Surviving and Thriving in a Recession
The pains caused by a recession can be brutal and most of us dread the thought.
A recession can mean massive layoffs, fewer jobs and wages frozen, which means consumers spend less and in turn worsening the economic slowdown.
If we look at the effects of the Global Financial Crisis (GFC) of 2008, between December 2008 and December 2010, about 1.8 million small businesses closed. According to Investopedia one decade on, business creation has not yet returned to pre-crisis levels. (GFC on small business)
As the battle against COVID-19 is far from over, financial markets have again been hit, consumers are tightening their belts and general demand is falling. All these signs point to one thing: the next economic downturn may just be right around the corner.
While this sounds like doomsday prepping, our hope is for you to build a successful, future-proof business. That means being aware of the possibility of further recession so you can prepare effectively.
In this article, we have tips to help you not just survive a recession, but thrive. Get in touch to discuss business continuity planning for your business and circumstances.
Stay Close to Your Numbers
Without a clear picture of your business’ financial health, it is hard to create an effective strategy against further economic challenges. Understand your financials, including your revenue, expenses, profits, and cashflow numbers can help you plan appropriately.
Business advice and continuity planning can help you review your business position and plan for possible scenarios. Cashflow forecasting helps you identify best, moderate, and worst-case scenarios for your business and how your finances can withstand such circumstances. Doing this will help you make sound business decisions that are based on updated financial data, rather than being driven by emotion, intuition or just guessing!
Improve Your Cashflow
Cashflow is the lifeblood of your business. Ideally you should be bringing in more income than the amount you are spending in order to grow your business. Before you can improve your cashflow, you must first ensure that you have accurate financial records and an effective accounting system in place. Our bookkeepers can help set you up with effective online systems to improve billing and simplify your administrative tasks. Alternatively, if your time is more valuable elsewhere, a bookkeeper can value add to your business.
With cashflow and bookkeeping sorted it is easier for you to take control of your cash position through:
- Payments from clients– timely invoicing, chasing payments, and offering to restructure overdue payments
- Reducing your expenses by reviewing software subscriptions, renegotiating terms with your suppliers and lenders
- Secure financing from government stimulus funds, take on investors, or get short-term financing. However, if you are thinking about incurring debt during a recession, we would highly recommend consulting with your accountant or financial advisor first.
- Make extra effort in nurturing your relationship with existing customers
- Enhance your products and services
Maintaining, Or Even Better, Growing Your Customer Base
If you want your business to thrive during a recession, you probably need to grow your customer base. One way to do this is by digging deeper on your target market. This may mean coming up with ways to improve your offering and entice customers, even during tough economic times. Research your competitors, identify your point of difference and plan how you will communicate those selling points to interested customers.
We understand that getting more clients during tough times is easier said than done.What many business owners fail to realise is that their existing customers are often their best opportunity to make more sales and provide better services. Keep your customers happy, identify how you can add more value to their lives or businesses and reach out to them to understand where there may be untapped opportunities.
Focus On Your Strengths
The concept of “diversification” is often misinterpreted. Simply adding a host of different products and services to your offerings will not magically transform your business. In fact, it may be a waste of time and resources and stop you from focusing on the things that you do best.
During an economic downturn, you should re-evaluate your existing products or services and focus on your key strengths or core competencies. If you’re selling physical products, this is also the perfect time to re-evaluate your inventory management and adjust based on the products that you want to focus on. Don’t ignore the potential of reducing your inventory costs by only ordering the items and the right amount that you need.
Improve Your Marketing Efforts
One of the most common mistakes of business owners is that whenever they need to minimise their expenses, they automatically cut their marketing budget or even re-allocate it entirely.
Marketing and sales go hand-in-hand. So if you want to keep a healthy flow of sales coming in, you need to have strong marketing as well.
When consumers are restless, especially during a recession, your customers become more careful with their spending decisions. Marketing is your tool to help them find and see your products and services as the best options in the market. So instead of quitting marketing, now is the right time to step up your marketing efforts.
Don’t be Afraid to Play Offence
Those who go full survival mode and simply limp through the recession will be much slower to recover and have a lower chance of catching up.
Secure your cash reserves and know when is the right time to play offence. Think about ways to innovate your products and services, streamline your operations to boost efficiencies. Expand your market share by improving your offerings to be 10 times better than your competition. You may even consider mergers and acquisitions but be sure to get advice on this. We work with many clients to help them build their businesses and plan for both considered growth and future proofing.
There is No Fool-Proof Way
In the business world, ups and downs are normal and growth stalls are inevitable. At the end of the day, thriving in a recession boils down to having exceptional industry expertise, getting better business visibility, implementing efficient processes and best practices, as well as having a business advisor who can provide you with expert guidance, fresh insights, and timely advice.
What’s next for your business? Get in touch with us and we’ll help you work out a strategic plan.