No matter how strong your business is it depends on the economy for survival, and whichever way you look at it, the economy goes in cycles. Economics is set up like dominoes around the world when one area suffers it has a ‘knock on’ effect over the globe. Consumer demand and world events have the biggest effect on the economy, but smart CEO’s and managing directors are prepared for a less than robust economy before it happens. Here are a few tips to help keep business booming during a recession
There is much you can do when the economy is strong to ‘futureproof’ your business, and however hard it is to think about it, downturns will come. By being proactive and preparing for these distressing times you have a better chance of surviving them.
Whether your company is in a robust phase or looking at an oncoming sales famine, here are a few ideas to help you prepare.
PUTTING CUSTOMERS FIRST
Customers are the lifeblood of any business so it would be wise to always put them first in the ‘good times’ so that when a downturn comes, they are dedicated and loyal and will stick with you right through the whole cycle. Make first class customer service a priority and you will keep the consumers you have, and the positive marketing will increase the customer base to those you don’t. This is a simple way to keep business booming during a recession.
When the downturn does come, think about:
- Starting a loyalty scheme or incentive program to increase sales activity
- Make sure your staff is well trained to answer questions and resolve any issues that may arise taking on more responsibility as necessary.
- Adapt your product to meet the current needs of your audience
- Diversify your range, keeping the needs of the customer at the heart of the innovation
If you are prepared with a great customer retention strategy you will be more adaptable during times of low sales.
HAVE A PLAN ‘B’ (or ‘C’, or ‘D’ – remember, there are 26 letters in the alphabet!)
Before a downturn arrives at your door, have several strategies for managing your profit in a sales desert. If you are managing on a 10% margin, you don’t have a huge amount of room for error. If you lose one in every ten of your sales it would mean that your bottom line is wiped out, so your plan ‘B’ should include short term strategies that will produce profit however marginal when you need it.
Try this for your ‘Plan B’:
- Make forecasts based on optimistic, realistic and worst case scenarios. Knowing where your revenue is heading helps you adjust your game and gives you more chance of a ‘Hail Mary’ pass.
- Make a crib sheet of early warning signals and have all your management look out for them. Things like shrinkage in consumers entering the sales funnel, a shorter backlog of orders or competitor desperation sales all indicate there may be a coming storm.
- Have a plan to place to reduce costs immediately, and again have a ‘realistic’, and ‘worst case’ scenario option. Get buy-in from those that would have to manage it so that it can begin as soon as it’s needed.
GO WITH THE FLOW
When the economy is robust cash flow is not usually a problem. Money comes in and products go out, with more money coming in than helping with the products going out, but, in a downturn economy, less money may be coming in and that means your budgets will have many heavy constraints put on them. Trying to maintain cash flow can be crippling under these conditions.
Have a strategy to maximize the use of every dollar coming in so that it contributes to working capital to increase your liquid revenue. This will help you to keep business booming during a recession.
Your plans could include:
- Reducing your inventory so that the time between sales and outlay is as close as it can be.
- Offer incentives to customers to pay their bills faster.
- Monitor the days between cash coming in and when your payments are due and take advantage of any suppliers that are willing to share the risk or offer more favorable terms.
You may already outsource some of your production to make the most of your money, but take a look at your company and see if you can outsource any other services. Small businesses rarely have an HR manager or office manager, so you may not be able to outsource their jobs, but if you are spending a large amount of time on these functions doing these jobs yourself it may pay you to find a part-time or virtual service to do it. Your time could be best used to concentrate on gaining sales rather than training new hires.
Some services you can easily outsource are:
- Executive secretarial
- Product delivery
The one thing that you need to do as soon as you suspect that there is trouble around the corner is looking at what you can do without. Does the office bathroom really need a hot tub and the break room a gourmet popcorn machine? Anything you lease may be able to go. You may miss it – but you need the money to survive a slow patch.
You also need to look at all processes, and even personnel, to see if you have more than you can afford to support. Making cutbacks is a hard decision, but this is business. The long term goal is survival and that means, at times, tough actions.
Think about these cost-cutting measures:
- Go through the ‘perks’ you offer. Free water, coffee, and internet may be great for morale but are unsustainable. If it doesn’t bring you closer to more working capital, it has to go! Not even business cards are immune.
- Phones, internet, power and other suppliers all have competition so there may be a better deal out there just waiting to be had. Go and find it!
- Learn to reduce! Printing, mailing, and packaging can all be reduced if you put your mind to it. Be creative! Actively look for ways to reduce everything in your company and you’ll be surprised at what you’ll find.
Surviving in a slow economy although a daunting task is possible. Having some extra plans in place if you need them can make all the difference between riding the cycle, or falling like a domino. Using these techniques will help you to keep business booming during a recession.