Making sure my business will survive the recession!
Are you worried about how a recession or downturn in the economy might affect your business? What happens in a recession? What should you do so that your business not only survives but thrives through a recession and comes out stronger?
What is a recession?
A recession is a period of economic downturn, the UK Government determines a recession by two consecutive quarters of negative growth. A recession can be characterised by reduced economic activity and increased unemployment. During a recession, businesses may experience decreased consumer demand for their products and services, leading to lower sales and revenue. Additionally, credit may become more difficult to obtain, making it harder for businesses to invest in growth or sustain operations. These challenges can result in decreased confidence among investors and consumers, along with negative media coverage further exacerbating the economic slowdown.
While some businesses may be better able to weather a recession than others, all are likely to feel the effects in some way.
During an economic recession, businesses need to take proactive measures to ensure their survival. Here are five key strategies you can consider: Mindset; Leadership; Management; Marketing; Sales
Mindset:
How you the business owner personally approach a recession will have a major impact on how your business performs through it. If you believe it is a bad thing for your business then that may well be the case. If you believe it is an opportunity to reset, strengthen what you are doing, and look for the opportunities for your business, then you will probably ride the recession well.
The great Automotive founder Henry Ford once said “Whether you think you can, or you think you can’t – -you’re right.”
So if you have a sense of doom, or are burdened by the thought of a recession, then your team and your customers are going to pick up on that. If you have a sense of opportunity and you are going to adapt, you will and your team and customers will adapt with you.
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Lead from the front:
Leadership is best delivered from the middle in most circumstances, encourage your team to do the thinking and the problem-solving, guide, challenge, and support them in their endeavour and you will have a better team and a better business. Recession is an exception to this rule. If you are worried about a recession and its impact on the business then it is likely your team is worried about a recession, and its impact on the business and moreover on their livelihoods.
Address the “elephant in the room”. Determine what the strategy is going to be for managing through the downturn. Share this with the team, ask them to contribute positively to it, and secure their buy-in, people will always buy in more readily when they have been part of building the plan. Build that plan of action to deliver the strategy.
Be confident and be seen starting to lead the changes that are going to be necessary, get your hands dirty in what is necessary. Be available to the team for their reassurance.
Manage more:
In periods of good, healthy positive trading, running a business is generally easier than we might like to portray as business owners. In these periods our processes in the business may have become a bit sloppy and a bit long-winded, our cost control might not be as tight as it could be, and there might be some fat in the business that we have been ignoring for a while because it was okay and we didn’t really want to deal with it while there were more important things to do bringing in and delivering the sales… Now there are a whole bunch of other excuses for not doing what you need to do. What fat or slack have you been putting off dealing with in your business? What do you know needs fixing to make the business more efficient or leaner? Going into a downturn is definitely the time to address these issues.
Make a list, make a plan, and schedule when it is to be done. Here are a few areas you should be looking deeper at:
Cost reductions:
Look for ways to reduce costs, such as cutting unnecessary expenses and negotiating better deals with suppliers.
Efficiency gains:
Look at team productivity, examine the team’s roles, responsibilities, and KPIs, and reset as appropriate. Are there opportunities for streamlining?
Measurement and reporting:
Are you measuring and seeing the right data and information for the circumstances? What information do you need to manage the business in these circumstances?
Cashflow forecast
Update the cash flow forecast, monthly if there is good headroom, and weekly if there is not. Use the forecast to determine the essential actions to drive sales or cost control and update it on a monthly or weekly basis as appropriate. If you don’t have an accountant employed in the business or you don’t have a good understanding of your financials, talk to your accountant and get up to speed.
Overdraft
Do you have debt in the business? Do you need an overdraft or need to revisit your overdraft with your bank. In general, do this early, the bigger a recession becomes the less willing lenders are to lend.
Keep Marketing:
Re-examine your marketing. Are the messages in your marketing right for this economic climate? Are you target marketing to avoid wasting money? What is working well? Do more of that. What has not been working so well – if you can’t identify why and what to fix then do less of it.
Remember this in marketing – your accountant may well tell you it is an expense or an overhead and you should be cutting your expenses and overheads. It is not! Marketing is an investment in generating leads for your business to convert into sales. If you do less marketing, you will get fewer leads. If you increase your marketing spend in the areas where you are getting a known and good return on investment on that marketing strategy you will hold or increase your leads in a downturn. Moreover, you will have a louder voice in a quieter space as some of your competitors will be cutting their marketing spend.
Sales:
Sales are going to be harder to make than in the earlier and better economic climate. If business has been good, the sales process has likely become a little slack. Revisit the sales process from top to bottom and tighten up the process. Has everything been happening that should have been happening? Have all the process touchpoints been made? How could it be improved? Review sales scripts – are they appropriate for the current climate? Review the close, is it still appropriate or does it need tweaking? If you have conversion rate measurement in place use it to help guide you. If you don’t have it in place, start measuring it and look at what it is telling you.
Lastly on sales, how can you add value for the customer in the offering rather than discounting to compete in the market?
Final thought:
A downturn or a recession is an inevitability in business, we will all go through them, probably a few of them. I have been through four as a business owner. They are an opportunity to reset the business, tighten things up, and adjust. It might feel like Autumn on the way into a downturn – the nights are drawing in the weather is less clement, Winter is ahead when we might have to wrap up warm and hunker down a for bit. Spring will certainly follow with all of its brightness and opportunity and then Summer will be here again.
How can your business be in the best shape possible for Spring? What you do right now will determine that. If you need any help figuring this out, reach out to a business coach.
By Tom Allchurch
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