596: Business Recession Planning

Recession chatter is at a continuous buzz due to the identification of predictive recession markers in the same way that hurricane preparation chatter would be abuzz if weather forecasters identified the predictive markers of a hurricane. Where I live in the lowcountry of South Carolina, we went through a four year stretch where we were either brushed or directly hit by severe hurricanes. The storms were no fun, and in some cases deadly.  In advance of those storms weather forecasters and government officials worked overtime to ensure readiness.  They were not able to influence or avoid the storm, but they were able to provide a helpful forecast based on predictive and principles markers that allowed for thoughtful preparation; the ability to make ready prior to the storm. Oxford Dictionary defines a recession this way, “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.” The markers of a recession seem to be swirling out off the coast and the winds of economic dis-ease have picked up substantially. The barometric changes of interest rates, pricing volatility, fuel increases, supply chain disruption, and a historic personnel shift have all been mixed into an economic cocktail that certainly has our attention. We can be naive and try to stop the storm, or we can diligently prepare for a potential storm strike and greatly increase the likelihood that we navigate tough conditions that will set us up for what I recently heard Dr. Tim Elmore describes Post-Traumatic-Growth; the hopeful idea that for the majority of people, trauma leads to growth. How do you make your business and your team ready for the storm strike of a recession? Here are four categories that you can invest in giving you a better opportunity to endure. First, to weather any storm, your team must be aligned around written and re-visited purpose. The three primary elements of purpose are a vision story, a succinct and memorizable mission statement, and 3 to 5 unique core values. Your vision story is a detailed snapshot of the future of your business…a long description of what is “out there”. Your mission statement is a less-than-ten-word, power packed punch explaining to someone why you are doing what you are doing. Your unique core values are curbs along the side of the highway towards your vision story.  Stay away from cliche values like excellence, integrity, respect, etc. Those should be values that are standard.  What are the decision-filtering-values that are unique to you? Next, your people must have access to culture they believe in and will compel them to remain locked into the mission. Culture is not a native business term, it is on loan from biology.  It is literally “to maintain the conditions for growth”. Most business owners want to grow whether it be the top line, bottom line, product development, etc.  Just in biology, the conditions must align with the growth you are hoping for.  To ready your business for the threat of a recession is to take the written purpose you have committed to publishing and sharing above, and ensure there is a recurring mechanism tilling that purpose into the soil, the people of your business. For us, we read through our 5 page vision story together as an entire team once every two months.  We review our mission and values at minimum during our weekly team meeting, and during our weekly 1 on 1 check-ins with team members.  We are obsessive about them and constantly revision so we are ensuring the soil of our business is properly hydrated, fertilized, and tilled.   Third, a pending storm demands that each process can continue in the case of a disruption setting in. If prices continue to remain volatile, schedules continue to be thrown off, people continue down the great resignation road…do you have your processes documented, communicated, trained and deployed so that the business can continue to deliver on your mission? Or is it “all in your head?” Finally, cash profit and retained cash earnings (actual EXTRA cash available in your bank account…we’re not talk about money you can borrow) are crucial during a storm in the same way provisions, fuel, and a means of generating energy are must-haves. In short, being cash-heavy gives you options and opportunities. If you do not have cash, you will struggle. If you do not know how much cash you have, you will struggle. Know your numbers by knowing your cash runway. The true measure of profit is not the number that sits on the bottom of your profit and loss statement…that is just ink on a page. The true measure of your profit is the actual cash you have sitting in a separate, designated account that is being continually filled up where you can see it on your online bank portal…and where you could withdraw it if you had to. Purpose, people, process, and profit. You intentionally build a store of those four elements and you will be able to look back from the other side of the storm and say, “we prepared well”...regardless of what the storm does to you. You have a choice, weather a storm with courage, or wither away in fear.