CEO, Atlas Surgical Group, one of the largest private ASC groups in the U.S., Author of “Success in Ambulatory Surgery Centers.”
Recession—depending on who you talk to, we are either in the eye of the storm or quickly sailing toward it. Covid-19, combined with unemployment bounces, supply problems and inflation, has made our economy unpredictable. The pundits have all weighed in, and they are, well, uncertain.
What should you do if you’re a business owner? The best strategy is to act as if there will be a recession. If you’re wrong, recovering from a recession that never happened is pretty easy. Business success is business success, no matter when and under what circumstances. As such, preparing your business for success during a recession will hedge your bets.
A recession means decreased economic output, sluggish consumer demand and higher unemployment. How can these pitfalls for success be buffered and turned around in your favor?
Incentivize employees.
The pandemic played a curious role in recession fears. In a recession, labor shortages occur, and Covid-19 twisted this into a phenomenon that’s never been seen in recent memory. Now that the worst seems to be over, many employees are returning to work. In a business that demands hands-on employees, the impact of remote employment as an arguable overhead factor is negligible.
Still, you should anticipate a turnover of employees and make it as easy as possible for them to return. Offer perks for staying with you. I recommend sign-on bonuses to replace those who don’t return and making changes to overtime so it won’t be so burdensome for others. After all, employees must live their lives away from you. Please don’t make them choose between your business and their quality of family life.
Cut costs.
A recession means a volatile supply situation, so you may want to re-strategize your costs to include supply interruptions or, with higher transportation costs, rising prices for the things you need. Reassess your tangible items turnover and revise the employee structure. You can hire a consultant to appraise your business’ efficiency and point out things or employees who don’t merit continuing. Some can be replaced, and many can be eliminated from your overhead, but remember the difference between employees and goods. Employees have families to feed. Accepting a profit loss may be the more human thing to do in these cases.
Accept lower profits so you don’t cut quality.
A business that struggles will be tempted to make profit a sacred cow. There is a sweet spot between the quality of what your business provides and the profit you need. It takes some talent (again, a consultant can show you where the sweet spot sours).
Businesses for generations have used the concept of the “loss leader,” offering something at a loss to attract customers who spend more, thus increasing profit. Suppose your business isn’t, by nature, in this consumer game. In that case, there is still a lesson: Keep the quality of services high, even if it means paying the same overhead during your business slowdown. This way, your reputation for consistent quality will survive.
Turning away a loyal consumer takes only one bad experience or disappointment. Keeping loyal consumers is much cheaper than wooing back the disgruntled ones. Your books don’t have to show stellar returns consistently. A net positive ledger during hard times is a battle won.
Shrink to expand.
As businesses mature, many residual expenses begin to collect, not the least of which is the number of employees. The one with the biggest machine is not necessarily the one who wins. A big, unwieldy machine with many redundancies in job descriptions can plant the seeds for failure.
Growth can mean maturity but can also be malignant. Knowing when to tighten is as important as what to tighten. Most mistakes are made when the tightening happens once it becomes an emergency. This can cause a downward spiral in which you constantly maneuver to catch your own tail. “Too little, too late” is a killer. I live by an old business philosophy, the law of diminishing returns. In our franchise, if a venture becomes progressively less profitable, we accept it as a sunk cost and move on.
Venture into new business models.
Everything changes, especially the economy. Entrepreneurs are constantly introducing new things in the business world. Some work and some don’t. But there’s no reason why you can’t be adventurous, too.
Clever incentives can increase your business and with safeguards put into place before implementation, you can protect yourself should it prove a mistake. Look for new business models that are related to your business. It’s what you know. Do not steer too far away from your waters.
In addition, concierge memberships, transportation to your business and special packages can be offered in your existing companies. Offer “big mouth” incentives for persons likely to recommend you.
Partner with new bedfellows. In healthcare, for example, a women’s wellness practice may offer a package price for someone who chooses Med Spa procedures simultaneously. This means partnering elective procedures with necessary medicine. Such arrangements can benefit everyone, especially you, as you attract clients without reason to use your facility.
In conclusion, every day is a brave new world in business, regardless of your services or products or recessions. Consider these strategies to help create a win-win for your employees, clients, customers and business.
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