The “R” word is one of the most feared words in the marketplace today: RECESSION. There’s a lot of debate around whether the United States is in recession, but whether you call it a recession, slowdown, correction, or a normalization, it’s clear the market is changing.
As a title professional, now may be a good time to consider taking action, particularly if you’re already seeing some slowing in your market. New situations like this present new dangers and requirements, but they also present opportunities.
Let’s start with the dangers. The most obvious threats are reduced sales or revenues, which could threaten profitability and put pressure on cashflow. Those are troubling possibilities, but good management techniques can help you navigate these potential headwinds. Here are some steps to consider:
Keep a close eye on your business metrics
- Get accurate revenue numbers and watch them carefully.
- Seek realistic sales projections. Know what’s in your pipeline, and in your customers’ pipelines.
- Watch expenses closely.
- Know your “cash-burn” rate (i.e., how long you can operate at a loss).
Hope for the best, but make a plan for the worst
- No one likes layoffs, but you should have a plan. Make this as soft as possible. You may consider salary “freezes” and percentage salary reductions as an option should conditions warrant.
- Work with landlords, vendors, suppliers, and banks for more favorable terms.
- Build a “war chest” or “rainy day fund.” Having cash-at-hand is prudent.
- Consider a line of credit. Seasonal slowdowns, roughly October through February, may make cash flow challenging. One alternative may be to obtain a reasonable line of credit from a trusted, local lender that can be used for short term coverage of payroll or extraordinary expenses “just in case” it is needed. The line of credit option creates flexibility for expense management.
Having discussed the dangers, here are some new responsibilities you may face in a contracting economy:
Get your game face on
- Things are a lot more competitive. There is more competition for each revenue dollar. Prepare your team to compete more effectively.
- Keep a close eye on your competitors. Know what they are doing and where they may be looking to take market share, your employees, etc.
- Take special care of your best customers. Know where your revenue is coming from. “Show the love” to customers who may be at risk.
- Find partners you can trust. Look for loyalty, financial strength, and assess the risk of being betrayed. Some underwriters may put increased pressure on you to make minimums, or they may cut staff or divert resources to support their direct and affiliate operations while neglecting your needs. Find the partners that are going to be highly responsive to your needs so you can get your difficult deals closed.
- Watch out for “bad moods.” Your team members may worry about slowing market conditions or even about being laid-off. Fear and stress can make it difficult to compete. Company culture is important. Stay close to your team and engage them. Get their input. Share your action plans.
- Make new commitments. Revise sales projections and requirements for the sales team. Now is the time to invest in your team’s selling skills and marketing efforts.
- Find efficiencies. It’s time to streamline processes and improve your systems. Seek ways to do more with less.
If you cope with the threats, fulfill your obligations, and have adequate financial capital, you may have the chance to take advantage of opportunities in a slowdown. Some of these opportunities include:
Improving the quality of your team
- Upskilling – consider education and training for your staff including CE, CLE, and sales training.
- One consideration is to hire top performers from competitors. Of course, you want to remain vigilant for competitors looking to “poach” your employees.
Become a bigger and better company
- Now may be the time to consider purchasing a competitor for a discount to expand into new markets and to obtain new capabilities.
- You may wish to rethink your customer experience and employee experience to give you a competitive edge.
- Streamlining management and operations can help you become a more agile company. This might include bringing in new technology to do more with less and to improve turn time and accountability.
- Consider making new offers – such as commercial transactions, education and training for your real estate agent customers, or new digital capabilities for customers such as mobile apps.
Regardless of whether the economy experiences a soft landing, hard landing, stagflation or a recession, anticipating what you might do in advance of these situations is essential to the success of title professionals. By planning ahead, you can overcome market challenges and adopt a new “R” word to describe your organization: RESILIENT. Of course, your Alliant National agency representative or agency manger is always available to discuss market conditions and ways to help your business thrive!