You Ask, I Answer: How to Prepare for a Recession?

Jeremy asks, what are you doing to prepare for an upcoming recession? Well, the first thing is keep an eye on recession indicators. There are and have been uh good indicators of recession, right? So when you see uh customers uh changing their spending patterns, pulling back on on spending, uh, that's usually a pretty good indicator that you're going to see a chain of uh reaction up the value chain impacting your supply chain and things like that. So B2C companies will be impacted first, and then that wave spreads through B2B companies all the way to manufacturers and things like that.

So keeping an eye on the end of the value chain is really important. Keeping an eye on some of the volatility and major financial measures. One of my favorites is the Chicago uh Board of Exchanges uh VIX, the volatile volatility index. The VIX is a time-honored uh indicator of lack of confidence in the market. The higher the number goes, the less confidence investors have in the market.

And for good or ill, the market does influence a lot of public opinion uh as well as how much money is changing hands. Most of all, keep careful track of your customers, right? Have coffee with them fairly frequently. Look at things like your email open rate or engagement rates in social media. Um look at your customers and how they're behaving, what they're sharing.

Um, if you can use the trick that David Maester teaches, which is to volunteer, uh, and that's works for mostly for service firms, but volunteer to hang out with a customer at their you know quarterly board review meetings or quarterly board reviews at your cost. And you promise you'll just sit in the back of the room and be quiet and not speak unless spoken to. But that will give you insight as to what's on the mind of customers, right? Join private social media communities in your industry on Slack or Discord or Facebook groups or LinkedIn groups or wherever it is that the people in your industry congregate and listen. Listen to the questions people are asking.

One of the things I've noticed in my own experience is that when times are good, people ask a lot of why questions and a lot of big strategy questions. When times are rough, people are pivot to a lot of very tactical how questions. How do you do this? How do you how do we make this work better? Things like that.

Pay attention to the questions that you are asked by stakeholders, right? One of the surest signs that you are entering a contractionary period is stakeholders suddenly getting laser focused on things like ROI, right? Because return on investment is not a goal, but it is definitely a KPI that a lot of companies dust off when times are not good. They say, hey, we've got to tighten our belts. We need to reduce our spending.

So we want to make sure we're only spending on stuff that works, right? If you see a sudden spike in people asking attribution models, you know that something's up that's making people say, hey, we need it, we need to be more parsimonious with our resources. So we're gonna spend less, and we want to spend smartly where you can. Once you see whatever basket of indicators that you're relying on for your industry, once you see that going in the wrong direction, then you do what you do for every recession, right? You make sure your contracts are in good condition, that um everybody knows what the early termination uh penalties are.

You stockpile cash, right? You reduce your own spending to some degree. Uh you stockpile cash, you build up your war chest so that you can endure uh a situation. When the pandemic first started, you know, uh one of the things that Katie and I at Trust Insights were doing was saying, okay, let's cut back our expenses as much as possible, you know, gather up as many receivables as possible, get more stuff in market, and just build a war chest because we don't know what's going to happen. Now, fortunately, um, you know, we were able to weather the storm uh and we had some government assistance and things to do that as well.

But uh when when the when the defecation hit the ventilation, uh we knew we had a plan ready to go. You know, we're gonna pull back expenses, dramatically increase your sales efforts, try to get as much pipeline as you can. Uh when you think a recession is coming, that is probably the worst time to cut back on marketing, right? You might want to cut back on your spend if the company's trying to stockpile cash, but that you should not be cutting back on your activity. You should be turning up the volume on your activity, hosting more webinars, going to more events, publishing new white papers and stuff, um, deploying new revenue opportunities, courses and books and videos, and whatever else that you can do to generate multiple streams of income so that uh again you're taking in more than you're spending, right?

That's the that's the path to becoming wealthy is spend less than you earn, uh buy as much of a margin as you possibly can. So those are the preparations that you do for a recession. The first and most important thing though, really is knowing that it's coming and seeing where you are in the journey to it, right? Because they're inevitable, they're part of the business cycle. But if you don't know when it's happening in your industry, um you you get caught unawares.

And that's a critical key point. There is a macro recession, of course, you know, when the the world as a whole or your country as a whole is in a recession. But different industries flex in recessions differently, right? Uh, not every industry goes down, some industries go up. Um, you see, like accounting firms can tend to do a little bit better sometimes in recessions because again, people are spending a lot of time looking at the books.

Um during the first days of the pandemic, you know, the travel industry took a massive hit, but online delivery companies, yeah, their their business went through the roof. So one of the things you have to look at is how does your industry react in recessions? Uh, you may need to talk to some folks with some gray hair to figure if it's been a while since a recession for you, um, and ask what happens in in this industry in recessions. You know, how do other how do competitors behave, how do suppliers behave, how do customers behave, and then be on the lookout at for those numbers as well. Have a battle plan and then have a really good plan for listening so that you know when to put the battle plan into action.

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