know that business, until quite recently, has been good. Now, however, that climate has changed. You find yourself ordering fewer hot dogs from your supplier, or your outside lines are not lighting up the way they were.
At first we hoped it would be just a brief shower or two. But now we know the dark storm clouds of recession have descended upon us.
As is any climatic shift, different circumstances call for different tactics. When the wind changes, business owners must adjust their sail trim and maybe even come about. For anyone hoping to ride out the storm, there are various survival tactics that business owners should - provided they don't already - acquaint themselves with.
What's the first thing you should do?
“Don't panic,” assures Kevin McNamara, director of marketing and public affairs for Centerprise Advisors, New Haven-based business consultants and CPAs.
“As business people,” McNamara says, “we shouldn't be standing on the edge of the window. It's important for us to recognize that a recession is not like a catastrophic event that comes out of the blue, with no anticipation. Recessions are cyclical events that occur from time to time in the economy. They should not be unexpected, but rather, planned for.”
“We need to make adjustments as to how the recession will affect our business,” McNamara adds. “Every business is different, just as every recession is different.”
McNamara cites reduced business capital expenditures as playing a key role in the current maelstrom, but admits recent horrific events have added to its intensity.
“Other things, like the recent terrorist attacks, have affected consumer confidence, which had been holding up fairly well and up to this point may have helped the economy in general. But this recession has come as no surprise - capital spending has be down for over 12 months now.”
McNamara sees consumer confidence on a continuing downslide, as layoffs occur and potential buyers become ever more wary.
“Even if you are not laid off, you may know someone who is,” McNamara explains, “and that causes you to become even more conservative in your buying as your confidence to hold onto your own job may begin to diminish.”
Still, McNamara concedes that businesses will emerge - with careful planning - on the wings of the upswings that inevitably lie beyond every recession.
One of the first things business executives must do, McNamara and other experts agree, is to check your spending.
“Now is the time to delay all unnecessary expenses,” he advises. “Look at your revenue line and ask yourself, 'Am I doing all I can to maximize it?' Review your expenses carefully - you have to be able to reduce them without hurting your ability to deliver the product or service you are providing.”
While it's not likely that any prudent business owner is in the habit of spending revenues unnecessarily, McNamara stresses that every budget can benefit from a good housecleaning.
“Anyone can go through and look at expenses and find things to cut out,” he asserts.
But McNamara also advises not to use too heavy a hand on that push broom.
“Because we know recessions are cyclical, you don't want to overreact and shoot yourself in the foot,” he warns. “You don't want to hurt your business in the long run. Remember: Your customers are going through a recession too. You want to be able to hold on to them, continue to service them.
“Look at it this way,” he suggests. “A recession is a test of your management skills. It's a challenge to manage through the process and remain healthy and strong so that you can be there for the upturn ahead. Business is a marathon. It's not a 50-yard-dash.”
Larry McGolrich, founder and president of Castle Bank in Meriden, agrees with McNamara's analogy and stresses the importance of planning ahead from the onset.
“Things have been going great,” he says, of recent economic conditions. “But hopefully business owners have been socking something away for a rainy day and have not extended themselves by getting stretched out on debt.”
McGolrich also advises business owners to take a hard look at their financial situation, but he encourages them not to do it alone.
“Now is the time to really talk to your banker - stay close to your banker,” he urges.
“We're a community bank and we know our customers,” he says. “We want to stick with them and work with them. We want to be part of their plan.”
McGolrich acknowledges there remains a certain fear factor among the business community with regard to bankers - especially when tough times hit. He says this comes from more and more community banks being gobbled up by large, specialized institutions. Bankers began to be known strictly as lenders. But McGolrich urges business owners to view their banks as financial consultants as well. And it's in times like these, he stresses, that your banker is one of your best friends.
“Business owners should be developing different sets of scenarios,” he explains. “You need to analyze what will happen if interest rates stay where they are. If so, here's what you do. If they pop up, here's what you do. You do this by sitting down with people who are your counsel - and your banker should be part of that counsel.”
If Carol Cheney, president and founder of Cheney & Co., a New Haven-based PR and marketing firm, had her way, your public-relations advisor would be a part of that counsel as well.
“PR and marketing budgets are cut,” she laments, “at a time when you need to stimulate more business.”
Nevertheless, a wealth of ideas could come from just such a team member, and Cheney reviews a number of them.
“Businesses,” she advises, “should be continuing their PR work through joint efforts - events such as chamber of commerce events, business expos, using the media in order to get more stories about your business out there, being sure to do all the networking.”
“Of course, it's not all cost-free,” she reminds business owners. “You still need to pay your staff for spending extra time developing a relationship with reporters and editors, for example. You can't rely on press releases to generate a story in the paper.”
Cheney also likes to see business owners stashing their nest eggs away right from the inception of their firms.
“My business is 18 years old,” she says. “We've taken a conservative financial approach. We keep a money market account to see us through any slow times.”
Cheney says financial adjustments should occur immediately when those slow times start to manifest themselves.
“Business owners should not take a profit for their own use,” she counsels. “They need to remember to keep a percentage to plow back into the business to make it more weatherproof.”
Beyond the obvious financial concerns, Cheney urges business owners to get on with business.
“This is not the time to climb into a hole,” she explains. “Service-oriented businesses need to continue gaining visibility and name recognition. They can do this by fulfilling inquiries in a timely manner, writing and getting out proposals quickly and developing a strong infrastructure in terms of potential client lists. There are a lot of creative, inexpensive ways to obtain these lists.”
Above all, Cheney stresses networking as one of the critical methods to get your business in shape for the rocky roads ahead.
“Networking is invaluable,” she asserts. “One great way is to volunteer. Get on a board, join a committee, help plan an event you are interested in. It's a great way to learn something new and make new business relationships.
“It's especially appropriate right now in this spirit of pulling together.”
Arlene Mazzotta, owner of A.R. Mazzotta Employment Specialists in Wallingford and Westbrook, believes in that spirit as well. She urges business owners to practice it inside their own walls, with every employee. Recessions are hard on everyone, perhaps on employees most of all.
While reviewing budgets and making the necessary adjustments, Mazzotta likes to see involvement from everyone.
“When deciding how much to cut out of the budget,” she says “managers should enroll as many people as possible to get ideas on where to cut and still get a good product.“
But Mazzotta acknowledges that all the creative financial planning in the world is sometimes not enough to sidestep layoffs, and she has some advice for business owners should they face them in the months ahead. These revolve around the old standby - good communications.
“Companies should always have some form of outplacement,” she stresses. “Even a less costly 'mini-outplacement.' As part of this, employees should be given about a month's notice - or a minimum of three weeks, and they should understand that it is not their work habits causing the layoff.”
Mazzotta offers a wealth of information for employees to remember in times of recession as well.
“Flexibility is the key,” she says. “Employees need to be able to adjust to doing anything they are asked to do - the more diversified the better. Remember that this always looks good on a résumé.
“You should also take a course to learn something new. If you're an older person and don't know much about the computer, take a computer course. If you're an IT person, take a course on salesmanship. I'm talking about quick courses here - not something that will take two to three years to complete.
“It's all in an effort to be prepared,” Mazzotta says. “And it only adds to your work history and makes you more valuable to your employer right now. So don't wait until you are laid off.”
And once that happens?
“It's so important that people not think of a layoff as the end of the world. People of all ages are needed in the workforce,” she assures. “Good people are always needed.”
One of the most important tips Mazzotta has for employees facing a layoff is to not go through this trying time alone.
“Find someone to use as a mentor,” she urges. “Someone who has been through this before. Someone who can say 'Your next step is….”
In fact her words ring true to us all - whether we are employers or employees, we are not going through this alone. We're all in this together.
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