Dr. Rick Franza, Dean of the Hull College of Business, discusses a different, timely business topic each Monday in this column. This week he talks about preparing to successfully survive a recession. The interview has been edited for clarity and impact.
ABD: In a recent survey of CFOs, 100 percent believe we’ll be in a recession in the next 9-12 months. There seems to be no question of if there will be a recession, just how bad it’ll be. How should businesses approach this?
Rick: The lesson we learned from covid, and from hard times in general, is that when things are going well we become complacent. When things change, it forces us to think outside the box. Adversity helps us learn a lot of things about our business. So it’s important to redeploy instead of being like a turtle and hiding in your shell.
ABD: You mentioned covid – will the fact that we just got through a difficult period for businesses help us or hurt us in the coming recession?
Rick: I think businesses will be better prepared to address it. But the new wild card is the increasing interest rates. Money had been pretty much free for a while because of the low rates, but now if you need credit, it’ll become more expensive.
ABD: What are some things businesses can do now to help them weather a recession more successfully?
Rick: During a recession, it is a great time to have cash reserves to make investments in your business, so plan now for cash flow during that time. Secure your really good employees by paying them appropriately but also providing an environment for them that makes them want to stay. Really take advantage of “free” advertising by using social media. Lock in rates with your suppliers – it helps their cash flow and gives you a reduced rate, a win-win. Treat suppliers as a partner, not someone you’re trying to chisel a low price out of. Identify where you can reduce costs but don’t skimp on what’s important to your customers.
During the 2008-09 recession, I was on the board of a country club. We were a full-service country club but the centerpiece was our golf course. The one thing we never skimped on was the maintenance of the golf course because that was what differentiated us from other country clubs.
So when you’re making decisions on cutbacks, make sure you don’t cut back on what your customers want the most.
ABD: It seems this would be a good time to start analyzing what it is your customers want.
Rick: Yes. Communication with your employees and customers is critical. You need to manage the expectations of both your customers and employees. It’s important to understand what your customers value. In a restaurant, for example, it might not be that they want large portion sizes but that they like the atmosphere of your restaurant. Whatever it is, don’t skimp on that.
ABD: The hospitality and entertainment businesses especially often have “dead” times when their venues aren’t used as much. During good times, the peak periods can cover that but how can they utilize those slow times in a recession?
Rick: When that capacity goes unused, you can’t get it back, so when you have the capacity, you have to find a way to draw in people. At the country club I mentioned, we offered more memberships for junior members but they could only use those during the week because that’s when the golf course was used the least.
ABD: Earlier you mentioned thinking outside the box. What are some ways to do that?
Rick: Ask your employees for suggestions. Often managers think they have to do it all but the people who work with the customers know what works best. Talk to people who are in the same business you’re in but in non-competing markets, but also talk to other people in your market who are in different businesses – maybe you can take an idea they’re doing and apply it to your business. The more people you talk to, the more ideas you’ll get.
ABD: All of these things sound like good ideas even when times are good.
Rick: These ideas are great for a recession, but they’re great anytime. Some of these things are good business practices no matter what happens.
