How to Recession Proof Your Business in 3 Steps
A recent Bloomberg report suggests the chance of a recession in the upcoming year to be around 35% in the US, versus 50% in the UK. In Australia, the odds seem lower — only 25%.
In any degree of economic downturn, it is important to focus on three key variables to keep your business stable:
- Cash reserves and cash flow
- Job profitability
- Service delivery and client retention
Some of these are harder than others to achieve. In a tight labor market, the ability to raise wages may be hampered by the need to be conservative with cash reserves. Instead, focus on ways you can add employee benefits without impacting cash reserves.
How to improve cash flow
You can improve cash flow by first gaining a clear understanding of each of your contracts. This starts with operational visibility.
- Know what resources (people, uniforms, equipment) are delivering on a contract at any given time
- Understand the true costs of a contract, including direct and indirect costs
- Identify any gaps in coverage causing cost-driving exceptions (like overtime)
- Gain a clear understanding of contract requirements to appropriately staff sites
- Workload daily activities based on contract volume
By gaining visibility over operations, you can have a better understanding of revenue per contract, even as expenses are being paid out. From there, you can adjust budgets and expenses to preserve cash reserves.
That way, if and when the economy dips, you can adjust contracts based on what is the most profitable to your bottom line.
How to increase revenue from your contracts
There are three main ways you can increase revenue from your contracts.
1. Broaden your scope of services
As clients work to lower their own expenses, you may see line items being removed from your scope of work agreements, especially as contracts are renegotiated.
It’s important to add services to your offerings to create the potential of more service scope in these situations. For a cleaning company, that might look like offering add-on services like waxing floors or high dusting options. In the security industry, it might include adding speciality services like health screenings, or expanding geo-parameters on jobs based on fluctuating traffic patterns, which require additional on-site staff or bill rates based on demand.
2. Explore “recession-proof” markets
While a true “recession-proof” market is hard to come by, there are markets that are able to withstand economic pressures better than others.
Consider expanding your service offerings to these markets. Demand tends to remain strong in markets like healthcare, government and educational institutions, who have ongoing needs regardless of market changes.
Breaking into a new market is easier said than done. So, start with the markets you already know. It’s possible there are opportunities within your current contracts to expand scope of work. Your current customers might not realize you can cover tasks they may be billing another vendor to complete.
Conduct your own research, do periodic customer profiles to gauge changing needs and come to negotiations prepared to make a case for being the vendor of choice to handle their growing needs.
3. Find efficiencies to cut back on resource drains
Finding additional revenue doesn’t always equal making more money. Just as you can create more financial wellness in your personal budget by cutting back expenses, contract finances can improve by creating efficiencies to drive down expenses.
Start by conducting a gap analysis. Figure out what areas you’re spending the most on (not just money, but resources, too).
- Is there an opportunity to cut back on the time your team spends on payroll activities?
- Can you enable employees to review their own schedules or submit their own time off requests digitally to save supervisor time and manual paperwork?
- Can you automate reports to be delivered to key stakeholders in your business to keep everyone up to date on the needs of a specific contract?
These kinds of changes can add up to real time saved. Time, which can equate to the workloads of entire overhead positions, which can then be redirected to other business-critical tasks. By finding ways to operate more efficiently, you can drive more revenue to your bottom line.
How to show proof of service to keep clients happy
The last key area of boosting revenue is to use service delivery as a way to retain clients, ensuring a dependable revenue stream.
Clients are asking for their contracts to show proof of work that’s been done on each contract. That’s why tight quality control and service delivery accountability is so important in preserving revenue.
By documenting every step of your operational process, you can provide that documentation directly to clients and prove the tasks that have been completed and inspected, audited, and performed based on requirements of a contract’s SLAs.
Proof of service supports customer satisfaction, while also being directly tied to your company’s reputation, which can lead to additional service requests and business referrals.
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Are economic conditions a concern to your company? Contact TEAM Software by WorkWave to learn how to use digital tools to help recession proof your business using efficiency-driving software.
Learn more about economic and labor market trends and forecasts in our recently published expert data report.