An economic meltdown also referred to as a recession is a financially tough time for individuals, households and businesses. It is a time that comes with tradeoffs, prioritizing decisions and rethinking survival strategies. A recession does not necessarily spell doom for your business, rather, it is a time in business when proactive decisions must be taken through quality market analysis and trends, experience and solid judgement.
Most businesses do not survive a period of recession not because their products or services are not needed in the market. Instead, their operational exits are occasioned by a lack of proper planning. overlooking essential market signals and not minimizing the business’ exposure to risks. Thus, to strengthen your business during an economic meltdown, it is important to identify the cracks in your system, and how you are doing your business now and look for ways to improve them.
Consider these proactive measures to protect your business during an economic meltdown.
1. Cash Flow Protection:
Every business survives through the cashflow. Without a cash flow, the business is as good as dead. In fact, as a business, the effectiveness of your cash flow determines the healthiness of your business. In a recession, the part of the business that is foremostly affected is the cash flow. It is a time when customers are cutting down on their costs which usually leads to decreased sales and patronage. Yet as a business, cash must flow inwardly and outwardly to make the most of business opportunities.
The obvious cash flow goal during this period is to bring in more income than before and reduce expenses than before. At this time, you want to studiously review your revenue and expense schedules to identify areas where more revenue can be generated as well as parts of the business where you can cut down costs to eventually reduce expenses – though you will have expenses as long as the business exists.
One way to increase revenue is to identify paywall opportunities within your customer needs and offer them as part of your product or services. To reduce expenses, for instance, consider reducing the cost of inventory or third part services by negotiating lesser charges for a longer-term contract.
2. Customer Prioritization:
Making your customers a priority is essential to the survival of the business at all times; it becomes even more important to put them at the centre of your decision-making. Why? They are the ones with the money and they are seriously prioritizing their needs. Any poor service is a turnoff and a loss to a competition that is assiduously working on how to poach your customers to their offerings.
Remember, a bird in hand is worth two in the bush. Before going after expanding your customer base to increase your revenue, you must ensure you are retaining and engaging the existing customers of your business. The customer experience is best described with the maxim: A good turn deserves another. A satisfied customer is usually a loyal customer who is likely to introduce your product or service to their family, friends and colleagues whom they believe also need your service. Hence, quality customer service could give you a domino effect in increasing your customer base, hence, leading to more revenue for the business.
In making your customers a priority, you should remember that customer behaviour is changing. To this end, activating a customer loyalty programme, and adapting your product and/or services to better meet customers’ needs are some sneaky ways to facilitate retention and engagement.
3. Growth Marketing:
A common mistake most small businesses make during an economic downturn is to cut back on marketing to reduce expenses. While reducing your business expenses is a proven survival tactic in a recession, marketing is immune in this case. Customers are actively looking for products or services that fit their buying behaviours since they are restless in their decisions. Being there when they are actively looking for businesses that solve their problem is the most affordable way and is a surefire strategy to expand your customer base. For every penny spent on marketing – when done well -, you are sure to get back at least three (3) pennies.
Meanwhile, when marketing, your unique selling proposition must help you stand out from the crowd. To do this, you need to review your marketing strategies and favour the ones that help you increase sales at the least cost possible. You can also try new marketing ideas to be prudent with your marketing spending. This could be exploring social media, word of mouth advertising as well as campaigns that show your customers you understand that the times are tough and empathize with them on their needs by making sure they get extensive value for every penny spent. These put together will increase your competitive advantage in the market and drive more sales for your business.
4. Employee Branding:
A demoralized workforce leads to low productivity which affects the efficiency of your business output. Another mistake businesses make during a recession is to let go of a reasonable percentage of their staff in the guise of reducing expenses. This is a counter-productive approach because such action would affect the corporate image of the business and introduce fear of the unknown into the system.
Keeping employees motivated with built-up morale is a better approach during a recession. To do this, clearly communicate with your staff what is happening in the business and get them involved in finding solutions. You will marvel at how supportive they will be to do business survival. To this end, explore opportunities such s training your employees to undertake more duties to reduce the expenses that go to third-party service providers. You can also adopt a remote working approach and reduce work time in a bid to help your employees create free time they can use to engage in other personal productive activities that can further increase their income streams.
5. Networking & Expert Advisory:
Networking, and seeking professional advice are some unconventional approaches to managing your business during a recession.
Networking can be a useful tool for your business in an economic meltdown as it offers you a pool of like-minded business owners who share thoughts on how they are equally coping. This can be very handy as you plan your businesses. During networking, you may also discover new business opportunities, business partners and even customers at a minimal cost to your business. You can achieve these through forming alliances with businesses offering complimentary services that you can leverage to expand your business reach.
Good professional advice should never be undermined during an economic downturn. An example is seeking the opinion of a tax consultant on how to reduce your tax risks and exposure to liabilities. With proper tax planning, you can discover tax holidays or tax avoidance opportunities for your business which is also good for reducing expenses.
On A Final Note
No business can protect itself 100% against a recession. It is even more concerning if you are a small business because you may not have the luxury of reserves that help cushion the effect of a recession. As customer confidence and buying behaviour change, taking these proactive measures can help your business stay afloat and even record profit during (and when exiting) an economic downturn!
DISCLAIMER:
The material contained in this publication is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this alert.
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