7 Tips to Counter the Ripple Effects of Recession on Your Business Mar 27, 2019Views: 116
The business landscape has a history of recession and overcoming the tumultuous times with common sense strategies. Even with the last recession when the Q4 2008 GDP stood at -8.4% for the US, an economic stimulus package rolled out by President Obama helped the nation to overcome the situation starting from Q3 2009.
Similarly, for any business, getting out of recession pretty much unscathed would require deep thinking around the company’s core business, cutting down on unwanted expenditures, and being well-prepared overall to handle the ripple effects of a bad recession.
Today, we have compiled a list of common sense and highly effective strategies that let your business to take on the waves of recession and still remain strong in the business.
1 – Assess the source of the crisis
A recession pervades deeper than regular ups and downs associated with a stock market and company stock prices. However, it is also true that predicting an adverse recession is complex and challenging to hit the bull’s eye. Hence, we need to be prepared to see any volatility arising from ‘too-good-to-be-true’ scenarios that deviate from the norms of conducting business. The subprime mortgage-led recession of 2008 is a classic example. Here, housing mortgage rates were lent very cheaply without carrying due diligence about the ability of the borrower to pay back. As defaults piled up, bank’s credibility and the top line took a hit. This shows how important it is to stick to basics and be prepared.
2 – Have an eagle-eye focus on core business
It is not uncommon to run side gigs and have multiple revenue streams when running a business. However, during a recession its best to stop the experimentation and high overheads businesses. Instead, you need to focus on the core business that feeds the side gigs. So, if you are an ad agency that also dabbles in web series, short films, and TV shows, you need to bring back the focus on the cash cow i.e. the ad agency business. This way, you are sure that the collective corporate energies are focused on sustaining the one business that started it all.
3 - Cut back on unwanted expenses
When business is booming, it is a common tendency to go beyond spending on ‘needs’, and start spending on unnecessary ‘wants’. While it may look good if the business is thriving for long, a smart entrepreneur will also look to build a nest to ward off the lean times in business. For this, it is necessary to always look for overheads that can be reduced. Take the case of Julia Ann from Miami. She didn’t put lock her capital on expensive offices leases for her 4-member team of web developers. Instead, she took up a shared working space. The rent also contributed to printing, Wi-Fi access, and use of meeting rooms. This shaved off a substantial amount in rental overheads for the business.
4 – Focus on ‘Bootstrapping’
Bootstrapping is emerging as a popular concept among entrepreneurs who don’t want to dilute their equity holdings to PE investors. This business model can also ensure that you sail the choppy waters when business is down. The core principle states that the expenditure made should come from the revenue generated for a given period. So, if you are planning to upgrade the servers, it needs to be from bigger invoices settled, rather than by tapping into emergency reserves.
5 – Sharp focus on existing client accounts
Your customers are the key (and sometimes the only) denominator of your business’ growth. In crunch times, it becomes all the more important to serve them to the best of your abilities. You need to concentrate on building and strengthening client relationships with great servicing so that they don’t take their business to the competition. This will help you spend less on acquiring new customers and have a steady flow of income.
6 – Strategize for survival
The overall culture at work needs to reflect that every employee is an intrinsic part of a company’s success. Be it the newest hires or the most experienced managers, everyone needs to follow a clear-cut strategy. But that can happen only when you, as the business owner, chalk out a written strategy for the business. Apple is a fabulous example of strategy drilled down to employee DNA. Their culture fosters on innovation and thinking ‘out of the board’. Every employee is expected to abide by this unwritten rule of encouraging innovation in their routine work. For this, it is important to have a strategy team in place. They will help conduct appropriate SWOT analysis in order to prepare for extreme market scenarios where survival becomes difficult. These will help you analyze four key areas –
1 – The strengths that your company possesses in order to manage economic turmoil
2 – The weaknesses that need to be overcome in such a situation
3 – The opportunities that are available to achieve your corporate mission and vision
4 – The threats that can act as barriers to achieving your mission and vision
7 – Use the fear of recession to your advantage
The layoff is the most dangerous impact of a recession. However, entrepreneurs need to re-group with their team and navigate the rocky situation with a bit of compromise rather than drastic measures like layoffs. So many may work at reduced salaries, while others may pitch in for extra responsibilities. As an entrepreneur, you need to avoid taking easy measures like layoffs. Remember that the employees are the bedrock on which your business stands. Treat them well, and it is likely that you will come out of recession faster than others.
To sign off
You would be amazed at how simple these survival methods are. They do not require you to go out of the way to accomplish the objectives. All that is needed is a bit of self-discipline and eagle eye focus on what is absolutely essential for the business. Yet it is surprising that not many adhere to these and eventually end up being swept by the waves of recession. Make sure that you utilize these tips and enable your business to weather the heady winds of a volatile business landscape.
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