Here we go again: recession round two. It's coming on fast, and the economy is headed for the dumper. Recession round two may not have officially started, but experts are reaching consensus about the inevitability of the next downturn. I don't think there's much argument about what's happening.
The question is, how will you survive?
Take a two-pronged approach.
First, increase marketing activities to generate additional prospects. Do more networking, advertising, public relations, etc. Do more of whatever works for you in your practice. More prospects mean more clients. Go with your strength; rinse and repeat.
Yes, more marketing means more marketing expense. Your costs will necessarily increase. You'll see a spike in your cost of acquiring each client, and you'll be frustrated by the decline in conversion rate. We saw that decline last time around, and it's likely we'll see it again. The increased cost of client acquisition is a small price to pay.
Second, manage your expenses. Be certain that the expenses track along with revenues. If revenues go down, expenses should go down.
If you've been reading these posts for the past couple of years, then you're prepared to keep expenses under control.
Here are the key actions to take:
- Variable pay: Ideally, you've got your team on a variable pay structure. Your payroll goes up and down with your revenue.
- Minimized rent: You've also reduced your overhead by reducing real estate, eliminating attorney and staff offices, and building a remote workforce.
- Outsource: Use lower-cost labor for appropriate tasks. Easy outsourcing includes IT assistance, marketing, accounting, benefits administration, administrative tasks, and some client interaction.
- IT in the cloud: You've moved your IT infrastructure to the cloud and eliminated servers and the associated expenses and achieved variability in the costs associated with managing your information.
- Phones in the cloud: You've also eliminated traditional phone systems along with commitments for other formerly fixed costs.
If your revenues go down, your expenses will go down. You won't be happy, but you'll be safe. You've eliminated the risk associated with the uncertainty. As revenues shift, expenses shift. You're good, not great, no matter what the economy brings.
If you're unwilling to ratchet up your marketing, you're likely to suffer. If you're unwilling to shift to a variable cost structure, you're also going to feel the pain. If you take both steps, you're going to ride this one out just like the last one. You'll be prepared to deal with reductions in the top line, and you'll minimize the impact of the changes on your bottom line.
At this point, we should all be pretty expert at riding the waves of recession. This time around might be easier since we've been through it before so recently. Hang on; here it comes again.
As usual, I accompany this article with my typical economic prediction disclaimer: I could be wrong, but if I'm wrong, so what? Aren't you better off with more marketing and expenses under control? Don't argue with me; just do it!