When a recession hits, it disturbs all parts of a country. Industrial, commercial and residential bodies are impacted. This is the constricting nature of a recession. However, businesses are able to alleviate the damage inflicted during a recession, by having a plan in place for how they will survive and benefit from the eventual upturn of the economy. There are different aspects that need to be considered when planning to endure a recession, this article aims to analyse these and help South African business owners overcome the impacts of a recession.
1) Protecting Cash Flow
Protecting incoming cash flow during tough economic times is the most important aspect of surviving during a recession. There are different methods that can be utilised to ensure positive cash flow is entering the business. One method is to analyse the way that inventory is managed, and reduce costs in this area by optimising it to the best that is possible, without reducing the quality of products or services offered. Examples of this would be, sourcing a product from another business to find a better available price. Just because the business has done something one way for years, does not mean it cannot be changed for the sake of survival. Businesses that understand this and start this process early, are more likely to survive the initial hit taken, and then flourish at a greater rate post-recession. This is shown in the graph below:
2) Current Customer Protection and Service
Customer service is crucial, but especially during times such as a recession, as both current and future customers will be drawn to a business that has excellent service. Ensuring that you look after your current clients is vital during a recession when everyone is struggling. It is easier to sell to and retain current clients than it is to search for new clients. This can be done by shifting the sales focus to what the already established clients are after, as this is near guaranteed positive cash flow.
3) New Customers Search
However, finding new clients will still be necessary for a business to maintain cash flow during tough financial times. There will need to be an influx of new customers, while retaining existing ones. Drawing clients away from the competition is a way to go about this. This can be achieved by offering something that the competition does not, or better yet, offering more than the competition does at better prices. This can be done by researching the competition and analysing them for a gap, then utilising this to gain some of their customer base.
4) Marketing
While many organisations cut out marketing as they see it as an expense, the opposite needs to be done. Marketing remains essential during tough economic times and recessions because people will be constantly looking for better value for their money. This is where a company’s good marketing scheme could earn them these customers. Gaining these customers will capture them as remaining customers post-recession.
These are just some of the strategies that people can adopt to help their business survive tough economic times, such as the COVID-19 epidemic and its economic impacts. This will help ensure that they remain on their feet, and can flourish when the economy picks up once more.
Reference List
Mysore, K. L. (2019, May 9). What Companies Should Do to Prepare for a Recession. Retrieved from HBR: https://hbr.org/2019/05/what-companies-should-do-to-prepare-for-a-recession
WARD, S. (2019, January 27). 7 Ways to Make Your Business Thrive in Tough Economic Times. Retrieved from Thebalancesmb: https://www.thebalancesmb.com/business-thrive-tough-economy-2948298