How to Protect Your Business Before a Recession Hits

By Charles Alvarez , Contributor, the Price of Business Show. * Sponsored

In ancient times, walled cities were built to protect the citizens against marauding tribes and armies. As the city grew, additional concentric circles of defensive walls would be built to enclose and protect ever-greater numbers of citizens. The cities would come to resemble dartboards with rings surrounding a bull’s-eye.
If the city was attacked by an enemy army, the citizenry would withdraw behind the outer ring of walls and defend themselves. If the outer wall was breached, the defenders would withdraw to the next wall. If that wall was breached, they would withdraw to the next wall, and so on, until they were forced back into the most heavily defended part of the city, the citadel. The Citadel was the key to the survival of the kingdom. As long as it held, the city could be saved. The enemy could be beaten back and the kingdom rebuilt.

The citadel would contain all the treasures of the city, and be designed to accommodate the king, the top army officers, the leading citizens and sufficient soldiers to sustain a prolonged siege.
With sufficient reserves, the city could survive until a neighboring kingdom sent an army to relieve the defenders.
Define Your Citadel
In your business, you have products, services and activities that are peripheral to your business, the outer walls of sales and revenues, and you have products and services that are central, your citadel business activities that represent the major sources of your profits.

Your core business can be thought of as your “Citadel.” It represents the product or service lines that are vital for your survival. They must be protected at all costs. As long as you remain strong in these areas, you can withstand market fluctuations and sales declines. You must therefore guard and protect them against all competitors.

Determine Your Core Products and Customers
As a matter of business policy, you should develop a “citadel strategy” for your business, especially in times of contracting markets, reduced profitability and declining cash flow. This strategy should include the setting aside of reserves to carry you over, based on a “worst-case” scenario.
You should always have a citadel strategy on hand. You should analyze and determine your most valuable, important and profitable products and guard them carefully. When your business takes a dip and you have to defend and protect your ability to survive, be prepared to withdraw to your citadel of key products and services.

Sponsored by the Price of Business, on Bloomberg’s home in Houston, TX

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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