Runaway government spending has led to excess money chasing the same goods and service resulting in inflation. To battle the inflation, the Federal Reserve has been boosting interest rates and reducing the money supply. Sooner or later, this will break economic growth and we will enter a recession. Here are six preparations you should make now.
1. Prepare Mentally
Economic downturns are part of the business cycle. They happen. They must be endured. But they do not last. Most are over within a year. And few involve deep contractions of economic growth. The stock market may take a pounding, but a deep recession is usually less than a 3% contraction. You can survive that. You can overcome it.
Smart businesspeople understand that recessions are also opportunities. In a recession, the competition often reacts emotionally and cuts spending. Competitors stop advertising and marketing. They lay people off. That makes recessions opportune times to pick up both business and plumbers if you are prepared.
If you prepare well a recession is almost something to look forward to. You can take market share from your competitors as they seem to disappear from the market and you can hire seasoned plumbers.
Preparing mentally means preparing your team as well. Be upfront that you know a contraction will happen sooner or later, but that you are planning for it and expect that the company will not only weather it but perform even better. Remind them that, plans or not, everyone will need to pitch in and perform at the top of their game. They are a team and everyone supports everyone else.
2. Set Aside Cash
Cash is king at any time, but especially important during tough economic times. Building up cash reserves in a separate account gives you peace of mind. It gives you the ability to take advantage of sudden opportunities, such as buying a struggling competitor at a bargain price or picking up a building at a discount.
3. Check Your Pricing
There has been a lot of inflation over the past couple of years. Is your pricing up to date? It is harder to raise price in a recession than before one.
4. Line Up Financing
When the economy is contracting, the always negative news media goes into hyperdrive. People worry about spending their cash. This makes financing even more important. The trick is to have multiple sources lined up so that you can shop them for the fastest approval and best deal. If one turns down a customer, the next may not. Research studies have shown over and over again that financing does not merely increase sales, it increases the amount of each sale.
5. Network Like Never Before
Your personal network and standing in your community is one of the ways you will stand out and generate business without a lot of advertising. In fact, personal connections generally trump advertising. However, building a network takes time. If you haven’t started, start now. Get involved with your local chamber of commerce. Join a service club, like Rotary, Kiwanis, Lion’s, Optimist, Civitan, or more than one. Join a leads group like BNI, Netweavers, Le Tip, or a local one found through your chamber of commerce. Volunteer to help community charities, always wearing your company shirt.
There is an added bonus from networking and volunteering. You are building goodwill in the community that could save you if you ever find yourself on the wrong side of a media sting. This is when the work you did to serve your community will serve you. You will have a bank of goodwill to draw from in your defense.
6. Start Affinity Marketing
Affinity marketing is where you take advantage of a shared affinity, such as a charity. Set up a program where people support the charities they like by doing business with you. For example, you could set up a program with a neighborhood homeowners association where you give $10 or $20 to the HOA for every service call in the neighborhood, provided the HOA promotes your business.
HOAs are easy because they have defined territories. You can do the same thing with virtually any charity, though it might involve giving the charity some kind of website link, card to pass out, or instructions to reference the charity.
Affinity marketing works at any time, but it works better in tough economic situations because people know their favored charities are hurting. While they may want to help them, they are also feeling pressure. Affinity marketing gives people a painless way to help and makes your company the preferred plumber.
For a free guide on setting up affinity marketing, visit www.ServiceRoundtable.com, click on the Freebies link, and page through until you find it. While there, consider joining the Service Roundtable to access their vast library of downloadable and customizable sales, management, and marketing tools created specifically for plumbing contractors.