All businesses are vulnerable to shrinking in a recession, but service businesses - those offering a service rather than a product - are particularly vulnerable to an economic downturn. Here are some suggestions on how business owners can prepare for tougher times ahead.

First, take a hard look at what you do now. Is your service a necessity to customers or clients? Or is it a luxury? Being objective is crucial. You may think your quarterly survey of customer satisfaction is important to a manufacturer, but they may see it as a luxury or frill when their own cash flow starts to dwindle. To assess you situation, create a scale by drawing a line with ‘necessity’ at one end and ‘luxury’ at the other. Then mark off where your services cluster, using a mark for each project and how the customers see it. Be objective; this is no time to kid yourself about how your clients view your offering.

If your services mainly fall at or cluster towards the luxury end of the scale, next take a hard look at your customers. Will they still be able to afford you when the economy shrinks? For example, if you cater to retirees or the wealthy, their incomes may not decline. But if your services tend to be subject to customers’ budget cutbacks, you need to rethink some of what you offer.

The first step is to look at how you can repackage part of what you offer, to either lower the price point, or vary the service to broaden the range of potential customers. If, for example, you have tended to do nationwide market studies, can you scale these back to offer regional studies that either existing customers or new ones may want to purchase? Or, if you do promotion, how can you streamline your approach, to perhaps offer services in one channel, for example, radio or e-mail, rather than a full spectrum of channels? It’s always important to revisit what you do and find a way to offer a “quickie”. You can still go on offering your full service, but the lower-priced alternate may help keep the dollars coming in when the economy slows.

If this is not possible, what services can you introduce that will be mainly recession-proof? Perhaps you have some new ideas on the back burner? Bring them forward; a slow economy is not necessarily a bad time for something new, it just has to be the right ‘new’. If you can offer a small, affordable luxury, people will still find the dimes even if they no longer have the dollars.

Another way to migrate to greener pastures is to focus on geography and find the areas of the country, which are less affected by economic troubles. What can you offer outside your usual territory? Which of your services can travel well and might lead to substantial new business away from home?

The next thing to look at, if you see your services dying off in terms of demand, is how you might change over to a ‘D-I-Y’ model and, rather than providing the service, act as a coach to your customers or clients so they can do it themselves. That is, if you usually develop and execute strategy, perhaps you now provide the ’skeleton’ and they have to flesh out the details themselves. Or, if you would normally be the one making calls for a market research survey, you now, instead, develop the questionnaire and guide staff at your client’s company to do the phone work.

A recession can also be a good time to look at how offering training or seminars, based on what you do, can broaden your markets and generate some needed cash. While each seminar might not deliver the same level of dollars as a full-scale project, it’s all ‘grist to the mill’. And if you keep the cash flow coming in, you’ll be better positioned to thrive when the good times return.

Copyright Deborah C. Sawyer