Is your business equipped to survive a recession?

Thursday 15 December, 2011

By Helen Thomas - helen@consumerchoices.co.uk

How to make sure your business comes up smelling of roses as the market takes a nosedive.

When the Dow is in the dumps, it’s important that you act fast to reduce the potential damage a recession can have on your business.

There are few businesses that naturally flourish during tough economic times - loan sharks, bailiffs and, according to reports, the vice industries, are usually the only winners during a downturn in the market.

While bigger companies may have large cash reserves to tide them over, as we saw from the fall of some of our high street’s best known stores, even big businesses can fall victim to a recession.

For small companies it can be even tougher to survive.

However, there are steps you can take to recession-proof your business – enabling your company to emerge no worse off, and potentially, be even stronger for it.

Plan ahead

Flourishing during a recession is unlikely if you only begin to act after the recession has an effect on your business. By planning a strategy in advance for what you would need to do, and when, should your business experience a significant drop in revenues, you won’t be caught off guard if tougher times arrive.

If a downturn is looking possible, consider running your reporting processes more often so you can quickly take measures if you start to notice an impact on your business.

Rolling out the red carpet

During a recession it is easy to assume that price is the only point of competition for customers. While this is inevitably an influence, exceptional customer service and strong relationships with your clients will often win out over the faceless big guns that may offer a bargain but hide behind automated systems and lack personal accountability.

Make sure you keep up client contact and create a positive customer experience.

However, while hanging on to the majority of your customers is priority number one, this is also a good time to prune customers that cost you more than they generate. Either work out ways to improve their profitability or politely pass them over to your competition.

The free (bie) and easy way to win new customers

While the above applies to satisfied customers, there will be a small army of unsatisfied customers ready to be tempted away from your competitors with special offers. When times are hard it is difficult to resist a freebie and you could seriously boost your customer numbers with a decent special offer.

Tighten your belt, but with caution

Reducing expenditure on employees, whether through wages cuts, cutting your training budget or redundancies will initially bring down your outgoings - but at what cost?

By being sensible with the areas that you can economise, you can improve your bottom line without it being detrimental to your future profits.

Consequence-free savings can be made by shopping around for suppliers who are hungry for your business and willing to cut their prices, and this could help you renegotiate with your existing suppliers - allowing you to hang on to long-standing relationships, but still reduce your costs.

Spend time ensuring you have streamlined your processes and improved efficiency as much as possible, but don’t cut corners that will damage your reputation for delivering a quality service.

Perhaps simplest of all is to make sure you are on the best deals for your communication services, such as broadband and line rental. These are simple to compare using our postcode checkers for business broadband and landline phone packages.

Increase your market presence as others shut up shop

Although it’s tempting to hit the retreat button in a recession and freeze your marketing and advertising budgets, during a slump there is a real opportunity to steal a march on your competitors. Make your company the neon advertisement in the marketing blackout.

It may seem reckless to splash the marketing cash when everyone around you is battening down the hatches, but successful entrepreneurs will say that taking risks is an essential component of growing a successful business.

As Albert Einstein - not an entrepreneur as such, but fairly clever nevertheless - said: “In the middle of difficulty lies opportunity.”

Short-term pain for long-term gain

While it’s tempting to cut the “luxuries” from your budget, investment in training for you and your staff should be one of the last areas you look to cull, as training will almost certainly bring payback to your company in the long term.

Improve your systems during the good times

While you are able to absorb the costs, make sure you have updated your technology and software to ensure you can spend as little time as possible on tasks that do not directly generate income, and enable you to contact the widest possible market.

Sort your search engine optimisation (SEO) so you are driving maximum traffic to your website and get your e-marketing up to scratch.

Diversification

Consider new innovations that could help you to fill gaps in your service. Seek feedback from your clients to find out what they think is missing from your business. Not only could you improve sales profits from your existing clients, you could attract a whole new market too. Don’t let competitors fill that gap and steal your market.

Remember that as a small business, you have the flexibility to be creative on your side.

While this advice is certainly beneficial in the event of a recession, it could be useful to your business during the boom times too.