Efforts to rein in the current high rate of inflation are likely to push the economy into recession in 2023. Chief among those are further hikes in interest rates, designed to curb excessive spending and hold wage growth in check in order to drive prices downward.
When the economy might go into recession, how deeply and for how long is uncertain at present. Because the economy is quite healthy overall, many economists believe if a recession does occur it will be moderate and short-lived. However, interior designers should anticipate some softening in the demand for their services during the coming year. To safeguard your business, build recession-proof strategies into your business plan now.
Ensure a steady cash flow
Unlike in the Great Recession of 2008, designers are not likely to experience an abrupt drop in business. Nonetheless, because declines in demand for services such as interior design tend to lag behind downward shifts in the economy, you can be caught off-guard as requests for new business start to taper off. To ensure you have enough cash on hand to continue to pay salaries and expenses, budget and set money aside now. (Because interest rates will be high, you don’t want to resort to using credit cards to cover ordinary expenses.)
Also, establish a line of credit with your bank if you don’t already have one. If you aren’t familiar with a line of credit or aren’t sure how to obtain one, this recent article in Forbes magazine may help.
Delay unnecessary improvements
If you were planning to make a major investment in your business this year, hold off for a while unless it is absolutely necessary or critical. That includes adding staff. You want to hang onto your capital until the economic picture becomes clearer. You will want to see that business is holding steady or improving.
Outsource rather than hire
In times of economic uncertainty, you want your business to be lean and adaptable. In addition to the fact that recruiting, hiring and onboarding staff can be expensive, you also incur a sizable sum of fixed expenses in the form of salaries, benefits, and bonuses. Delegating non-essential tasks to freelancers and outsourced services will give you more flexibility. You can adjust personnel as needed and have more control over your spending.
Automate and standardize processes and procedures
You can improve your business’s efficiency and responsiveness, as well as lower costs and avoid the need for additional personnel. Do this by taking advantage of the many software programs and apps created to perform routine project and business management and financial tasks. Standardizing common processes and procedures will ensure everyone on your team knows what to do and how it is to be done. Then, your business will require less supervision. This will free you up to spend more time on billable tasks and client acquisition.
Keep marketing and communicating with clients
Especially when business is slow, you want to intensify your marketing efforts. Take advantage of low-cost digital marketing opportunities to explore reaching out to a wider pool of potential clients. Maintain regular contact with current and former clients to remind them of the breadth of services you offer and to encourage them to refer you to others.
Diversify your offerings and revenue streams
During a recession, budget-conscious clients may not be willing to undertake a large design or remodeling project, but they may be open to improving their home or business interior environments in other ways. Put together a menu of auxiliary improvements and services, packages, and special offers that will appeal to them. Tap into current trends, like the desire for greener and healthier homes. Curate a collection of unique products. For those prospective clients who are not ready to commit as yet, offer consulting and advisory services to help guide them toward a future project.
Nurture your employees
Remember that a recession can be doubly stressful for your employees. They will be concerned about the welfare of the business and their own personal finances. With having to do more with less, you don’t want to lose your talented and experienced staff. Allow adequate downtime and more flexibility in schedules and work hours, including options for remote working if that’s possible. Cultivate a work environment that is supportive and less pressured.
Prepare for what comes next
Watch for signs and news that the economy is beginning to emerge from the recession. That is likely to include a rebound in the stock market, improvements in home sales and values, and an increase in consumer spending. Often those are harbingers of a growing demand for remodeling and design services in the months ahead. Ratchet up your marketing efforts and visibility on social media platforms. Adjust your team and business processes as needed in anticipation of a resurgence in business. Touch base with contractors, vendors and suppliers to have the latest information on who and what is available.
With planning, good management, optimism, and ingenuity, you can weather the upcoming recession and lessen its impact on your business. Look for conditions to improve, very likely in the second half of 2023.