Make sure your business is ready to weather a recession
After a period of business interruption, you can expect an influx of customers. But with a disruptive crisis — whether it’s a pandemic, a national security issue, or a natural disaster — the economy may suffer in the aftermath. While you can trust in the resilience of the beauty industry during recession, you can’t rely on the “lipstick effect” to pull your business through. Building business resilience will include concrete planning. Here are some steps you can take:
Have a detailed plan
It’s far easier to prepare for a recession before it begins than in the middle of one. Do some business continuity planning to brainstorm a few emergency scenarios, and periodically rethink them as your salon grows. Ideally, your plan should account for the following financial considerations:
Audit your assets outside of tax season.
Determine your assets and operating capital.
Calculate how long you could sustain the salon after losing customers.
Prioritize any essential expenses while highlighting options that can be cut.
These plans don’t necessarily need to be recession-based. Anything that causes a slow period or loss of customers — such as increased competition — might be a reason to break the emergency glass. If that happens, you’ll be far more comfortable working from a plan than without one.
Set up a line of business credit
Any organization looking to build business resilience should have access to a credit line or small loan — even if the economy is doing well. During a recession, lending guidelines are more restrictive, making it harder to obtain liquidity when it’s needed.
Remember, credit lines and small business loans are not the same:
Credit lines have high interest rates, but no monthly payment until making a purchase. It’s an ideal safety net when a recession or unexpected expense occurs.
Business loans have lower interest rates, but you must start repayments immediately. They’re preferable when you’re working on a project that will generate long-term returns.
Finally, do not use personal credit to keep your salon running. That kind of debt can hurt you long after the recession has turned around.
Have a downsizing strategy
You can do everything to possibly prepare for a recession and still face the point where it’s necessary to downsize. That doesn’t necessarily mean rushing into things — if you downsize in stages, it’ll be far easier to ride out the economic downturn and rebound once it ends.
Reduce operational hours: The most effective option is to reduce the hours your salon is open. If you run a small salon with three employees, closing an hour or two early will save the same amount of money as laying a team member off.
Trim your salary: Taking home a smaller paycheck is the responsible choice as an owner and shows your employees you’ll make personal sacrifices for the team as well.
Downsize the right way: If you do have to downsize, be professional. Prioritize team members based on seniority instead of personal preference, offer a reference letter, and see if they’re available to rehire down the road.
Be open with your staff
There’s no point in hiding a difficult financial situation from employees. In fact, they probably already know more than you expect. What they do need is a leader who will be transparent and address the challenge in a clear way. You don’t have to describe bank statements for them in detail, but a general picture can help cultivate trust in a difficult time. What’s more, your team might have great ideas about how to adapt services to survive the recession.
For more details on creating a recession plan, be sure to read The Beauty Industry During Recession: 5 Survival Tips
Managing your business through a crisis is doable, but there’s no denying that it will be the challenge of a lifetime. You will need to make difficult choices to grow your business, let alone preserve it. At the end of the day, what matters is making connections — both for customers and for you. If you treat your brand as a community instead of a business, you’ll have people to depend on, no matter what challenge arrives next.