What It Takes to Survive a Recession

Survive this down economy with these strategies: Track your cash, diversify your customer base and be flexible enough to take any job that comes in the door.
Feb 1, 2009

A make-it-or-break-it task during a recession is staying on top of your financials. Make sure you know what  you are making and spending, and review it on a regular basis. Photo courtesy of Mind's Eye Graphics, Decatur, Ind.

By Greg Kitson, Contributing Writer

The briefest glance at any newspaper or TV news program lately is enough to make the steeliest of stomachs wrench in anxiety. Between the slow-motion stock market crash, sinking 401(k) values, frozen credit pipelines, mounting job losses, plummeting home values and increasing unemployment rates, it's enough to make you want to bury your head in the sand until the economic storm passes.

The good news is that during my 34 years in the decorated apparel industry, our shop — like those of countless other decorators — has weathered a number of economic downturns, meaning that survival is certainly attainable. And while none of these crises were as serious as the calamity we face now, all were good teachers of some valuable lessons in business survival — and all made it painfully clear which types of decorators have what it takes succeed, and which ones are doomed to fail.

History Class
I had been in the industry less than a decade when America entered a recession around 1982. My business wasn't solid enough to withstand the downturn, and I went bankrupt, technically — although I wasn't even business savvy enough to realize it. Basically, I stuck my head in the sand until the recession lifted in the mid '80s. When the next slowdown came in the early '90s, I knew enough about my business to pay close attention to my financials, including cash flow and other critical areas. After Sept. 11, 2001, our country again faced an economic downturn — a period of uncertainty where credit dried up and unstable businesses closed their doors.

The common denominator in all of these recessions is that during a crisis, the strong survive and the weak either fall to the side or go out of business entirely. And what of the decorators who fall in the middle, somewhere between weak and strong? Well, that depends on what steps they take during the recession. These borderline businesses either clean up their act by taking control of their business, or they simply give up.

The Weak Ones
Prior to a recession, failing shops stay in business in spite of themselves. During a recession, their journey toward inevitable demise simply accelerates. These shops survive on checkbook accounting — scraping by day to day. If there's no money coming in that day, there's no money to go out for bills or payroll. This rickety house of cards is bound to fall even in a solid economy, much less when times are tough.

On the positive side, as these weak businesses fall, the marginal shops can scoop up their customers, helping their own efforts in surviving. Of course, some of these customers may be undesirable, trained by the failed shop to expect unsustainably low prices or to have their excessive demands for endless artwork revisions met.

That said, marginal and successful shops will do well to choose new customers carefully during a recession. Find the right balance between customers who help keep the doors open and those who are simply more trouble than they're worth. If the relationship is not a win-win, you shouldn't get involved.

Having said that, there are customers who need bail-out orders printed when their current decorator fails. This is the customer who will come to you at the last minute and say, "I was working with ABC Screen Printers in the past, but they're closed now, and we have a festival this weekend. Can you do the job?" In this situation, take close stock of what the customer will require, as his situation may not be salvageable. If it is and you do the job, you'll be his savior and earn a customer for life. If it's not, and you do the job, he'll likely blame you, and you will have lost a customer for life.

Marginal Shops
Marginal shops straddling the line between strong and weak are in a precarious position. The business may seem relatively successful during healthy times, but the owner may be oblivious to its failings, such as excessive dependence on a single customer or niche market. When that one customer or niche market suffers during a recession, so does the decorator that depends upon that business. Sadly, marginal shops often don't have control over how they'll fare in the recession because they've tied their fate to that of a few clients or a particular market.

Thankfully, marginal shops probably don't have to generate sales today to make payroll tomorrow. In other words, they have the advantage of time. They also may have access to a line of credit — a huge plus during a recession. Businesses that expect to weather an economic downturn without a previously existing, sound and solid relationship with a lending institution are likely in for a world of hurt.

You should develop a line of credit prior to an economic downturn, not in the midst of one. It's difficult, if not impossible, to establish a new line of credit when the nation's credit pipeline is freezing up. In fact, even if you've already established a line of credit, there's no guarantee that you'll be able to renew it; some banks are simply not lending right now.

Successful Shops
A healthy business owes its success, at least in part, to having built up strong relationships over time. They have predictable sales and steady receivables, meaning they have customers who have money and can pay on time. These shops have a proven track record of fulfilling their agreements with banks, no matter the size of their financial pipeline.

This is an important point: A successful shop isn't necessarily a large one; it's a shop with these solid customer types and solid financials. In other words, successful shops have put themselves in a position to be the masters of their fate during a recession, rather than being subject to the whims of customers and the roller-coaster ride of the economy at large.

Survivors also have a keen understanding of cash flow. They know how to determine necessary expenses vs. unnecessary ones. They can handle it and extend credit when customers who normally pay Net 30 become Net 60 or Net 90 customers.

Put simply, a successful business is one that is managed well and understands its market well — and thereby is actually in a good place to grow during recessionary times.

Survival Factors
What else helps a decorator survive a difficult economy? Without a doubt, a diverse customer base is critical. Our shop is located in an area where one-third of all jobs are related to the recreational vehicle industry. Not surprisingly, this industry has been hit hard by the downturn, with unemployment as high as 20% in some areas. If our company depended largely on this local market, we would be in dire financial straits.

Shops that want to survive also must be adaptable. When the phone stops ringing with calls for process-color printing, your shop's specialty, you must be adaptable enough to start doing spot-color jobs or allover printing, or whatever else the market demands.

Adaptable shops can shift their focus to milestone printing — jobs done around events that continue even in the midst of a recession — like births, graduations, anniversaries, sporting events and so on. They're able to adapt to these lower-paying, yet more-plentiful jobs. It may not be the orders they had hoped for — but it may be exactly what's required to weather the economic storms on the horizon.

Greg Kitson is founder and president of Mind's Eye Graphics in Decatur, Ind. For more information or to comment on this article, e-mail Greg at greg@mindseyeg.com or visit mindseyeg.com.

Hirsch Video Demonstrates Oversize Shirt Printing
A new video from Hirsch Intl. shows how to print oversize designs on the Mimaki inkjet garment printer the company distributes. To see the video, visit hirschinternational.com . Click on “Direct To Garment Printer” and search the right navigation bar for available videos.
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Decorators Open Up on DTG Workflow, Profits
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