A recession is defined as a significant downturn in economic activity across multiple sectors of the economy. Some recessions can last several months to a year or more.
Most have precursors — warning signs that an economic decline is on the horizon. These signs can include:
Weakening government forecasts
- A rise in unemployment
- Major retailers reporting lower sales
- Rising inflation and interest rate
- Supply chain disruptions
- Months of stock market gyrations
Yet recessions are a normal part of the economic cycle even if no one knows how long one will last. The upside is that paying attention to these warning signs can help you plan ahead.
Given the fact that national and global affairs impact the economy here at home, it’s critical to start recession proofing your business. If you haven’t started recession planning yet, now is the time.
What is a recession-proof business?
When a product or service is deemed essential by customers, and is safe from budget cuts, that business is recession-proof. Essential services such as food, healthcare, utilities, insurance, and education, are so-called recession-proof industries.
Other recession-resistant businesses, although not deemed “essential” by a majority, can include hair stylists and barber shops, automotive repairs, and do-it-yourself (DIY) home improvement stores.
Unfortunately, contract security guard firms are usually not among the businesses immune to the effects of a recession. In fact, many businesses will view on-site security guard services as one of the first expenses that can be cut, especially if no security-related events have recently occurred on the premises.
It’s important to note that during a recession, despair rises — as does crime. Part of your job is to convince decision-makers that security is essential to the continued well-being of their business, especially during a recession.
6 Business Strategies to Beat the Downturn
While maintaining client communications is critical to surviving a recession, there are also a number of things you can do internally to streamline operations and reduce vulnerability:
Improve your hiring practices
Everything starts with good people. Recruiting the best candidates takes time and effort, so knowing where to find new talent can cut down on the cost of hiring and recruitment. Also, your competitors are seeking top-level talent as well, so reaching them first gives you an edge.
Attend high school job fairs/career days for graduating seniors. Recruit at criminal justice schools and firearms training schools. Partner with local military and law enforcement agencies for candidates who aren’t eligible for the military or a police force but may be interested in a related position as a security guard. Look to hire veterans — an underutilized job pool.
Post openings on social media and online job boards. Be sure to include the dirty details and heavy lifting aspects of the job to discourage undesirable applicants.
Connect with the HR managers at large enterprises in your market as a resource for employees being laid off or seeking a career change.
Leverage your current workforce to find new guards among friends and family.
Offer remote training/licensing opportunities to remove the inconvenience of in-person training that shrinks candidate pools.
Improve your retention policies
Finding good people is one thing; hanging onto them is quite another. Some employees leave after a few shifts, realizing the job is not for them. Others experience burnout, feel mistreated, underpaid, unprepared, or exposed to physical violence. No wonder annual turnover rates in the security guard industry approach 80%.
Reducing turnover not only helps improve profitability, but the consistency and reliability it presents to customers helps build long-term account relationships. Here are some things you can do to ensure guards stay on the payroll:
- Provide proper training so that guards feel empowered to take charge when necessary, whether the issue is an irate customer, a theft in progress, removing a visitor from the premises, or performing CPR.
- Offer a career path. Very few employees wish to remain a frontline security guard forever. Build their skills with additional firearms or management training for transition into a supervisory role.
- Value employee feedback and dignity. One of the top reasons security guards change firms or leave the industry is due to how they are treated on the job. Ask for their input about how things can be improved on the job site, and make sure they have access to the proper amenities during a shift.
- Offer fair compensation. The cost to replace a guard is much less than the expense of a bump in hourly salary. Prevent your employees from leaving for the sake of a dollar or two per hour by offering competitive wages.
- Healthcare benefits are a huge incentive to reduce turnover. Offer employee medical benefits if possible.
- Reward team members with bonuses and spiffs for outstanding performance.
Manage your budget
Minimize the impact of a recession on your business by closely examining your budget. What are your expenses for the month, and how many billable guard hours do you need to cover it?
- Understand cash flow. Knowing what level of dip in cash flow is acceptable during a slow month and how long your cash reserve will last is critical. Have financing or a line of credit set up behind you to bridge the gap and meet expenses in the event a client pays late or not at all.
- Operate within your budget. Creating a budget is easy, it’s living with it that’s hard. Be prepared to put off upgrades and purchases that can wait. Can you negotiate a reduction in rent, or reduce the square footage of leased office space?
- Practice timely, accurate billing. Make sure client invoices go out on time with an accurate accounting of all billable hours to avoid discrepancies.
- Manage guard scheduling to eliminate non-billable overtime. Use a time and labor management solution to keep officers below a 32-hour weekly threshold reduce overtime pay.
- Know what to charge for guard services in your market. How much do you need to charge per hour to maintain a profit? How large can/should that profit margin be? Are you leaving money on the table because you are undercharging clients, or losing out on business because your rates are too high? Get a competitive baseline in your market and price your services accordingly.
Focus on the competition—and your clients
What makes a business thrive in a competitive market?
Quality of service and an impeccable reputation.
To address the former, do some research to get an understanding of other contract security firms operating in your market.
- What do they do well, and in what areas do they lack expertise?
- What is their reputation? Is there a niche that is going unmet by competitors?
- What is their billable rate? How do they train their workforce?
With this knowledge you can approach prospects with advantages your firm provides in terms of better service, better trained guards, and at a better rate. (See the last bullet in Manage your budget).
For the latter, step up your frequency of communication with clients. Take the time to build relationships and customer loyalty before economic pressures threaten business. Your guards may be on-site every day, but you are not.
Pick up the phone or drop by to learn firsthand what their impression is of the security services you provide, and what you can do to improve them. Most importantly, meet the commitments of the contracts you signed and keep your word (even if it means a little non-billable overtime in the short term) to build a solid reputation as a reliable partner who can be counted on through the good times and the bad.
Build flexibility into your business model
An agile business is a successful business. The ability to modify services by customer will allow you to be more sensitive to the needs of businesses that also may be feeling the impact of a recession.
- Be prepared to adjust service offerings such as pricing, the minimum number of hours, or length of the contract term to meet changing customer needs. If you can adapt, even temporarily, you can retain clients that might go elsewhere looking for the discount you were not previously prepared to offer.
- Cross train staff to allow for more versatile scheduling. Teach your event security specialists the protocols for school, retail, or corporate security—and vice-versa, so you have guards available to work any post at all times in case of illness, no-show, or to capitalize on a last-minute opportunity.
- Focus on recession-proof or recession-resistant industries. Target businesses that are most capable of weathering the storm and that consider security to be an essential service such as hospitals, property management firms, automobile dealerships, manufacturing facilities, active construction sites, large jewelry stores, marijuana dispensaries, upscale residential communities, and stadium venues for concert and game security.
Improve your Business Acumen
Learn from your mistakes. Companies endure not because of the things they do when times are good, but because they strategize to improve and adjust operations in anticipation of the tough times ahead. [link to Blog #5 when posted]
- Perform strategic business planning and analyze your client roster to determine their—and ultimately your—vulnerability to recession.
- Have a clear picture of your financial forecast and access to emergency funds or outside financing to get through a rough patch.
- Shore up client relationships.
- Pay attention to trends to spot emerging markets like protecting election officials and ballot processing facilities.
- Get involved in the community to learn when conferences and expos are coming to town, or which year a major bowl game is in the rotation for your city, for example. Reach out to new businesses, property management firms, and residential communities coming to your market.
- Take care of your employees to reduce turnover and leverage technology to alleviate the burden of manual scheduling or reporting tasks to avoid burnout.
Plan today to be here tomorrow
The bottom line is that security companies that focus on what they can control, brace for the long haul, and are agile and open to change will not only survive but thrive in an economic downturn. Our team provides security workforce management solutions designed to help contract security firms streamline operations, boost productivity, and profitability during even the most trying business conditions.