During periods of financial and economic turmoil businesses face a unique set of challenges. By employing certain strategies, not only can smaller companies survive but they can thrive.
BUSINESS SKILLS SESSION
Business Insights is an exciting programme brought to you by inospace. The programme showcases exclusive opportunities for inospace clients to gain insight into business ideas, trends and advice.
The insight events combine an interesting mix of seasoned executives who have encountered a relevant challenge, together with Q&A and business interaction.
Topic: How to Survive and Win in Tough Business Environments
Venue: Island Workshops,Paarden Eiland, Cape Town
Date: 6 November 2019
Speaker: Inospace CEO, Rael Levitt
During periods of financial and economic turmoil, small and medium-sized businesses face a unique set of challenges. By employing certain strategies, not only can smaller companies survive slumping demand and low consumer confidence—they can thrive.
Cash Flow is Everything
Cash flow is the lifeblood of a business, and when there is a downturn, you need to be prepared to strap in and get leaner. This means you need to simulate your cash flow if revenue were to drop 30%, 40%, or even 50%in the event of a downturn. You need to know how your business will survive if revenue slows down cash flow. Furthermore, look at your operating expenses and delve into what can be cut if the business were hit hard. You don’t want to get lean without prior planning; make sure you have your game plan once the economy slows.
Reduce Discretionary Expenses
Any time there is financial instability (whether it’s due to the economy or company shortfalls), the first step is an obvious one: reduce discretionary expenses. Discretionary expenses need to be cut, and this is the time to re-evaluate your company policies for travel, entertainment and office supplies. During a recession or other financial strain, look to see how you can reduce all costs. Look at vendor output and decide if you can hold off on online advertising, web design, accounting or other miscellaneous services.
Work with Your Creditors
Demonstrate good payment behavior and increase your line of credit prior to a recession, as you may need a higher credit limit during the economic downturn. Banks use credit history when making credit line decisions, so making payments on time is an important factor. In addition, paying more than the minimum amount due and paying in advance of your due date are also important because they portray you as a lower risk.
Stay Focused on Your Long-Term Goals
Although it is important to increase your savings for rainy days, you also want to make sure to keep working to achieve your long-term goals. You may have to change the approach or timeline, but you don’t want to lose focus on the end game. If the business slows down, it is time to stop and think about what is working and what isn’t working. Then figure out what you can do to build and/or maintain your competitive advantage.
Look for Ways to Optimize ROI
The best way to prepare your business for the next recession is to begin paying attention to areas where there is return on investment (ROI) for the company. Keep an eye on methods where ROI can be optimized to grow your business. Look at ROI for everything you do. Then leverage your nimble nature to adjust and correct. Be willing to test, learn, and adjust quickly.
Manage Debts Properly
To prepare a small business for a downturn, owners should reduce debt before the economy slows again. Less debt will give your business more flexibility if the economy slows. Pay off debt aggressively if you can afford to do so. If you can’t pay off your debt, tackle your highest-cost balances first to get the most bang for your buck. Also, pay down personal debt. This will also make life less stressful if your business doesn’t hit its normal sales or revenue targets and you need to cut your personal income. If you can’t pay down debt, make sure you have secured the lowest interest rates for which you qualify.
Create a Growth Mindset
One way to prepare your business for a downturn is to create a growth mindset. Instil a positive, you-can-achieve-about-anything mindset. This will be especially relevant when your employees come up against roadblocks down the road. Make sure to lead by example. If you expect everyone else to double down and work long hours late into the night, then you must do the same.
Develop & Follow a Strong Business Plan
Business owners should look at every aspect of their business, starting with how well the business is performing against its business plan. Developing and following your business plan is fundamental to the success of any entity. Losing sight of it can bring unwanted results. It’s crucial to monitor key performance indicators (KPIs), including loan covenants and looking at historical trends to see if they are moving in a positive or negative direction.
Get Creative with Collecting Debts
The recession is a great opportunity for your business to extend better customer service. For those clients who might be struggling to make ends meet, get creative breaking up collections into smaller payments or extending the payment period. These types of clients will later reward your flexibility with their loyalty for the long term, and will often refer others to you because you handled their situation.
Rightsize your Team
Remember that the bigger your dream, the more important your team. You can’t get to world-class with a low-performing support circle. To protect your company when profitability is down and relief does not appear to be in sight, you’ve got to get lean and mean with your team. Look to where you can right-size your work force. Low performers must go, and top employees should stay. They help drive profits and carry your company towards the future.
Develop Multiple Business Strategies
To prepare your business for the next economic decline, it is essential to develop multiple strategies, as there is no one-size-fits-all kind of formula that works for different circumstances. You and your stakeholders should meet to discuss the market conditions and the predictive signs of various economic crises. You should plan different strategies to help your business brace various kinds of downturns and shocks.
Sell,Sell, Sell and Market, Market, Market
Tough times are when you need to hit the streets and sell your products and services to existing and new customers. Shrewd, cost effective ways must be found to market your company.Don’t forget that the best form of marketing is often the cheapest – and that is one-on-one interactions with your existing and prospective customers.
Get to Your A-Game
Stop being so hard on yourself. You’re human. You can’t control the environment. Control the controllable. Plan your week in intimate detail every Sunday morning. This removes the need to make multiple decisions each day [because you have a blueprint in place]. And that frees up your focus + energy to dial into the few priorities that are most vital to your A-game. You absolutely need excellent sleep, a proper diet and regular exercise to perform in tough environments. And to be happy, healthy and strong. Remember that in the past your pain has served your growth. Your setbacks have strengthened your character. And heartbreaks help heroism. Let resentments go.And trust life has your back.