It is getting more difficult to see the economic horizon. Too many first-time factors are contributing to the very cloudy outlook. I am addressing this writing to the possibility of a recession; I am not predicting one. Forbes describes the impact of a recession on your business: “During a recession, the economy struggles, people lose work, companies make fewer sales and the country’s overall economic output declines. The point where the economy officially falls into a recession depends on a variety of factors.”
There are two concerns regarding the possible recession… how to get your business finances in order and how to work with clients during a recession.
A recession directly influences you, your business, and your clients:
The stock market declines as other investments areas are more stable and attractive
Economic growth dips, steadies and grows
Interest rates rise, steady and decline
Unemployment ticks up, stagnates and declines
Inflation continues, slows, and stagnates
Buying accelerates, steadies and declines
Investments into advertising and promotion are cut
Price becomes a greater factor in choice
A recession is not the best time to voluntarily look for a job. It is not a time to spend unless it is a critical need. It is not a time to take on debt, but sources for lending should be secured before the onset of any recession.
We can almost toss away U.S. recession history as well as most pages in the playbook on how to fight a recession. Even the most recent recession of 2008+ is different. Be with the war in Ukraine, the continuing epidemic, supply chain issues, transportation, etc., there are more mitigating, first-time factors influencing the global economy than ever. My prediction, for what it is worth, will see 75% of your clients tighten their belt. Advertising and promotional dollars are often in the first round of cuts. It is far easier to cancel one advertisement for $100,000 than terminate an employee. However, Procter & Gamble’s chief brand officer Marc Pritchard said it best: It’s time to “double down.” He tells us that now is not the time to cut media, advertising and promotion. Why do so? Pritchard said “because this period of unpredictability happens to coincide with ongoing, massive shifts in how people consume media and interact with advertising, along with a corresponding set of changes in how brands can expect to reach and connect with customers. Companies that cut advertising and promotional budgets do not come out of recession well. Their growth stagnates for years, market share does not return easily, and sales continue slower.
Now is the time to look at your client list. Try to project which client may suffer most. With inflation and recession, a restaurant may once again experience a downturn as their customers cut back. Perhaps it is time for a meeting with that client to look down the road and work with them on “connecting with their customers”.
Get In Now – Most corporations do budgeting in the Fall. NOW is the time to work with your client on 2023. Not all of your clients look ahead, most are reactive. You need to be proactive. You know who buys a calendar, the steady apparel buyers, the gift buyers the fund raisers. Try to get it all done before the real recession shows its face.
Contact your larger clients who actually budget. Ask them how they are doing in the last quarter of the year and see if they will have a surplus budget from 2022 that you can help them spend. They have allocated their funds and spending it now is a weapon against cuts next year.
Consumer spending is the key to it all. Right now, we are spending on virtually everything and production is back logged. The way the Harvard Business review categories spending is helpful:
“Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:
Essentials are necessary for survival or perceived as central to well-being.
Treats are indulgences whose immediate purchase is considered justifiable.
Postponables are needed or desired items whose purchase can be reasonably put off.
Expendables are perceived as unnecessary or unjustifiable.”
Consider creating a “Top 25 Recession Product/Group List”. Focus on steering your clients to items that are needed, not frills or luxuries, not useless but useful. As a business partner and advisor, show your clients you are valuable and, like a financial advisor, you are thinking and acting for them.
Be willing to adapt your business. Fact: the focus of the world is digital. Digital delivery of content is cheap. However, we don’t have much content to deliver. Find goods and services that will flow with the headwinds of technology. That does not mean we get out of the “stuff”” business, it simply means we need to go with the business flow and morph with the times
As for your own business and your own financial wellbeing, look for places to save on costs; example: always shop for business insurance. Policies get expensive and there are many lower cost policies. Saving 10-15% is significant.
Pay off debt.
Maximize your sources of credit – It is easier to get a corporate credit card or line of credit in good times. You may not use it but have it ready.
Squirrel away some funds now. You will need emergency money, credit lines from suppliers will tighten. Liquidity, liquidity, liquidity.
Let’s all hope the economy stays robust - hope for the best, plan and prepare for the worst.
Joel D. Schaffer, MAS is CEO and Founder of Soundline, LLC, the pioneering supplier to the promotional products industry of audio products. Joel has 48 years of promotional product industry experience and proudly heralds “I was a distributor.” He has been on the advisory panel of the business and marketing department of St. John’s University in New York and is a frequent speaker at Rutgers Graduate School of Business. He is an industry Advocate and has appeared before the American Bankers Association, American Marketing Association, National Premium Sales Executives, American Booksellers Association and several other major groups. He has been a management consultant to organizations such as The College Board and helped many suppliers enter this industry. He is a frequent contributor to PPB and Counselor magazines. He has facilitated over 200 classes sharing his industry knowledge nationwide. He is known for his cutting humor and enthusiasm in presenting provocative and motivating programs. He is the only person to have received both the Marvin Spike Industry Lifetime Achievement Award (2002) and PPAI’s Distinguished Service Award (2011). He is a past director of PPAI and has chaired several PPAI committees and task forces. He is a past Chair of the SAAGNY Foundation, Past President of SAAGNY and a SAAGNY Hall of Fame member. He was cited by ASI as one of the 50 most influential people in the industry.