By Marcus Holloway, CEO and President, MTM Technologies
Economically, things are looking pretty good right now. Many businesses are experiencing one of their most profitable years and planning for additional growth as we head into a new decade. Plus, we are seeing several positive economic indicators, including:
- Lowest unemployment rate in the history of economic statistics
- Over 35 percent GDP growth since 2016
- Over $1 Trillion increase in real investment since 2008
Too good to be true or too good to last?
Now is the time to plan and take action, whether the economy continues soar or takes a slight turn. Below are a few things to consider now, while business is good, that will ensure your business continues to thrive rather than simply survive during the next business downturn.
- Invest in your future business today. The temptation when business is doing well is to maximize profits and grow your business as much as possible. However, when your profits are up, as they likely are now, it’s time to take a step back and think strategically about the future business you will need to be in and invest in that business now. The hardest time to invest in a new business initiative is during a downturn when capital becomes scarcer and when strategic thinking becomes an unaffordable luxury in the fight to survive.
- Think about the unthinkable. Consider what would happen if you lost your largest customer or your sales suddenly shrank by double digits. Could you cut costs fast enough to survive? How long would you be able to withstand the downturn on your current cash reserves and funding sources? Some of your funding may be constrained just when you need it most in a downturn. When times are good you should be running various “what if” scenarios. It is much better to have a rough plan in place for a downturn, and never need to put it in place, than to avoid the unthinkable now, and potentially flail around when you are caught in an “economic vortex.”
- Maintain human resource discipline. When the economy is booming the fight for talent becomes an all-out war. Salaries for new talent skyrocket and it is easy to lower your standards just to obtain the necessary resources to meet demand. In addition, as good as your company may be to your employees, your best employees may begin looking around at other opportunities. Maximize the utilization of your current proven performers. Give them more responsibility and opportunity to maximize their income. It is safer to financially reward proven performers than to take risks with new employees who may not meet expectations and feature high on your next RIF list. Lastly, never stop removing under performers no matter how well your business and the economy are performing. It is easier to lose HR discipline when times are good. Good companies don’t let this happen.
- Variablize support costs. Business have an unprecedented opportunity to implement consumption and transactional cost models for support costs with service providers. SaaS (XaaS) and cloud-based service models allow everything from desktops to entire IT functions to be priced variably so you are only charged for what you need. This can be extremely helpful in a downturn. If your demand for support declines, then your costs will decline as well. Now would be a great time to take a hard look at all general and administrative (G&A) costs. Learn what parts of these costs are truly variable and explore whether more of your “fixed” support costs can be variablized. If they cannot be variablized, then they should at least be minimized and restructured now.
- Monetize non-core assets. If you are not in the real estate business, you should already be thinking about selling your real estate assets or initiating a sale lease-back transaction while real estate prices are high. You can also monetize other parts of your business, even some of your cost centers. Some technology and business services providers will “buy” your internal business processes in exchange for a long-term services contract. In some cases, you can negotiate either declining or variable pricing for these services which can be very helpful in a downturn. Any up-front incentive payments you receive can be saved for rainy days or invested in your business of the future.
Times are good now and should be enjoyed. However, some time invested now considering how you might fare in a downturn would be prudent. If you have the resources and management capacity to explore some of these suggestions on your own great!
If you would like some outside advice and guidance MTM Technologies would be happy to look for ways to help you recession proof your business and explore the possibility of monetizing some of your non-core and support costs with our Managed and Cloud Services. Click here to schedule a call.