Okay, there’s no way to absolutely recession proof your insurance agency. Although ups and downs in our economy are inevitable, each recession brings its own unique conditions and challenges. But there are steps you can take right now to help prepare your business for the next economic downturn, whenever it comes.
Make Smart Choices about Debt
In a perfect world, we could grow our businesses without incurring any debt. Unfortunately, that’s not always an option. Still, don’t let perfect opportunities lure you into more debt than you can handle. (Trust me, very few opportunities really are once in a lifetime.)
Keep the following factors in mind:
- Be sure you can service your debt and meet your recurring operational expenses if circumstances change.
- Know if any of your debts have terms or interest rates that may be impacted by outside economic conditions.
- Look at the length of the repayment plan before taking on a new debt. Compare your economic projections to the loan requirements. If you don’t meet your projections, will you still be able to service the loan? Or will doing so slow your overall growth?
You want to manage your personal and business credit ratings carefully so you can access credit if and when you really need it. Remember, a recession can make it as difficult (if not more difficult) to restructured existing debt as to secure new loans.
Balance Staffing and Automation
Staff size and automation often occupy opposite ends of a teeter-totter. When it’s more cost-effective to hire additional employees, companies invest less in automating processes. When labor markets are competitive or when tight budgets make the costs of hiring new employees prohibitively expensive, automation becomes a lot more appealing.
Don’t wait until staffing becomes expensive to invest in automation, though. Implementing a new automation system – whether it’s an off-the-shelf solution or one custom-made for your organization – usually has a BIG investment of time and/or money up front. Create a strategic plan that balances staffing and automation instead.
Stay on Top of Accounts Receivable
I’ve never really understood why some businesses adopt such a relaxed attitude toward collecting money owed to them. If you’ve done the work you promised to do, that’s YOUR money. Why let it sit in someone else’s bank account?
Have a robust invoicing and collections process – and stick to it! This habit gets clients used to paying on time. Of course, you’ll want to know and comply with laws governing collections in the jurisdictions where you do business. If you do choose to make the occasional exception for a valued client, decide what exceptions you are willing to make before the situation arises.
Finally, set a good example. Stay on top of your accounts payable!
Once upon a time, outsourcing was something of a naughty word. No one wanted to admit they couldn’t do it all themselves. Attitudes have certainly changed! Outsourcing is a great way to secure skills and resources you don’t have or perhaps don’t need that often. Just be sure to consider all the costs when deciding whether utilizing outside experts makes financial sense. Include staffing costs, training, benefits, hardware/software expenses, etc.
You may have noticed a common theme in many of these tips: being proactive. Exploring your options before a crisis allows time for careful consideration. It’s always easier to make good decisions when emotions aren’t in play. Also, you negotiate from a position of greater strength if you don’t wait until circumstances are dire. Finally, taking action before the crisis hits gives you first choice of a greater range of options – instead of having to scramble with the others who choose to react rather than plan.