During the first two years of the last major downturn in the world economy, many businesses in the United States and Canada failed. Downturns or recessions are not one-time events. With the stock market hitting record highs, and a booming economy, it doesn’t take an expert to see where we are in the economic cycle.  Busts inevitably follow booms. Businesses need to prepare for the downturn.  Here is how you can do that.

Do a review

You can’t get where you want to be without knowing where you are. Don’t procrastinate. Get started now. If your company is big enough, consider putting together a team to work on this. Your review needs to be written and ongoing. You don’t know exactly when the downturn will come, but the sooner you’re ready for it, the better.

Have a written management strategy

Get it down on paper. Often small business owners like to keep things in their head. Bad idea. In reality, this is more often than not just a lazy habit. Documenting your strategy helps to crystalize the plan.  It helps you come up to speed quickly when you need to.

Own your building

Many of the businesses that survived 2008-2012 did so because they were their own landlords. If you already own your land and buildings, that’s great. If you don’t, consider a strategy to make it happen. Naturally this has to be considered alongside debt management strategies, but if you can execute a purchase while interest rates are still low, and spread amortization out, you may ultimately give yourself a lower monthly overhead and start building equity you can use later. Be creative.

Maintain good relationships with suppliers

When times get tough, there can be occasions when you may need to delay payments to suppliers. Don’t panic. In rough times, your vendors are often struggling to stay afloat too. If you have a good history with them, they will be more inclined to work with you and be flexible.

Pay your bills on time

This fits in right alongside the previous point. Similarly, building strong, positive relationships can pay off if you need a little extra time to come through with that cheque for your fleet maintenance, or telephone systems.

Build up cash reserves

Although this may seem obvious, it’s important that you don’t lose sight of this point as a key part of your written plan. Making available low cost lines of credit while times are rosy is also worth considering, so long as you access it with great prudence.

Reduce Debt

The right kind of debt is good.  Debt that allows you to purchase a building is good.  Get rid of the insidious debt that just keeps dragging you down without ongoing benefits.

Focus on customer and staff loyalty

Without these two entities you likely don’t have a business. When times get rough you’ll need them more than ever. Build solid relationships while times are good.

Don’t increase expenses

Never reduce expenses just for the sake of reducing them. Make intelligent decisions as to whether an expense is necessary or not. At the same time, give extra consideration to any new expenses you may be considering at this point in the cycle.

Know when to quit: sell or close now

Hindsight is 20/20. Maybe now is a good time to sell. Too many owners decide to get out after it’s too late. While the financials are glowing and business is great is the best time to sell. If you know that you’re riding on the edge, you might consider packing up while you can still do so gracefully.

Have an exit strategy

As many retailers learned in 2008, sometimes no matter what you do there is no coming back. This can be hard to accept for many entrepreneurs who are accustomed to always looking for a solution to seemingly unsolvable problems. It’s what makes them successful, but you have to know when to cut your losses and move on. If that time comes, you need a plan of action.

Even following a few of these key strategies can be what it takes to outlast your competitors and be a survivor. You’ll position yourself as a stronger, more valuable businesses, and you’ll sleep better knowing you’re prepared. Now let’s get started.