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Are you worried about the impact of the economy on your business? This article gives you advice to protect your business, including a review of William B. Conerly’s book, “Businomics,” and a discussion of his advice on managing a business during a recession.
Good business planning includes the development of a plan for how your business will survive adverse impacts over the short term and the long term. This type of planning is often called your business continuity plan (BCP).
Why do you need a BCP? According to Ken Doughty, editor of “Business Continuity Planning: Protecting Your Organization’s Life,” many companies are required to create a BCP to comply with federal law, which protects the interests of clients and shareholders. If you need help with constructing a plan, you can visit the web site of the U.S. Small Business Administration or Homeland Security’s Ready.gov. If you already have a BCP, it should include a component for anticipating economic slumps.
William B. Conerly, Ph.D., explains how to anticipate economic slumps in “Businomics.” Published in 2007 by Platinum Press, this resource is available at book retailers like Barnes and Noble. Business owners and managers should consult this text for great advice on business planning and understanding the relationship between their business and the cycles of the economy. Conerly’s book is especially relevant in times of economic downturn. Business owners can especially benefit from Chapters 3, 5, 6, and 10.
A professional economist and business consultant, William B. Conerly, explains that your business plan can function as an early warning system. Consider this example:
“When the early warning system begins to flash a warning, review and update the contingency plan, and…limit new hires to vital positions, reduce or eliminate capital spending plans, monitor inventories closely, [and] set up credit lines if possible.”
You may be thinking that Conerly’s advice is not relevant to your business. However, it helps to look at your business in the bigger picture. Medium and large businesses can implement a hiring freeze and only replace the most important employees. If you are the sole employee and are thinking about outsourcing work or taking on an employee, a recessed economy does not present the best environment for such a move.
Another thing to think about is your own workload if you are a one-person operation. If you are already working a full workweek to meet your obligations, the uncertain economy suggests that you hold off on expanding operations. For example, if you own a lawn business, you don’t want to take on too many new accounts. You can pad your business with a few extra clients in case you lose some clients during a recession. If you lose a significant number of clients, use your free time to go out and use in-person marketing to obtain new clients.
The second component of Conerly’s advice is to trim down capital spending. In larger businesses, this advice refers to major spending on assets such as property and expensive equipment. In a smaller business, this advice refers to any spending that you are doing to reinvest in your business. In the lawn business example, it might mean holding off on buying an extra lawnmower or a new trailer for your truck.
Conerly’s third suggestion is to regulate your inventory closely. For inventory-based companies, it may mean keeping less stock in your warehouse. Companies that do not deliver products may not have a large inventory. However, they have other types of inventory such as technology, equipment, furniture, and office supplies that should be safeguarded. For example, if you have several employees, keep on only the people you can trust. If employees are stealing or wasting supplies, it is advisable to discipline them or terminate them. Small costs can have a minor impact on your business. In a recessed economy when revenues are down, minor impacts can become major impacts.
Conerly’s final recommendation is to establish lines of credit if possible. Some businesses already use loans or credit cards to support their business. Here is a word of caution. When you look at how much you will borrow to tide your business over, don’t borrow so much that you can’t make your minimum payments when business slows down substantially. Overextending your debts is a common reason why businesses go belly up.
Protecting your business is important for its long-term health. Be sure that you update your business continuity plan, and use cost-saving measures to protect your livelihood.
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