Here it is late 2018 and the economists cannot decide if we’re going to stay in a “booming” economy or if recession is just around the corner. While I don’t like to get into arguments about economics, it does look like the average worker isn’t really gaining anything from President Trump’s tax cuts. “Trickle down” economics only helps the rich get richer. As inflation continues to grow most Americans are just getting by on slow wage growth. Really, we’re losing ground every month, bit by bit.
The news is paying a lot of attention to our “historically low” unemployment rate. But there is something fishy with these low employment numbers. They don’t add up. Tens of millions of Americans remain among the “long-term unemployed”, those people who have given up trying to find a job. So where does the Bureau of Labor Statistics come up with these numbers? They tell you right on their Website, and it’s scary.
The government has selected a pool of 60,000 families who are “surveyed” about their employment status every year. Each family is chosen for a monthly survey for four consecutive months and then they wait 8 months to participate in the surveys again. The same people are surveyed over and over again. And the government doesn’t change out these families very often. Once you’re in the “pool”, you’re in. And so they calculate the unemployment rate on the basis of who is working out of these 60,000 families.
Yes, that is really how our tax dollars are put to work. I can see the advantage of using the same pool of families over and over again. You don’t have to spend any money finding new families to survey. That is probably a Republican cost-saving measure.
Let’s Assume a Recession Is Coming
You know what? A recession is coming. We just don’t know when it will get here. But sooner or later, everyone agrees, the US economy will contract for at least two quarters and that is a recession. Maybe the Trump administration’s trade wars will trigger a recession. Who cares? It’s coming. So how can a small business get ready for it?
I think the right answer to that question is simple: establish an excellent reputation for taking care of your customers during the good times. Why wait until it’s hard to generate sales before treating your customers like kings? If you’re a small business, you have to compete on the basis of better service anyway. If you haven’t stepped up your customer service game already, that’s a great reason to do so. But being the “go to” company during a recession may depend on how much consumers love you. They will be much pickier about where they spend their money when times are tough.
Inflation May Be Your Friend Right Now
If your company’s prices are not affected by inflation in your supply chain, you’re lucky. Your customers are lucky, too. But it might be prudent to increase your prices by 1-2% per year while getting ready for a recession. When the time comes, you’ll be able to lower your prices and still make a reasonable profit.
Your loyal customers will appreciate the savings and you’ll be in a better position to compete with rivals. By increasing your customer service you can justify a small price increase anyway.
If inflation is already hitting your suppliers then adding more inflation into the mix is probably NOT a good idea for your business. It may be better to start shopping around for less expensive suppliers (without sacrificing on quality, of course).
Reduce Your Shipping Costs
The shipping and distribution industries are evolving. Although there may be fewer independent shippers and distributors than there used to be, the economies of scale should help even small retailers bring in new product. By saving money on your own shipping costs you can compete more profitably for customers’ business.
Local delivery options are now becoming available to all types of companies. For example, you may be able to work out a deal with Lyft and Uber to deliver your products to customers. You won’t have to hire full-time drivers or pay insurance for them. I’m not saying reduce your local delivery staff. I’m suggesting that you can grow your local delivery business by using contract drivers.
When the recession comes, having a contract-based local delivery team in place may give you a competitive advantage over other companies that didn’t prepare.
Expand Your Storage Capacity While It’s Cheap
Although business real estate prices can be volatile, a lot of retail malls are struggling to find tenants. Many are going out of business. But you may be able to expand your local retail store’s floor space without paying much more in rent, or even paying less, by moving into vacant space at local malls that need new tenants.
Having more retail space means you can build up your inventory. Now, that may seem counter-intuitive. After all, during a recession most companies are eager to reduce or turn over their inventories. But if your sales drop off you can stretch out your inventory orders by absorbing demand into a larger supply.
In other words, if you can pay for that inventory in advance during the good times, and have it ready to sell at a discount when you need to compete on the basis of price, you have an advantage. You’ve already absorbed the cost of purchasing the goods. Your cash flow is more important when there are fewer customers.
Conclusion: Think Ahead and Be Ready
Leveraging the good times to prepare for the bad times is exactly what every company should be doing. This is good, old-fashioned Biblical advice, too. Remember when the Pharaoh of Egypt had a dream about seven starving cows eating seven fat cows? That was a sign from God that bad times were coming.
You probably won’t be warned in your dreams about the next recession. But history has already taught us that one is coming. It’s just a matter of time. You just need to put the time you have to good use.