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CEO Insider

This online lending CEO’s message to a recession: Bring It On!

Often I’m asked, ‘Krista, how are you preparing your company for the upcoming recession?”. It’s honestly a question that every CEO has been asked in the past year or two. This impending recession, whenever it comes, will affect businesses across the nation.

Discretionary spending is expected to go down as consumer and clients are affected by the bear market and small and medium sized businesses (SMBs) will have to operate in a lean and efficient manner in order to succeed. It’s absolutely a daunting outlook to consider, but it is my job as a CEO to be prepared to take care of my company, my employees, and my fellow shareholders and put us in the best possible position to succeed, no matter the market conditions.

This impending recession isn’t really ‘preparing for the unexpected’ because it is something we’re all expecting. When dealing with a ‘when’ and not an ‘if’, there’s no excuse for not preparing your business for a worst-case scenario. While the upcoming recession has been a common topic the past couple of years, it has been my job to make sure P2Binvestor not only grows in the present but can also withstand and operate in a future recession. Having said that, what exactly have I done in order to prepare my company for the worst?

Create Partnerships To Mitigate Risk

It was important to realize we would not be alone during a recession. Just like us, there would be other SMBs out there struggling to keep their clients and grow their business. As a lending company, there is obvious risk in lending to SMBs that might struggle during a recession. However, by realizing that ‘we are not alone’ in regard to this problem, we decided to seek out lending partnerships with community banks across the nation. By creating a joint-lending program, where our business and community banks could co-lend to SMBs, we could share financial risk while both maintaining and growing our portfolios. It was a win for us and a win for banks.

Moving towards the recession, it is vital to identify strategic partners that can help you grow your client base. What partners can offer a complimentary service to the same client base where you both benefit and grow? What other SMBs share a similar vision and mission where you can both and grow towards a common goal? Find these partners and create a long-term plan to grow your business and minimize risk.

Diversify Your Portfolio

We’ve made it a focus to expand and diversify our client base as much as possible in preparations for the recession. When lending to several industries (CPG, Food/Bev, Staffing and Recruiting, Manufacturing, etc.), we’ve created a model that can withstand poor market conditions. With our product offering being as equally as valuable to this wide range of industries, we protect ourselves if we lose some of these clients during a recession.

Your business should not be offering only one product to one client profile. Do what you can within your means to diversify what you offer to a wider variety of clients. It is natural to assume that the appetite for some product offerings will decrease during a recession, but by diversifying your product set, you mitigate risk and allow yourself to operate in a bear market. If you don’t have the financial means to expand your product offering, create strategic partnerships (as mentioned above) to create new products you can offer to your new shared set of clients. You win, your partners win, and your customers win.

Focus On Profitability Over Growth

Our company has always been focused on a profitability model over a growth model, but the impending recession affirms that decision. Our current profitability model has already forced us to manage fixed costs and control overhead, therefore lowering our external risk to market trends and allowing us to scale at an appropriate pace while continuing to gain market share in the alternative lending industry. In addition, this profitability model allows us to be flexible and hold more control in future growth rounds and also gives us the ability to easily pivot the business towards market opportunities that have growth potential in the future. ‘Revenue’ focused SMBs will have to adapt much more during a recession purely due to overhead (salaries, benefits, equipment, office space) which will require greater cuts. Unless your business model is ‘recession-proof’ your revenue growth model can’t be sustainable if your customers are no longer spending the money to help you grow.

Most economists think the next recession will happen by 2021. So there is still time to make the appropriate operational and strategic shifts to prepare your SMB to outlast the incoming bear market. Have a ‘Plan A’ and a ‘Plan B’, and even a ‘Plan C’. Be prepared to operate under the worst times and be ready to take advantage of the best times. Our market naturally has ebbs and flows, and if you prepare in the right ways your SMBs will be in better shape than others. So next time someone asks you’

How will you prepare for the next recession?’ your response can be, ‘Bring It On’.


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Krista Morgan
Krista Morgan is co-founder and CEO of P2Binvestor, a marketplace lender that provides asset-based working capital to growing companies. Krista is an opinion columnist for the CEOWORLD magazine. Follow her @krismtl.
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