Are you Ready for a Recession? 4 Smart Questions and Actions to Face itAug 16, 2022
There is so much talk about recession, whether we are in it or if it’s coming shortly. But what you need to worry about as a franchisee is how to make sure you are prepared for whatever happens in the economy.
You have to be aware that there might be global, countrywide, or local events that could affect your operations. That’s why you need to think through and act to make sure that your business is as protected as possible. That’s one of your jobs as a business owner: take the time to design strategies to minimize the negative impact of outside influences.
That’s when you work on your business, not in your business. Especially if you are a growing multi-unit franchisee, dedicating time to strategic thinking is critical to protecting your business, your people, and the brand that you invested money in.
In this blog post, I want you to analyze the questions you should ask yourself. And, as we answer them, take note of the action plan you need to design to be better prepared.
1. What is your risk level?
To answer this question you need to understand what business you have and how can it be affected if a recession happens and your revenue goes down. You should also consider that we're going through tremendous inflation. Have you measured how is this impacting your business?
You must follow up on how these economic events are acting on your business, and document and write down all the possible ways in which you can be affected.
2. How can you protect your revenue?
As we all know, revenue is the oxygen of your business. If you have no revenue you won’t have a business. Think through what is your franchise’s primary need for products and services. Also, if what you provide is something that people will still need regardless of what happens in the economy, or if it's something optional.
Those answers will give you an idea of how much you should focus on protecting your revenue. Think about it: if your franchise has to do with a primary need for a customer, let's say food, then the focus is going to be a little bit different than if you offer a secondary necessity.
Here is where your business innovation and differentiations will determine how your transition through this economic downfall will be. Even if your offer is considered an optional service or product, you can still make it so special that your customers will still want to come to you.
Another business strategy you need to consider is how can you maximize your revenue channels. Also, analyze all of the potential channels you may implement.
Some of you may have an over-the-counter business, others might have a service business. Perhaps within those, there’s some retail opportunity that you can either add or be focused more on.
Are there any other items or products provided by the franchisor that you can add to your line? If you are in food service, can you explore alternative channels to provide your products, like take-out, catering, or delivery?
3. What can you do to protect your margins?
A smart thing to do to ensure the continuity of your profit regardless of where the economy goes is to look at your product cost often enough to make the proper adjustments in your pricing to help you be competitive and keep up with your operations.
Speaking of pricing, look at your competitors to see where they are and make sure that you don’t charge more for your products or services. That way, when your customers analyze where they're going to do business, you'll be their obvious choice.
However, you still need to protect your margins by looking at the price increases that go according to your inflation rate.
Another thing you can do to protect your margins is to differentiate between the nice-to-haves and the must-haves. I’m sure that you learned a lot in the last couple of years about this difference, so apply all that knowledge to your business.
Your profit statement is a great place to start your research. If you look at it with fresh eyes, you're going to find things every time.
You should also analyze what are the cost strategies you can do to address your labor costs as well as your cost of goods. What are the things that worked in the past when you needed to squeeze every penny?
It would also be smart to train your people on these tactics so that they can implement them right away if you need to. Don’t wait until your margins are eroding before executing those cost-saving strategies!
You can also leverage technology to help you be more efficient and protect your margins. This doesn't always imply a new investment; the systems and devices that you already have can give you additional data to make better decisions when it comes to your cost savings.
4. How can you protect your people?
The reality is that if you do all the recommendations from points 1, 2, and 3, your business will remain healthy. And with that, you’ll be protecting your employees.
Remember that who you are as a business or a franchise leader will determine the financial stability of the people that work for you, as well as the financial stability of your business and your family.
As we are approaching this potential recession, think thoroughly what are the things that you need to do to prepare yourself and your company. You’ll be able to come through this. But rather than focusing on the things that are out of your hands, concentrate on what you can control so that you can be successful at the end of the day.
In every economic downturn, there are going to be winners and losers. If you do these things, you can be in the winner's column. But you have to take the time to design and implement these strategies with responsibility, instead of applying them in a hurry or from a stressed perspective.
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- Have you evaluated how affected your business might be in case of a recession?
- How can you make your business so special that people want to continue to buy from you, regardless of where the economy is?
- Have you differed your business “must-haves” from the “nice-to-haves”?
- Are you maximizing your technology to be more profitable?
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