By Joe Legato, Bill & Rod’s Appliances & Mattresses
It lately seems there is a story on repeat from every person claiming to be an expert on the economy.
That story is that we are headed toward recession, that all the markers are there, and that the economic expansion has gone on too long to not have one. They are right to be concerned, and while no one can accurately predict when the next recession will hit, it does pay to be prepared for it. If the inevitable contraction of the economy were to happen today, where would your business be?
Here are some ways that you can have your finger on the pulse of your business and help to protect what you have worked so hard to build.
Know your numbers. Inevitably someone will read that and think, “Gee, I’m not really a numbers person.” I am here to tell you that you should be. Truth be told, you may already be one without even knowing it.
Let me ask you some questions: Do you know how much cash your business has in the bank right now? How about total revenues for the year, month and week? Do you know what bills you have coming up? Do you expect that you will have enough to cover expenses and still show a profit? If you had answers to these then you are well on your way to being a numbers person.
I look at our bank accounts daily. I check cash on hand, money coming in and money going out. Then I compare it to my accounts payable and accounts receivable reports to see where we are tracking. The tracking helps to plan and discover trends before an issue can arise.
The last step of my process is to check the bank accounts against my sales and service reports to make sure what should be going into the bank is making it there. Are you doing something similar? If not, you should start doing so immediately.
Keep leadership on the same page. How often do you meet with managers or key employees? If you can’t remember the last time, then it’s been too long. In the hustle and bustle of everyday life at the store, sometimes you go on autopilot. Don’t do that! Your teams need to hear from you.
When meeting with your managers, stick to a basic framework; freestyling leads to not getting where you want to go, and things get left unsaid. Start with giving an update on goals for sales and service. This will clue your team in on the overall health of your company. Next ask “What was good this week?” and follow that with “What was bad this week?” Get input and use it to make positive changes. You may be surprised by what you hear. Finish up with updates on projects that have been assigned to team members.
Set goals for sustainability. Contrary to popular belief, in business you do not have to spend all your money at the end of the year. In fact, you should want to put money away for a variety of reasons, but it all starts with the professional goals of your business. Looking at where you want to be, how you can get there, and when you want to arrive should help you plan your savings goals.
Beyond that, setting money aside every month will help when times get lean. Having that aid to draw from, rather than the bank, will help you reach your goals in the long run without accruing immense debts that cannot be surmounted. Saving can also put you in a positive position for growth in a down economy.
Inevitably there will be a company with different products or services that chooses to shutter its doors when the economy turns. This can create opportunity if you have cash on hand to buy someone out and expand your own business. In the process, you will give people in your community the chance to keep their jobs, increase your market share and have more opportunity for profits by consolidating expenses.
So, what are some small steps you can take now?
Starting today you should begin taking a look at your store’s overall picture. Have an accountant walk you through your financials and help you dial in on the fiscal health of your business. I would even recommend contacting a trusted friend in the same industry to compare expenses to percentage of sales. Next, meet with your leadership team and share your dream with them. Invite them to join you on the journey and help everyone get to where you hope to be. Finally, create goals and benchmarks to make sure that you can get there. You may even want to invite a financial advisor to check in and keep you accountable for reaching your goals.
The bottom line: It’s not a question of if there will be a recession but when. The question you have to ask yourself is, “What are you doing to prepare for it?”
Joe Legato is Chief Operating Officer of BrandSource member Bill & Rod’s Appliance & Mattresses, a retail and service company in Livonia, Mich. Now in its third generation, the family-owned and operated business provides appliances, mattresses, grills, and appliance parts and service to the greater metro Detroit market.