Will we have a recession? Are we already in a recession? I don’t know. I’m not an economist.
Even if we have a recession — far from a certainty — I believe Northwest Arkansas will weather it better than anywhere else.
For this treatise, however, let’s assume we will at least have some slowdown. One of my pet peeves is how most people believe a recession will hurt their business. That doesn’t have to be the case. Even if your industry is affected in its totality, no single company necessarily must decline in a recession.
You can grow during a recession if you do the right things by taking business away from other firms whose owners are not responding to it appropriately. That is especially true for companies operating in large, mature, fragmented industries with many providers — the exact situation many of our readers are in.
Here are my thoughts on how your business can thrive in a recession:
Increase marketing and promotion efforts. Sam’s Furniture is the best example locally, and I have used it before. During the last recession, they grew when everyone else in Northwest Arkansas declined or failed because Sam’s increased their advertising and promotion efforts dramatically. They became the largest furniture store in the state by spending their way out of it (a slowdown in furniture buying). You can do the same thing. It may be counterintuitive because most companies cut back on marketing during tough times, assuming the customers aren’t there to sell to, but it works.
Improve product and service quality. If economic clouds are on the horizon, you want to be sure your business is the best at whatever you do. There will always be buyers for the best of anything. And those who can afford the best are the least likely to be affected by the economy. Think about it. That’s what we did in our residential design-build/development company from 2008-2013. We dedicated ourselves to ensuring that the quality of our housing projects was the best in the area, regardless of cost. That appealed to well-heeled buyers who still had money. It even worked in the rental market. We grew, and others in our business failed.
Redouble your efforts to find and keep the best people for your team. You, as the leader, have to keep a positive attitude. Show no fear. Be confident that you will be fine if you do the right things. Promote your successes inside the company. Share your numbers with everyone in the firm. Cut in everyone who works there on your cash basis profits. Don’t cut back on training or institute across-the-board pay cuts.
Save your cash for working capital. That will give you some gas to throw on whatever fires are burning but get all the credit you can get now before you need it. That way, if you need it, you will have it. And if you have cash and credit, you may be able to take advantage of the opportunities a slowdown presents (like hiring good people or buying distressed real estate or competitors) that others can’t. It may be too late if you wait until your profits and cash position take a hit.
Doing these four things is my best advice. I’m 64 and have seen many recessions over my lifetime. Instead of hitting the brakes, hit the throttle.
Mark Zweig is the founder of two Fayetteville-based Inc. 500/5000 companies. He is also entrepreneur-in-residence teaching entrepreneurship in the Sam M. Walton College of Business at the University of Arkansas and group chair for the Northwest Arkansas chapter of Vistage International. The opinions expressed are those of the author.