Surviving a downturn requires many of the same qualities as excelling in a boom time: agility, adaptability, strength, direction, prudence, perseverance, positivity, patience; to name a few. But what practical steps can businesses take to ensure they survive and succeed during a downturn?
1. Review your business plan
Compare your business plan to your business reality. Are you on track or off course? Is your financial performance as strong as your plan says it should be? If it’s not, how might this affect your future plans and operations? To what extent could a downturn in business affect your strategic objectives, targets and financial projections? Your review may give you confidence moving forward, or else you might need to adapt your expectations for the future. Either way, reviewing your business plan puts you firmly in the picture, and thus firmly in control.
2. Budget with caution
Cutting costs may be an inevitability during hard times. But do so with care and precision. Improving financial efficiencies is one thing, cutting budgets to the detriment of business performance is quite another. Cutting costs may result from a panicked perception that your business will not survive without tightening your belt. But this may become a self-fulfilling prophecy, in that your business might decline – not because you didn’t cut costs, but because you did. Reviewing budgets is crucial – just make sure your evaluation weighs up the costs of cost cutting.
3. Sales and marketing
The temptation to cut sales and marketing spend when things get tight could be strong. The great paradox with this approach is that sales might dry up further. A tricky balance. The single most important step to take – over and above cutting spend – is ensuring that spend is achieving results. This means tightening up on performance metrics. Track activity closely and identify which sales and marketing initiatives are performing strongly. This enables you to maintain strong activities, and helps identify areas to cut costs if necessary. Research and development is also important for effectively identifying and fulfilling customer needs, which may change during downturn.
4. Relationships matter
Renew your focus on relationships with customers, employees and suppliers. Loyalty initiatives could help retain key customers; or more generally – take time to understand what issues and challenges customers face during downturn, and be flexible in adjusting to their needs. Employees may also be affected by downturn, so engaging effective and open lines of communication is crucial. If tough times are ahead, employees will be more understanding of change if they are well-informed (as opposed to being kept in the dark). Motivating staff through training or development initiatives (for an example, see ‘innovate and motivate’ below) could also give employees a sense that they are contributing to the fate of your business. Finally, a focus on maintaining strong relationships with suppliers could, for example, help you to negotiate better credit terms should you need to.
5. Innovate and motivate
A recent global survey – based on interviews with 765 business leaders – placed employees as the number one source of innovative ideas (not surprising when you think about it). This offers two opportunities: innovate, and motivate your employees while you’re at it. And remember, innovation doesn’t necessarily mean conjuring up grand inventions or ground-breaking technologies – it could simply mean tackling the small things, such as doing more with less, or finding new ways to satisfy customers. A focus on small, incremental improvements to business performance could make all the difference and give you a competitive edge. It could also engage your employees by empowering them to contribute to your business’s survival and success.
6. Keep both eyes on the ball
Pre-empting problems in advance of their arrival is vital to planning effective solutions. For example, banks are not particularly interested in lending money when things go bad, so spotting financial issues before they arise means you can present lenders with a well-reasoned action plan to get you back to full strength. Identifying sales dips or staffing issues as early as possible also means you can stay one step ahead, avoiding potentially nasty surprises. Open lines of communication with key staff, alongside regular performance and financial monitoring are therefore top priorities. Avoid paranoia, but also avoid burying your head in the sand.
7. Don’t panic
The media spotlight invariably turns onto tales of woe. In light of such negativity, business owners may feel as though their fate is already sealed. Talk of recession is definitely premature; recent figures predict nothing more than a slowdown in growth. There is, then, no reason to panic. It may be wise to prepare for the worst, but there is no good reason not to strive for the best. A positive, realistic and constructive frame of mind is the best way forward. The dictionary defines panic as ‘often causing wildly unthinking behaviour’. Avoid it at all costs.
8. Be agile
Many of the tips discussed in this article demand a single common quality: the need to be agile and adaptable in the face of change. This demands an early awareness of change, a rapid acceptance of it (as opposed to resisting it), and a flexible, motivated workforce capable of responding to change positively. Find out more about business agility in June’s business i.
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