by Amanda Bailey Oct 13, 2022Share On:
It doesn't matter how effectively your company is run; you can't be 100% certain that it won't feel the impact of a recession. It may not even be alive after the recession.
Even successful businesses are also prone to the effects of the market and challeging economic conditions.
This massive effects of the economic decline are far-reaching and are caused by factors outside of control.
Notwithstanding, certain things can be done better by business leaders to protect their company's finances during hard times.
WHAT IS A RECESSION?
A recession can be defined as a difficult, widespread, and extended period of decline in economic activities.
A commonly accepted fact is that two-quarters of consecutive drops in a country's Gross Domestic Product (GDP) amounts to a recession and increasing unemployment levels, a decline in retail sales, and measures of income and manufacturing becoming smaller for an extended period.
This is because recessions are known to last for more than six months.
It takes years for an economy to fully recover from a recession that only lasted a few months. Recession can be caused by inflation, changes in technology, unpredictable events in the economy, and excessive debt.
HOW DOES A RECESSION IMPACT BUSINESSES?
Companies experience low sales, some employees lose their jobs, the economy struggles, and its output declines. During a downturn, It can be challenging to survive.
Many businesses are typically forced to reduce the number of hours they offer employees because of the recession's impact on the economy. Sometimes, they may decide to employ fewer new workers instead of hiring those who are well-known to be less efficient.
Since more people are without jobs, it becomes difficult for people to get another job. People with jobs may see salary reductions and find it hard to negotiate their future pay raises.
Many people find it hard to make their mortgage payments and other bills on time during the recession. This can lead to home loss, foreclosure, and even bankruptcy.
Suppose you intend to invest in stocks, bonds, and other investments known to depreciate during a recession. In that case, it is vital to remember that these investments could cause short-term damage to your savings account and retirement plans if there is no economic improvement soon after you invest your money in them.
Business loan companies tighten standards for mortgages, business finance loans, start-up loans, and other ways of financing your businesses because more people cannot pay their bills during a recession.
HOW TO SURVIVE A RECESSION?
During a recession, your business might experience a downturn, but there are still ways and methods to help you survive and keep your business running well through the hard times.
Listed below are 12 efficient ways to make your business survive a recession.
Assessing your business health is very vital during a recession. If you aren't careful to take stock of your situation, you could lose everything, but if you're, you may be able to come out unscathed with little or no damage.
When there is a decline in the spending and sources of customers' capital, the budget of any business might suffer.
These may lead to changes in product pricing, staff benefits, marketing strategies, and even launches of new products.
2. IMPLEMENT CHANGE
Ensure to readjust or restructure your staff or the chart of your organization. This may include switching the roles and responsibilities of some teams or delegating new functions to others.
Products and services should be evaluated to ensure your client's market demands are continually met. Readjust benchmarks and projected growth targets.
Every business problem cannot be solved at go. Issues with the highest potential to cause customer dissatisfaction and damage your business culture should be prioritized.
3. MAKE CUSTOMERS YOUR PRIORITY.
As a business owner, customer satisfaction should always be your priority. Customers want to be sure that when they use your product or service, it will be top-notch as long as they get what they need, even if there are delays or inconveniences.
They must be getting their money's worth from the services you render and their relationship with your company. That means even when things are, no matter how uncomfortable, your business will be attentive and responsive to their needs.
4. SEEK ASSISTANCE
Others have gone through similar situations as you, don't be afraid to seek help from them. Support and advice can also come from your family members if they have gone through similar situations.
Also, have a plan for the worst-case scenario. This involves having a substantial amount of money saved up or an emergency plan that will sustain you if everything falls apart.
5. MEET THE NEEDS OF YOUR EMPLOYEES
It is easy to forget about those who made our business successful. Putting the needs of those people first should be the priority of every company, even if the recession caused the company's budget to be flat.
Businesses facing a hard time financially may be tempted to cut off employees' salaries and benefits. But doing this would make you lose good employees at the end of the day.
6. GET CREATIVE TO SURVIVE A RECESSION.
Firstly you must make your business more flexible. You must bring out your creativity and have new ideas during a recession. You also should be able to adapt to recent trends and changes; this involves your willingness to test new products and services.
It would help if you also adapted to the change in how customers relate to your company.
During a recession, customers are usually unwilling to spend on luxury. They would rather spend their money on necessities like food and health care.
7. BE TRANSPARENT
Transparency is essential, especially when there's a recession. It builds trust in people's minds if they can see how transparent your company's financial situation is.
Your advice would also be taken seriously because they know how your business is run.
8. SCRUTINIZED YOUR EXPENSES
It is possible to forget that there are a lot of unexpected twists when the economy is booming. Still, managing your business to flourish during a recession is essential when there is change.
Your costs should constantly be scrutinized, ensuring that money is spent only on things that would boost your business.
9. RECESSION-PROOF YOUR BUSINESS
Although it is paramount to be ready for the long term, actions still need to be taken at the moment.
Small businesses must plan out their communication, training, productivity, and recession mitigation strategies before they need them. This will provide enough time for implementation, leading to better results for those actions.
Surviving a crisis is dependent primarily on measures like these.
12. PROTECT CASH FLOW
During a recession, business owners have no choice but to lay off employees to cut expenses. Sadly, this can sporadically result in problems in cash flow.
13. PROTECT CORE COMPETENCIES
Core competencies are sets of skills and knowledge that provide for us and give us an advantage over other businesses.
If your business is going smoothly, independent of the economy, you must focus on your core competencies to keep it going.
For example, if your specialty is in the production of books, do not bother yourself if people will purchase them; keep producing them.
If you lose your core competencies, you will find it harder to flourish in a recession.
14. DON'T STOP MARKETING.
Your business may not flourish anymore, but that doesn't mean it can pick up. So never stop doing your marketing.
If you stop marketing, you will have no idea how many potential buyers your business is losing.
In the business world, nothing is certain. Even a flourishing business can be affected by unforeseen circumstances like a recession.
Businesses today face many more challenges than ever before, but there are ways to ensure your business can survive a recession no matter what challenge it is faced with.
By examining your weak point, adaptability, and resources, making choices concerning your product or services, and fostering your relationship with companies and vendors, you can protect your business for many years.