Do not despair, however, because with perspicacity and finesse there are golden opportunities to decrease business and still raise profits. Even better, with the right techniques and changes one can emerge stronger and more profitable as the market catches up.
Profits can grow without sales growth. There is more than one way to work the profits=sales-expenses equation. Improvements in operating costs are just like a loan from the bank, but at zero interest. Any idiot can make money in an expanding economy, but it takes insight, skill and cost reduction to survive a downturn.
Your customers are hurting too. For those customers who do not manage their finances well COD, extending a little credit, charging an appropriate, not exorbitant, price and costing in the expense of these services is fair. Gouging and taking advantage of their plight is not. Supporting and "partnering" with customers in the bad times as well as the good will pay handsome loyalty dividends in the future.
Make friends with customers, not enemies. The business signed the checks, but the people wrote the orders. Individual loyalty is still a factor even after the company is long gone. When the employees move on, continue to maintain communication and before long their new employer will be your good customer.
Watch the number of lines written per order. With diminishing business, customers purchase more frequently in smaller quantities. Increase your efforts to have what they need, when they need it. Your lost sale or back order can become their downfall. Help them keep their promises.
Stripping your inventory naked. Slow moving items and "dead stock" can be reduced, but cutting should be done cautiously and on an item-by-item basis. Eliminating inventory can eviscerate your operation by removing the heart and soul of your existence. Now is when your customers need your inventory to replace theirs. Cut the quantity as necessary, but never the quality of your offerings.
Order more often and pay on a timely basis. Turning the inventory 12 times/year and paying once a month means that the vendors are essentially financing your stock for free. Receiving and stocking must be expedited so that the same (or fewer) people can perform this function to better balance the equation. Pay your bills on time. Vendors appreciate the "service" and this may translate into future loyalty, opportunities and discounts.
If you can't find it, you can't sell it. Adding a locator system to the warehouse, along with the disciplines to use it, will result in less time devoted to hunting for lost merchandise. Install systems to track everything; on order, receiving, finished goods, in process and customer orders. This makes sense regardless of the economy.
You can (and should) clean up during a recession. Instead of expanding staff "busy work" to fill the available time, provide "fill in" assignments that have been deferred. Cleaning the yard and aisles will facilitate further productivity and make it easier to find materials. Keeping the staff busy will reduce mischief and waste.