How to make your business recession-proof
Consumer purchases slow down, competition starts cutting prices and the banks stop loaning money to help you though turbulent times. The recession is here and rumour has it that we are in it for the long-haul. However, good companies should not just...
Consumer purchases slow down, competition starts cutting prices and the banks stop loaning money to help you though turbulent times. The recession is here and rumour has it that we are in it for the long-haul. However, good companies should not just lean back and await the end of the storm. A recession offers an opportunity to those companies who can act peremptorily, take a proactive approach, make difficult decisions and position themselves for the coming economic growth. There are several things one can do such as:
Make sure that you have a business plan and that you refer to it on a regular basis. A business plan is not something that you just show to a bank. You need to know how you are going to reach your goals - especially in times of uncertainty. Thus your business plan should include a course of action for unexpected incidents. Investing in different scenarios is worth it since management in a recession means flexibility, market preview and fast reactions to ever changing conditions.
You should also monitor your cash flow regularly. Cash flow management should always have a high priority; but in times of economic crisis it is even more important. Furthermore you should re-evaluate financial obligations, banking conditions and loan agreements. Because of the credit crunch, credit has become more expensive and harder to get, it might be a good way to negotiate now for increased credit facilities. In addition, curb your spending and do not give the bank a reason to charge you more money by being late on payments. You might also consider prompt payment discounts with your suppliers.
Another way of cutting costs is to increase outsourcing. Outsourcing of certain tasks such as accountancy, tax compliance or corporate administration is a way of cutting infrastructure costs and adding flexibility in uncertain economic times. Furthermore, it allows you to concentrate on your core business such as looking for new market opportunities. When the business climate changes, customer needs change as well and an economic downturn brings with it new product and service demands.
Try to find out what your client's currently require and keep in close touch with your customers. Understand how their business is being affected, the new problems they face and offer them new solutions. Lasting relationships are built in hard times. Moreover, due to their differing needs you customers may suggest new service lines or product formats. You should not take their suggestions lightly. For example, changing your offer size can pay huge dividends.
Spend on hiring: Business owners should hire not fire in a recession. It's easier to invest training time for new employees during slower growth periods. Employees that are fired during a recession will have to be re-hired - which costs companies a lot more money in the long run. Another strategy is to look around for people who have been laid off from other companies and pick up some available talent. They may bring some fresh ideas to your company.
Innovation is also a powerful tool that can help you ride out the tough times and position you for future growth. If you focus on innovation while others are cutting costs, you will quickly catapult past everyone else. A lot of companies successfully introduced new products in hard times: Kraft introduced Miracle Whip in 1933 and saw it become America's best selling dressing in six months, and Apple launched the iPod in 2001. Apart from these successful examples there are also companies that failed. It is for this reason that companies should analyse any long-planned projects in an extensive manner in times of economic downtown before making an investment.
Among other things, marketing becomes a seemingly useless activity in a recession. But it is not. It's a fatal mistake to assume that marketing should be stopped for the duration of recession. In fact, during recession, you can get even better results simply because most of your competitors are not marketing at all. A McKinsey study of the 1990-91 recession found that companies that remained market leaders had increased their acquisition, R&D, and advertising budgets. However, if you continue your marketing as before, it will not work. You have to keep in mind your customer's changing needs and address them in your marketing campaign.
After analysing the individual company situation, according to the abovementioned general suggestions, one should not rush to a hasty decision but also think of the medium- and long-term impacts of the decisions. Do not let an economic downturn cripple your business, but try to turn the current recession from a threat to your business to an opportunity.
Fenlex offers an array of commercial support services, including company incorporation & management services. The company also provides back office support such as accountancy, banking, tax compliance and payroll.
• The author works with the Fenlex Group of Companies.
Make sure that you have a business plan and that you refer to it on a regular basis. A business plan is not something that you just show to a bank. You need to know how you are going to reach your goals - especially in times of uncertainty. Thus your business plan should include a course of action for unexpected incidents. Investing in different scenarios is worth it since management in a recession means flexibility, market preview and fast reactions to ever changing conditions.
You should also monitor your cash flow regularly. Cash flow management should always have a high priority; but in times of economic crisis it is even more important. Furthermore you should re-evaluate financial obligations, banking conditions and loan agreements. Because of the credit crunch, credit has become more expensive and harder to get, it might be a good way to negotiate now for increased credit facilities. In addition, curb your spending and do not give the bank a reason to charge you more money by being late on payments. You might also consider prompt payment discounts with your suppliers.
Another way of cutting costs is to increase outsourcing. Outsourcing of certain tasks such as accountancy, tax compliance or corporate administration is a way of cutting infrastructure costs and adding flexibility in uncertain economic times. Furthermore, it allows you to concentrate on your core business such as looking for new market opportunities. When the business climate changes, customer needs change as well and an economic downturn brings with it new product and service demands.
Try to find out what your client's currently require and keep in close touch with your customers. Understand how their business is being affected, the new problems they face and offer them new solutions. Lasting relationships are built in hard times. Moreover, due to their differing needs you customers may suggest new service lines or product formats. You should not take their suggestions lightly. For example, changing your offer size can pay huge dividends.
Spend on hiring: Business owners should hire not fire in a recession. It's easier to invest training time for new employees during slower growth periods. Employees that are fired during a recession will have to be re-hired - which costs companies a lot more money in the long run. Another strategy is to look around for people who have been laid off from other companies and pick up some available talent. They may bring some fresh ideas to your company.
Innovation is also a powerful tool that can help you ride out the tough times and position you for future growth. If you focus on innovation while others are cutting costs, you will quickly catapult past everyone else. A lot of companies successfully introduced new products in hard times: Kraft introduced Miracle Whip in 1933 and saw it become America's best selling dressing in six months, and Apple launched the iPod in 2001. Apart from these successful examples there are also companies that failed. It is for this reason that companies should analyse any long-planned projects in an extensive manner in times of economic downtown before making an investment.
Among other things, marketing becomes a seemingly useless activity in a recession. But it is not. It's a fatal mistake to assume that marketing should be stopped for the duration of recession. In fact, during recession, you can get even better results simply because most of your competitors are not marketing at all. A McKinsey study of the 1990-91 recession found that companies that remained market leaders had increased their acquisition, R&D, and advertising budgets. However, if you continue your marketing as before, it will not work. You have to keep in mind your customer's changing needs and address them in your marketing campaign.
After analysing the individual company situation, according to the abovementioned general suggestions, one should not rush to a hasty decision but also think of the medium- and long-term impacts of the decisions. Do not let an economic downturn cripple your business, but try to turn the current recession from a threat to your business to an opportunity.
Fenlex offers an array of commercial support services, including company incorporation & management services. The company also provides back office support such as accountancy, banking, tax compliance and payroll.
• The author works with the Fenlex Group of Companies.