The world is in a state of shock and everything is at a standstill due to coronavirus pandemic. Coronavirus has already affected 203 countries, infected more than 1 million people and has taken over 50,000 lives. What’s even worse is that by the time you read this article, these numbers might have increased.
Businesses in general and small businesses are the hardest hit due to this outbreak. Business owners are forced to close their businesses while other companies are asking their employees to work remotely. We are already experiencing supply chain disruption, stock market crash, a slowdown in manufacturing activity and contraction of the service industry. All this points towards an economic downturn and if that trend continues, we will soon enter a recession.
Yes, the future looks bleak especially, if you are a business owner, but that does not mean that you should start panicking. Thankfully, there are many things you can do to make your business survive and even thrive during this crisis. All you must do is to look for ways to weather this storm and we will tell you about it in this article.
In this article, you will learn how your business can not only survive but also thrive during economic downturns.
1. Assess Your Risk
The first thing you need to do during an economic downturn is to evaluate your risk. Although there are many different types of threats, but during the economic meltdown, you should focus on these three risks.
- Business risk
- Client risk
- Recession risk
Here are some of the questions you need to ask yourself to evaluate these risks.
- Could you survive an economic downturn?
- How much cash do you have in the bank or at hand?
- What are your payment terms?
- How much do you owe to lenders?
- How much do customers owe you?
- What are the chances that your clients will be affected by the recession?
- Are your clients localized in a single industry or are they spread across different sectors?
- How recession-proof is each sector?
- How long will the recession last and how severe it can be?
Answering all these questions will give you a clear picture of your overall risk.
2. Categorize Your Clients
Once you have accessed your risk, now it is time to analyze your clients. Ask yourself, what are your clients’ risk exposure and how important they are to keep your business up and running? Additionally, also consider the resources required to serve each client. Some clients can be served with fewer resources, while others demand intensive resources.
You can divide your clients into three categories:
- Highly vulnerable clients
- Mildly Vulnerable clients
- Comfortably placed clients
Clients that your business is most likely to lose during an economic downturn are highly vulnerable clients. In most cases, they might not be very profitable to you so you should not worry about losing them. The mildly vulnerable client might not stop buying your products or using your services altogether, but they will spend less. As the name suggests, comfortably placed clients are clients who can easily survive an economic crash because they have high cash reserves or operate in a sector that is not impacted by the economic slowdown.
3. Tailor Your Products and Services
What kind of products and services are you selling? Does it fall in the “must-have” category or in “nice to have” category for your customers? You might be busy evaluating your clients and they might be doing the same. There are certain products and services which are dispensable and if you are offering those products and services, your business might take a hit especially, during an economic crisis. That is why it is important to tailor your products and services according to the changing times.
4. Create a Governance System
Develop a governance system in your organization that helps you make tough business decisions based on data, not on emotions. Whether it is decisions regarding day to day business operations or potential layoffs, implementation of cost-cutting measures or decisions related to your employees and clients, a governance system can make sure you make the right decision at the right time.
5. Spring Clean Your Organization
There are three key components of an organization.
When there is an economic boom, businesses tend to double down on all three aspects. They might hire more people, invest in state-of-the-art technologies and make their processes more efficient.
Similarly, when there is an economic crash, everything goes south. Organizations lay off employees, cut back on technology expenses and stop improving their processes. In short, they try to get rid of unnecessary baggage that is increasing the costs and delivering little to no value.
6. Communicate, Communicate, Communicate
Whether it is your employees or your clients, it is essential to establish robust communication channels and communicate with them frequently. You can use online task management software to manage tasks while staying in touch with your team members. Ask them how the economic slowdown is affecting them?
Provide resources and support to help your employees recover from the economic slowdown. The same goes for clients. Most clients might want to renegotiate their contracts due to the financial crisis and you should welcome them with open arms. Tell your customers and stakeholders that you are doing everything in your power to fight this economic downturn.
7. Work with Your Competitors
Recession is not the time to crush your competitors. Instead, you should look to help your competitors recover from an economic crisis, especially if you are in an industry that is severely affected by the economic downturn. Join hands with your competitors and brainstorm ideas that can help businesses overcome common problems.
Brands that indulge in competition might be open to collaboration during a crisis. You can take advantage of this situation and look for ways to solve these issues. You will be surprised to see how open your competitors might be to a partnership offer.
How are you keeping your business afloat during the current harsh economic conditions? Share it with us in the comments section below.