THE SHOP

November '19

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8 THE SHOP NOVEMBER 2019 Early steps to retool your business can return rich dividends in the form of a stronger bottom line long before a reces- sion actually hits. And, once the economic downturn does begin, your lean and mean machine can beat the competition. "With the right preparation, an economic downturn can be more of an opportunity than a problem," says Lisa Anderson, presi- dent of LMA Consulting Group, Clare- mont, California (lma-consultinggroup. com). "While less capable retailers fall by the wayside, your own business can expand its customer base." Bonus tip: Businesses that prepare for a recession tend to pull ahead during and after the slowdown, says a report in Harvard Business Review. PLAN FOR GROWTH So, what do you do, exactly? Above all, avoid the common mistake of undisci- plined cost-cutting. "Focus on expanding your business—not on just cutting back," says Cliff Ennico, an attorney and business consultant in Fairfield, Connecticut (cliffennico.com). As you approach a recession, strengthen your market position by developing initia- tives to win new customers. Selling more to your existing market— and expanding it—need not be expensive. You can likely ferret out new ways to get more from your current organizational structure. Further, rationalizing your cur- rent resources often translates into a reduc- tion of expenses. "Every business suffers from costly fat that tends to grow over the years, especially during long periods of growth," says McQuaig. "Now is the time to identify where your people are wasting their efforts and how your operations can be made more efficient. Is an entrenched bureaucracy, for example, slowing your customer response time?" Rationalizing your operations can unleash unrealized potential. "Most businesses have a lot more capacity than they realize," says Asbury. Unlocking efficiencies will help shorten your backlog and allow you to process orders more quickly. At the same time, he says, you can become a more reliable supplier. "Your on-time delivery and quality can cultivate loyal repeat customers," he adds. Here's another way to increase capacity: Leverage the digital revolution. A recent Harvard Business Review study found that successful companies tend to use funds from reduced operating budgets to invest in productivity-boosting technology. But wait: Isn't a recession on-ramp the wrong place to increase spending? Not if it results in a more profitable operation, says McQuaig. "Doubling down may seem counterintui- tive, but it can be the best way to prepare for an economic slowdown." Bonus tip: Remember the adage, "You can't cut your way out of a recession." TRIM INVENTORY Excess inventory is a drag on profits at any time. In a recession, it can spark failure. "I have seen more stores go out of busi- ness because of bloated inventory than anything else," says James E. Dion, presi- dent of Dionco Inc., a Chicago-based retail consulting firm (www.dionco.com). "If you're not careful, your inventory can sit around for months until it has no value and the consumer is tired of looking at it." Managing inventory through technology is a lot easier today than before. But the human factor can also play a big role. Experts advise making a special effort with vendors. Make sure you are getting all the discounts to which you are entitled. But also make your loyalty known. "If you do not have good relation- ships with your supply chain, start today to improve them," says Daniel Feiman, managing director of Build it Backwards, a consulting firm in Redondo Beach, Cali- fornia (builditbackwards.com). "It will help you reach a critical goal of managing the inventory you need rather than the inven- tory you have." How to Recession-Proof Your Business While no one is happy when the economy softens, a downturn can serve to reveal opportunities for making your business stronger and more profitable. Turn hard times into an advantage. While there is no recession-proof business, the winners are those that adapt best to challenging conditions.

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