With most of the world suffering from a deepening recession that is set to last through until 2010, firms and households are doing all they can to make sure they do not become a victim of the credit crunch. The recession has inevitably resulted in decreases in consumer spending, and any firm dependent on the consumer will suffer a knock-on effect. All is not doom and gloom, however; there are ways to fight the crisis and ensure your business is still solvent at the other end.
1. Marketing
During a recession, many firms decrease their marketing budget, when in fact they should be doing the opposite. Studies have shown that companies which continue to advertise during tough economic periods often see growth, and those that make cuts see a decrease in sales. Marketing your business and product can not only increase sales now, but it can also better a firm’s chances for the future, once the recession is over. Firms should make use of advertising techniques to differentiate their services and products. Customers are now looking for reliable products of good quality. It is important to remain in the public eye, so customers can be reassured of the brand.
2. Lower your expenses
A recession is a good time to review internal costs, and to cut back on the nonessentials. Shop around for cheaper deals on services such as telephone, broadband and utilities. Encourage staff to spend less company money, and to use it as if it was their own. It is also a good idea to negotiate cheaper deals with your suppliers, who may well be feeling the pinch themselves. If this is not successful, consider switching to a cheaper alternative. Instead of investing in new items, consider cheaper options such as repairing or upgrading what you already have.
3. Manage cash flow
Successful cash flow management should be a top priority in an economic downturn. Monitor your bank account regularly, and keep an up-to-date cash flow forecast. Ensure that any payments are collected efficiently and on time, and start chasing up as soon as they become overdue. To help avoid this situation, send out payment reminders in the run up to collection. Where possible, offer clients a discounted rate if they pay early or on time. You can also have the option to credit check clients before you do business with them. This doesn’t have to be expensive, and can be done online.
4. Focus on your clients
Although all customers are important during slow periods, it is important to focus on your key clients. It is a proven fact that 80% of a firm’s business comes from 20% of their clients. Maintain a good relationship with them, and recognise their needs and wants, which will enable you to do your job better. Following up with clients upon completion of transactions is a great and easy way to retain their business for the future. Getting new customers will be tougher, so get back in touch with former contacts and customers. If your business appealed to them then, it is likely it still will.
5. Staff
In the current business climate, businesses are continuously seeking ways to streamline costs and reduce outgoings while remaining competitive. Investing in your staff will not only improve productivity, but will save you the time and money required to recruit people from outside. Staff morale will also be boosted. With redundancies being announced across many industries, it is natural for your staff to be fearful. Therefore it is important to keep them updated on any relevant situations, and of the effects this may have on them. This way, they can be prepared for the worst. If you do need to make redundancies, differentiate between those employees that add critical value and those who do not. Do not employ someone for a job you have the skills and time to do yourself.
6. Stockholding
If your company sells a product, you may want to consider lowering your stock levels if it isn’t selling. Stock costs money and if it is not selling, although maybe an asset, it is not making you any money. However, make sure you are how long it will take to restock once the economy has picked up again.
7. Information technology
Use existing resources to reach out to new markets, build new contacts and networks, and maximise your sales and marketing opportunities. Try to find ways to computerise any tasks in order to reduce the workload on yourself and your staff. Training for staff can also be done online, at your own pace, providing an immediate return in increased productivity and job satisfaction.
8. Networking
Networking focuses on creating relationships, rather than selling. It is only once a rapport has been formed between parties that they can do successful business. Once you have met someone, it is essential that you follow up with a phone call or email to keep the relationship going. It is a good idea to become a member of a networking group. Your national Chamber of Commerce is an ideal place to start (go to http://www.eucommerz.com for details on the national Chamber of each EU member state).
9. Revise the business model
Innovating your business model during difficult times will not only benefit you now, but also in the long run. Whether this entails halting production or changing working patterns, a successful business model is one that is able to adapt to the current economic climate.
Consumers become more value orientated and are more likely to shop around for the best deals. Cutting list prices may not be the best approach to take. Alternatively, try price promotions such as buy one get one half price, or offer discount vouchers to use on their next purchases to ensure they come back.
10. Plan ahead
The key to surviving a recession is to have a plan and to see it through. Planning ahead is one of the best tactics to use if you want to last through an economic downturn. All of the above steps will not only improve your chances during a recession, but can result in growth in the future. Staying positive is also crucial. If members of staff or clients sense that you are unsure of your business, it can affect productivity and morale, and customers will look for more stable firms to buy from.
