With cost-of-living issues beginning to bite, whether we technically have a recession or not, most commentators agree we are in for some economic turbulence. Optical practices I speak to are already seeing evidence of patients deferring their examination, lowering their spend or ‘shopping around’.
In my 35 years running optical practices, I have seen many ups and downs. It is clear to me that economic cycles come and go much like the seasons, and that downturns are a natural stage of this cycle. So, the question we need to answer as business owners is not whether we will have a recession but what we are going to do about it. I have highlighted below five strategies for helping you identify how a downturn might affect your business and how you might handle it. I hope you find these useful.
Take a regular business health check
One mistake that small businesses often make is using the state of the company bank account as their sole measure of success. This is a dangerous game as a cash rich business can sleepwalk into trouble, often not realising until it is too late.
For optical practices, measuring key indicators, for example appointment efficiency, average transaction values and recall effectiveness, can give you clues as to what will happen to your future performance.
It is essential to understand what the metrics say about your business, even when they show your company is doing less well. While each business will be unique, some common questions which these trends will uncover are:
Keeping a handle on what your key indicators are telling you will help you make the right decisions for your business.
Take action
Now that you have identified the areas to work on, you need the commitment to act. Many business owners decide to make changes, but fail to take action, sometimes purely through the fear of making things worse.
One thing I recommend is to become part of a peer mentoring group, where you can sense check your decision-making with trusted peers and mentors. It also makes you accountable for taking the action you commit to in the group.
Maximising your human resources
When a downturn puts the squeeze on new resources, it is important to work out how you can make the best with what you have, especially if hiring new team members is not an option. This may include changing employee roles, adding certain new responsibilities or even completely retraining staff for a new role.
Communication is key and explaining openly and honestly about the tough times ahead will help the team bond in a positive way. Remind them that their hard work is valued and does not go unnoticed or unappreciated.
Regularly asking for feedback from your team and customers will help you spot where the weaknesses are in the organisation so you can plug these holes. By involving your team, you may also find they come up with innovative solutions and ideas to improve the business.
Look after your team
Looking after your team should always be a priority, however, it is even more important when things may be tougher than usual. The effects of a downturn in the economy can have a damaging impact on team morale and it is your role as leader to keep the motivation high. In fact, in these times you need your team to be even more effective and efficient than usual.
You achieve this by understanding your employee’s personal needs. Listen to your employees, using a staff survey, one-to-one meetings and team meetings. If your team are experiencing stress in their own lives, it is likely this will impact their work life and vice versa.
Regular communication about how the business is doing and how they are contributing to the success is essential and non-financial perks such as team events and get togethers, flexible working or more holiday are all things you can consider.
Recession-proof your business
Once you understand that downturns in the economy are a common part of the economic cycle, you can build their impact into your plans. Rather than simply adding 10% to each year as an arbitrary target, (something I see happening on a regular basis), look for trends and try to set pragmatic and realistic budgets for the business over one, three, and five years. It is better to budget low and exceed your expectations, than to be too optimistic and have to cut costs later.
Spending time planning properly pays dividends in the long run, by reducing nasty surprises and avoiding having to take more drastic action down the line.
I hope this article has given you some food for thought and also the confidence to know that recessions and downturns are just as normal as the highs we experience when everyone is feeling great.