It’s out there. It’s everywhere you turn. It’s on every newscast. You feel it every time you go into a store, fill up your tank or place an order for supplies.
Yes, things are getting tougher. The economy is changing, rapidly, right before our eyes. It doesn’t matter whose fault it is. Blame Trump, blame Biden or blame Putin. The fact remains that we are headed into a different, more difficult period of time for our economy. It will affect everyone and every business. Yes, even your own restoration business will be impacted.
Many of you are sitting there thinking, “Wait… I thought we were in a ‘recession-proof’ industry. After all, broken pipes and weather events don’t know anything about the economy, and insurance companies have to pay for the losses, so we are safe.” In theory, you are not wrong. Your core business will still go on and be less impacted than other types of business. But in practice, a recession affects every person and all aspects of life. You will have to be nimble to manage your way through.
Before we lay out the “how,” let’s spend a few minutes discussing the “what” and the “why.” A recession is generally considered a period of time when the overall size of the US economy is shrinking. This is a rare event, given our history of capitalism and expansion. When it happens, businesses and investors start to doubt their own actions and consumers start to rethink their expenditures. This “negative vibe” results in a loss of confidence in the entire system, which inevitably leads to a contraction.
Most of you have lived through recessions before and might not even realize it. Before getting into restoration coaching about 13 years ago, I spent 28 years on Wall Street, so I lived my life with an acute knowledge of economic realities. The way you guys look at The Weather Channel is the way I followed CNBC and The Wall Street Journal. I was on the trading floor on “Black Monday” in 1987, when the stock market collapsed and sent the US economy into an instant recession. That lasted about three years. Over a decade later, the end of the last millennium brought with it the “Dot-Com Bubble” and crash, which was a small blip on our overall growth chart. Only a year later, September 11 brought with it a very weak economic cycle. Finally, the housing market and financial crisis of 2008 shook our system to the core, and nearly took down our entire free-market structure.
If you worked in or operated your company during any or all of those periods, congratulations — you survived! Without even knowing it, you were able to get out of those recessions with your company and wallet intact. I’m sure some of you experienced some pain — that is unavoidable. The good news is that you are still here, older and wiser and determined to make it through again.
Since we are in this industry, we are somewhat shielded to the worst of the oncoming recession. I say “somewhat,” because we are certainly not immune to negative consequences or threats. Let’s list just a few risk factors we will have to overcome:
Rising Costs: Contrary to conventional logic, prices generally rise during the early stages of a recession. Producers try to get more money for their products, knowing there will be a slowdown in the coming months or years. Employees, seeing their own living costs rising, will demand higher compensation for the same level of work.
Housing Construction Declines: When the economy weakens, the first place we can spot that is in the housing market. Builders will halt new home production at the slightest sign of weakness. Their industry is based on the speculation of growth, so they are averse to risky projects. This doesn’t directly affect our day-to-day business, but it impacts us due to…
Increased Competition: When the economy suffers, businessmen have to make survival decisions. Many times, plumbers, renovation companies and builders will turn their companies into “restoration” companies. Remember, we are recession-proof, right? Like it or not, this reality pressures us and dilutes our position in our marketplace.
Homeowner Financial Struggles: Insurance companies make their profits through investing your premiums in the markets. Stock and bond prices decline during a recession, so these companies have to make up the difference somewhere else. They will raise premiums and deductibles, resulting in a greater strain on your clients. Even when you respond to a covered loss at their home, the burden they will face when paying your invoice will be greater than even a year ago.
Knowing these facts, how can you position yourself for survival or, better yet , growth? With hard times approaching, there is no better time than now to look deep into your business. Hard times can always be defeated by hard work. You just have to commit to the hard work at the start so that you can manage through the hard times. Here are a few things to think about as you work towards making your company recession-proof:
Know Your Numbers: I’m a “Numbers Guy.” I think it is vital for an owner to know every stat about their business. You will know so much about your efficiency, productivity and profitability by studying your numbers. Analyzing your own business should tell you where you are operating with peak efficiency and where you might be bleeding out. Take this time to address all issues while strengthening your core profit centers.
Market More: Generally speaking, residential water damage is a better core business during a recession than mold, fire or commercial work. It is more consistent, easier to execute and more profitable. If this is already a strong point for you, re-double your marketing efforts with your existing lead sources. Plumbers and insurance agents will be getting hounded by your competitors and will need more attention from you, but they will still call you if you stay “top-of-mind.”
The Golden Rule: We know what this means: He who has the gold makes the rules. Be smart about how you are going to spend your money. As I said, prices will rise at the start of a recession, but as the time passes, they will start to fall due to lack of demand. If you are a smart consumer, you can take advantage of this fact and time your purchases accordingly. Another thing about a recession: Cash is King. Don’t be afraid to “discuss” pricing with your vendors, especially when you’re going to make a large purchase. Supplies, equipment and vehicles will be sitting around (unlike today’s supply chain backlog) and you can make great purchase decisions when you hold the cards- and the cash.
Lean and Mean: Now is not the time for your ego to be running the company. If you are the type that likes to brag about how many employees and trucks you have, maybe it’s time to rethink that inner drive. You can come out of this downturn stronger and bigger by getting leaner and meaner right now. After you’ve done your analysis, you should be able to identity a few areas of fluff and excess that can be trimmed. Today. If your business picks up in a few months, there will always be the opportunity to bring on additional staff. I know, right now it feels impossible. But remember this: many companies in your market will not do the right thing and will fail, causing more talent to be available to you. That is another reality in a recession.There is no greater feeling than coming out the other side after a struggle. What makes that feeling even sweeter is when we can not only survive, but thrive! Put in the hard work now and you will enjoy the benefits on the other side.