R-R-Recession
A tightening market. Mustn't use the "R" word.In an industry that's all about bigger, better, brighter, it's almost an anathema to be, well, negative. So naturally I'm hesitant to talk about recession, yet I feel strongly that web companies are in a good position to weather a recession - even more so if they plan for it.
With the US officially in recession, a few European countries on the verge of recession, house prices in the US down by up to 40% in some places, skyrocketing food prices, a worldwide crunch on inter-bank lending, etc, I've started to realise that the bad news has just kept coming. In fact, over the last 18 months the world economy seems to have been following some kind of gradual descent path. Not a crash, not an instant panic, but a longer and more consistent run of problems that each seem to compound each other.
It all makes me wonder what things will look like in twelve months. In my own work I've been asking the question, what type of business keeps going in a recession? You may think I'm just being a nay-sayer, and hey, I hope I'm wrong, but what harm can a bit of sound business planning do?
OK, so for those of you who are still with me, here's what I think.
In a recession people stop buying new things but keep fixing old things. IT maintenance of all kinds should remain good core business. Also, people will increasingly look to the web as a way to save money by reducing travel, finding bargains, accessing low-cost entertainment, reducing their overheads etc. That sounds like a whole lot of markets that could actually expand.
What else? Well, hosting seems like a good one. If your business is built around lots of passive income from hosting it should bear up well. People will be looking to cut the big $ not the thirty something a month expenses of the one asset they could actually use to reach new markets.
Here's another thing to consider, governments and corporate always seem to have money. Most of our members are in the SME market, but how much would it take to reach into a higher market? A merger with another local web business, networking in the right circles, some capitalisation via a financial partner, new skills? All things to consider.
Oh, and don't forget expenses - yours. What can you do to cut them back now and increase your business liquidity? Perhaps consider tightening your credit policies to secure greater commitment from new clients, or collecting harder on older outstanding debts? In terms of protecting your client-base, don't forget also to keep in contact with and look after your existing clients so that your client retention is strong. It doesn't take much to keep in contact with something meaningful.
All this is really just a very brief ramble on the subject, but if you are seriously interested in structuring your business to succeed even in adverse circumstances, call me on a Tuesday or Thursday morning to discuss ideas. What you'll find is that most of the ideas that come out of it actually turn out to be very sound business ideas that should be good for your business even if the threat of recession recedes.
Tagwords: recession
Posted by John Jones ~ Tuesday 29 July 2008
