(This post originally appeared on Philly.com)
The stock market has fallen significantly since the Coronavirus (COVID-19) outbreak. This is because the people on Wall Street are always betting on the future and unfortunately the the near term doesn’t look so rosy. No one really knows what the full economic impact of the virus will be, but investors are deeply concerned that it has already caused enough of a disruption to orders, shipping and manufacturing worldwide that in the coming months there could be a significant slowdown. All that could even send many economies, including ours, into a recession.
Small business owners in this area haven’t seen a recession in over ten years. But many of them are still around and are already preparing. Those that survived the last Great Recession learned lessons that they hope will prepare them for the inevitable downturn. What kinds of lessons?
When the economy slowed back in 2008, many of these business owners found themselves having to work much harder just to stay afloat. Most made it a priority to retain their best employees. Some used the opportunity to try new product lines or diversify their product mix. Others decided – or were forced – to close up shop completely. But most survived and often did so through common sense management.
For example, every successful business owner will agree that the best defense against an economic downturn is money in the bank. They know that if slow times are coming soon, then it’s important to build up both cash – and credit – availability.
That’s a lesson that Bob D’Amicantonio, the owner of D’Amicantonio Shoe Store, a custom high-end shoe and accessory shop in Wayne, Pa., learned from his father. “Dad told us a million times, if you don’t have the money, you don’t buy it,” D’Amicantonio recalled. Smart business owners like D’Amicantonio know that it’s important not to get short of cash. They always try to keep some savings in the business. This lesson helped him through the last recession and will do the same again.
So now is also the time to make sure you have firm commitments from your bankers. One way to do this is ensuring that your operations are as lean as possible. Which means cutting expenses wherever possible and questioning any expenditure that doesn’t seem necessary. Otherwise, more substantial – and painful cuts – will be needed.
That lesson was learned by the managers at Barry Isett & Associates, a 160-person, multi-discipline engineering firm based in Phoenixville. During the last recession, managers like Alex Ulmer, the company’s chief environmental scientist, said his company was forced to require some employees to take vacation time instead of a paycheck.
“Most of our employees had their salaries cut by 10 to 15 percent for about two years,” he says. Ulmer says layoffs were made, contributions to the company’s retirement plan were suspended and even the annual holiday party was put on hold. “The recession was very tough for us,” he admitted. “We hadn’t done the best job of managing our cash flow, and it was very hard to get credit at that time.” Happily, the company survived, learned from the experience and has been steadily building cash reserves since.
But more than anything, surviving a recession is all about taking care of your customers. Which is why many business owners have used a slowdown as an opportunity to double down on their marketing.
“The 2008 recession kind of had an opposite impact on our business.” said Christine Ramos Carr, a manager at M3 Printing in Philadelphia. “It turns out a lot of owners desired to do what was necessary to promote themselves and many focused on getting the word out about their businesses.” More companies stepped up their marketing and wanted flyers, printers, brochures, pamphlets, and other promotional materials. “We were there to service them,” she says. “So we actually got pretty busy during that time period.”
But marketing can come in different forms. Some business owners during the last recession sought out partners to expand their customer base and provide better services to their community. “We merged with another company, and that enabled us to expand our services business,” said Virginia Gavin, the owner of Appligent Document Solutions, a Lansdowne company that has provided document management software and services since 1988. “There will always be fluctuations in business and so you have to be prepared to make changes as needed.”
So will the Coronavirus cause a recession in 2020? It’s possible. At the least, it will bring on more than a few economic challenges. But the good news is that we have some limited time to prepare. Many small business owners operating today were also around during the last Great Recession, and a large majority will use the lessons they learned to steer their businesses through any potential downturn in the future.