To those who still doubt it, a major recession will hit the whole world. It could well turn into a depression even worse than that of 1929. Preparing for the recession is a matter of survival for companies. In this article we propose 9 concrete actions to prepare you for the recession. Far from being a theoretical article, this guide brings together the actions that we are already implementing at IntoTheMinds.
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- The 3 main principles of survival in a recession
- 5 concrete actions to minimize costs in times of crisis
- 4 concrete actions to maximize income during a recession
Preparing for the recession and surviving it: the 3 main principles
Surviving a recession requires careful management of your cash flow. It is the sinews of war. To achieve this, here are 3 main principles to follow:
- First of all, you have to reduce your debt (or not increase it at the very least) so as not to be at the mercy of the banks. It’s a question of survival. It is therefore essential not to take out loans. The period of inflation and rising interest rates does not lend itself to this anyway.
- Then you have to eliminate your fixed costs and make them variable. This will give you flexibility and allow you to react faster.
- Finally, you need to increase your profitability by all means. At constant scope (i.e. without increasing your payroll), the 2 adjustment variables available to you are
- the costs
- income (turnover)
In the rest of this article we give you solutions to minimize costs and maximize your turnover.
How to minimize costs in times of crisis?
1/ Replace online advertising (SEA) with SEO
One of our clients spent 20% of his turnover on Google AdWords, or nearly €150,000 per year. Advertising, while crucial, comes at a cost. Every Euro spent on SEA (Search Engine Advertising) will be missing from your bottom line at the end of the financial year. In many cases advertising can be replaced at zero cost by SEO (Search Engine Optimization). Organic results give you free natural exposure in search engines. If you want more details, do not hesitate to contact us.
2/ Terminate your lease and switch to cowering
The cowering solution can be interesting for small teams and for service companies. As energy costs increase, switching to a cowering solution where everything is included (electricity, heating in winter, air conditioning in summer) can be a good ghostwriters. In addition, in the event of a recession, you may have to let go of certain collaborators. In this case, it is better to have a flexible solution rather than a fixed rent for an office space that would become too large.
As far as we are concerned, we pay around €250 excluding VAT per month and per employee. It’s unbeatable.
3/ Hunt down useless subscriptions and discounts
A simple rule: if you haven’t used one of your subscriptions in the last 60 days, your business doesn’t really need it. Delete it and presubscribe for 1 month when the time comes if you really can’t do otherwise.
If you really need a subscription service, here are 2 tips to save up to 50%:
- If you are already subscribed, let the subscription expire and wait for the site to send you a renewal proposal. 9 times out of 10 you will be offered a discount.
- If you haven’t subscribed yet, look for discount codes (type the name of the service followed by “discount code” in google). If you can’t find one, ask the company for one! Our attempts proved successful in 50% of cases.
4/ Apply the Pareto principle to your expenditure items
80% of a company’s expenses are generated by 20% of suppliers. Based on the Pareto principle, you have every interest in doing the exercise with your accountant and finding alternative solutions. At the end of 2021 we had done the exercise and saved €1522.89 per year!
4 simple ideas to limit your expenses
- Terminate your fixed line or replace it with a virtual line
- Clean up your Google Drive and upgrade to an annual plan
- Delete unnecessary subscriptions (see above)
- Replace paid solutions with free solutions when possible
5/ Identify the most sensitive costs to exchange rates
It will not have escaped you that the Dollar has appreciated strongly against the Euro. The latter lost 20% in the space of a few months. The consequence is simple. Everything you buy in Dollars now costs you 20% more.
Identify the lines in foreign currencies on your bank statement (the conversion rate is listed next to it). If these lines are recurrent, look for European alternatives.
At IntoTheMinds we do over 100 recurring transactions a year in Dollars and have found Euro alternatives for half of them.
How to maximize income in a recession?
In times of recession, you must maximize your turnover in relation to your payroll. In other words, you have to make the most of your employees’ hours. Any optimization starts with a calculation of the turnover generated per employee.
1/ Eliminate the least profitable customers
Some customers are more profitable than others: these are loyal customers. They require less work (because the trust is already there). In his book “The 4-hour work week” Tim Ferris tells how he increased his profitability by keeping only 7 out of 100 customers. It may be counter-intuitive, but it is the recipe we applied to one of our clients (ProDegustation) and it worked.
2/ Eliminate the least profitable products
If you want to maximize your profitability, you also need to focus on your most profitable products. For a service company, these are the services that bring you the most income in relation to the time they require.
To carry out a product profitability study, the method to be applied is called Accosting (for Activity-Based Costing). This analytical method makes it possible to identify fiction ghostwriting services, for each product or service, the associated activities. This exercise, although complex, each time has its share of surprises.
3/ Seek additional customers through inbound marketing
Let customers come to you rather than spending money chasing them. This is the principle of inbound marketing. Our market research agency has only been working with inbound marketing for 10 years. This allows us to have no salesperson and only receive 100% qualified requests.
4/ Hunt public markets
Public markets are often scary, sometimes going unnoticed for lack of knowledge. Yet they are an inexhaustible source of business. The first thing to do is to identify the national sites on which public contracts are published. Focus first on your national market.