Recession-Proof (CONT’D FROM PAGE 18)
your costs primarily fixed or variable? If the former, that is supportable when things are going well. But a recession is an opportunity to reconsider. Can you convert some fixed costs into variable ones, reducing your expense base ac- cordingly?” One example, said Harms, is real estate. “Do you have long-term leases you may not need? Is there a way for you to adapt a more flexible approach where you're not being locked so much into long term payments?” Renegotiating may mean more expense in the short run, but more man- agement flexibility in the long run. Retain Top Performers Brownell suggests taking a holistic look at your em- ployees to make sure you've got the right people in the right places, and you know which are the critical ones to the operations of your business. “Who are your vital cogs? Who could you not get along without? Who are the people who can perform cross discipline tasks in the event of a
Then figure out how to do more business with the custom- ers who get the highest scores. Cut Expenses Underperforming fixed assets can be another source of funds. “It’s not uncommon for a business to accumulate non-operating assets during good times,” said Harms. Ex- amples include vehicles, inventory, property, and equip- ment such as forklifts. “See if you have some stuff sitting in the back lot tying up capital, along with requiring pay- ments for licensing and insurance and fuel,” said Harms. “Maybe it’s time to sell it.” While cutting too deeply can harm a company, some attention must be paid to reducing any expenses that have been allowed to grow too high during good times. “It’s good to focus not just on the amount of expenses but also the structure of your expense base,” said Harms. “Are
reduction in force? Those are the people you want to shore up now, and make sure that they feel valued and they know that you're going to stick with them.” It's more important than ever to retain your “A Players” in this tight labor market. “Given the talent crunch and the changing demographics, it’s really important to secure your talent base,” said Palisin. “Retention has been an ongoing issue for the last couple of years. You need to make sure you have a stable workforce, and that your company culture helps to retain your best people.” Your top employees can be a source of innovation, of new ways of doing things and even cost savings. “People on the front lines see things that those in the front office don’t,” said Palisin. “So it’s important to solicit their ideas, empower them, and make sure they have the opportunity to contribute.” Companies can also increase employee loyalty by being very clear on career paths within the company. Provide opportunities for people to find more value in their work and to move forward. And be honest with the chal- lenges the company now faces. Acknowledge that there may be headwinds, and that there may be the need for some sacrifice, including foregoing bonuses or reigning in the compa- ny credit cards. “That kind of forward planning will make you feel more in control of the situ- ation as opposed to just sitting there and get- ting buffeted by these exogenous economic factors,” said Harms. The prudent company will also identify underperformers who might be let go when revenues decline. “During the post-pandemic recovery period, many firms staffed up mas-
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March 13, 2023
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