So you want to recession proof your business? You may be considering the ever popular cutback. We are seeing more and more businesses considering cuts - or as it’s so commonly referred to, Reorganizing, streamlining, narrowing your focus, … the euphemisms are many. I call it Chapter 6 Management, because when you are done, you will start Chapter 7.

Here is the prediction - the companies that are successful in implementing cuts early to prepare for the recession, will be the ones that don’t survive it. Why? Because what they are doing is getting rid of the parts that could be their saving grace in a real recession.

They are:
-Reducing their core competencies by cutting staff
-Reducing possible revenue by cutting customers
-Reducing the chance of referrals by cutting customers and/or staff
-Reducing their revenue streams by cutting “dogs” out of their product line

I’ve heard consultants advising clients to get rid of high maintenance accounts and thereby increasing profits. Now this may sound like a good idea. Lose the problem customers and only work with those that are easy and quick to pay. But the problem with this approach is in the long term. You may end up keeping the very customers that fall first in a recession. You can’t control their decisions, and they could be making all the wrong ones. If your customers are the first to fall, I’ll let you guess where you will be going…

Heading into a recession you should be building momentum as much as possible. Chances are that this will be a very long uphill battle. You don’t want to be standing on the breaks or you’ll never get to the top. The onset of a recession is the time to maximize your revenue stream, simply to make sure that your customers are numerous enough for you to survive it. If you have a strong organization with lots of revenue streams, you will actually stand a change of growing in the middle of a recession when your customers fall by the wayside. What little business they shed will be up for grabs as that point.

By the same token, once you are IN a recession, you need to consider where your holes are. Now is the time to recognize, fix and/or get rid of unnecessary expenses. Before you actually get there you have to consider if the expense will pay off in time before you cut it. It could turn into a revenue maker that keeps you alive later. Once the economy is crumbling around you - cut, and cut fast.

You need to pay close attention to your production to catch the ones that are costing you money. Even if they show great potential in a normal or strong economy, you don’t have time in a recession to wait for them to mature into moneymakers. Unless this product or service is bringing you other business that is profitable, or shows great promise of maturing very soon then this is what you should cut. But again, only cut what is costing you, not the items that are breaking even or better, they are bringing business, and business brings more business.

The great thing about living through a recession is that you will have a head start on everyone that tries to start up or get back in after it’s passed.

Go in strong, and come out rolling. Step on the breaks too soon and your competition will thank you for the customers they inherit.