6 Steps to Prepare Your Trucking Company for a Recession
As the high probability of a recession within the next 12 months per J.P. Morgan continues to loom over the U.S., it’s important to prepare your transportation business to sustain any potential impact.
The telling signs of an inevitable economic slump are visible not only via the ongoing turbulence in other emerging markets and through looking to major predictors including the Dow Theory (covered in a previous PEOPLEASE article), but also in examining historic economic downturns, including those surrounding presidential terms.
With the pending election and completion of President Obama’s term, it’s important to look beyond the headlines swirling around candidates Donald Trump and Hillary Clinton to note that nearly every presidential term has ended in economic crises. Bush Jr. concluded his two terms with the Great Recession of 2008. Clinton ended with the dotcom crash. Bush Sr. left the office amidst the Savings & Loan (S&L) crisis. Carter ended with the recession following the Iranian revolution. Nixon resigned during the oil crisis, and LBJ’s exit of office led into a recession that materialized just a few months following the end of his term. Other Presidents of the modern era – Eisenhower, Truman, Roosevelt and Hoover all ended their presidencies with recessions. [List of recessions in the United States]
The nation’s largest trucking and transportation PEO, PEOPLEASE serves hundreds of transportation customers across 45 states, managing their more than 15 thousand co-employees. Having been in the industry for over 22 years, we’ve guided countless companies through tough times and formulated the six steps below to help steer your trucking business away from hardship and towards success.
The following six steps are a product of our experts’ collective knowledge and are intended as a simple guide to brace your company for a recession:
1) Don’t wait until the recession hits. Start bracing for impact now.
Do you recall any warnings prior to the implosion that was the Great Recession? 2008 took us all by surprise. Remain vigilant and stay ahead of the curve by proactively preparing your company for tough times to come. Take a holistic approach at your company and identify areas that have the potential to provide a reliable cushion should things take a turn for the worse. Though the pending recession is likely to be milder than what we experienced eight years ago, ignorance in the case of a recession is anything but bliss, so act now.
2) Explore Smart Expansion.
Once again, we invite you to remember 2008. Some regions were less impacted, and ratios between full and mixed loads varied and changed. Assess your company’s offerings and see whether demand exists more prevalently in certain areas. An account by account review may make sense to highlight areas where ancillary offerings make sense or room exists for price increasing. Services and geographic areas that garner steady and consistent interest may afford your organization room to grow and maintain stability in an unstable economic climate.
3) Shore Up Relationships
Solidifying relations with your staff, clients and partners is always a good idea, but having the right people in place is especially wise with a recession on the horizon. One of the best ways to conduct a temperature check and strengthen relationships is through listening. A well-managed survey tool to measure both staff engagement and productivity, as well as client satisfaction, is a good start to securing your company as one that employees and clients want to stay with when the going gets tough. Review any survey results with an open mind and take action on feedback where it makes sense to do so. Transparency and open lines of communication go a long way in fortifying rapport and trust, and retaining your best players and partners is critical in surviving economic downturn.
4) Make your company lean.
Drop unproductive capital by examining your investments and revenue. Taking a hard an honest look at your accounts (as referenced in #2) and cleansing your books may point to areas in which risk is too high, and those accounts may need to be trimmed or eliminated in order to better focus resources, energy and possible expansion elsewhere. It may also be wise to maintain a close relationship with accounting and financial resources who have their finger on the pulse of your business. Individuals in these critical roles often have the best insight to your clients’ overall health and value. Open, forward thinking conversations early on amidst the onset of a recession can be invaluable and maintain agility and flexibility in the event sudden changes are required. You can move quickly and responsively without being taken by surprise.
5) Reduce your debt.
Expand access to capital, lines of credit, and cash resources. Check in with your lenders, debtors and creditors to make sure that you are fully aware of the financial scorecard. Do so early and often. With interest rates as low as they presently are, this may be a good time to consider offloading old equipment and purchasing new and updated trucks, etc. While spending may seem counterintuitive, old equipment has little value in a recessionary period and proved to be more of a liability and encumbrance than an earner in 2008. Updated and reliable vehicles are money savers as they provide reliability and don’t require the maintenance time or expenses of older equipment. Furthermore, updated equipment will spare you the hassles and costs resulting from the gaps in safety that are inevitable with dated trucks. Extended payment terms should also be evaluated as a preventative measure in the face of a recession.
6) Outsource Wisely
Business owners often spend too much time and energy on activities that aren’t helping boost the bottom line. Enlist the expert help of third-party consultants for anything non-strategic in order to focus on your core business and mission. Benefits of using a PEO like PEOPLEASE include:
• 7 to 9% faster growth! Since December 2004, employment at small businesses using PEOs has grown more than 7 percent faster than at small businesses overall, according to the Intuit Small Business Employer Index.
•10 to 14% lower employee turnover! The average overall employee turnover rate in the United States is approximately 42 percent per year, based on 2012 data. It is 28 to 32 percent for companies that used PEOs for at least four quarters.
•50% less likely to go out of business! Businesses that use PEOs are approximately 50 percent less likely to fail (permanently go “out of business”) from one year to the next when compared to similar companies in the population as a whole. The overall business failure rate among private businesses in the United States as a whole is approximately 8 percent per year, based on 2012 data. It is approximately 4 per cent per year for those companies that used PEOs for at least four quarters.
Nothing can be more important than acquiring solid Human Resources, Accounting, Payroll, Taxes and Risk Management strategies to help protect what you have worked so hard to build. A comprehensive plan around these areas is an example of where PEOPLEASE can step in to lighten your load. We understand the challenges and difficulties you face in running your business, and we’re here to help. Our services and programs have been specifically designed to serve businesses like yours – and are proven to be successful. Our business is a people-helping-people business, and our rapid growth is the result of our in-depth understanding of the transportation industry and our reputation for outstanding customer service. The goal of PEOPLEASE is to provide solutions that allow you to increase profitability, maximize productivity and reduce risk, cost and time.
Equip yourself and your company with the tools necessary to weather a recession by letting our specialists show you how we’ve helped other companies thrive with our customized solutions.
President and CEO
Call PEOPLEASE today to see how we can help drive your success! 800.948.4453
* The above article is not intended to be legal or financial advice and is for general information purposes.