Today, we leave in a world that is completely different from the one we knew at the begging of this year. An unexpected, invisible enemy, the new coronavirus has resulted into a worldwide threat for the medical system collapse and it has elapsed over downturn economy. Countries all over the world are implementing the necessary quarantine measures, social distancing regulations in order to stop the spread of the virus and protect human lives, but during this time business owners are struggling to survive the economy downturn on the horizon. Only in United States, over 50 luxury companies have been declaring bankruptcy and only those who have the ability to adapt fast and see the present business opportunities are able to succeed and gain market share in a niche that maybe they did not think of before. The world has not experienced a Great Lockdown and such a huge and fast coming collapse in the business sector. The economic downturn to come is predicted to be deeper and longer than any other recession.
On one hand, people are starting to lose their jobs as consumer spending is dropping and companies cannot afford to pay them anymore. On the other hand the business sector is crashing to the the economic downturn intensifying at a very high speed all around the globe.
This crisis is not like anything we have experienced until now and the amount of uncertainty is affecting people and companies. Due to the hard prediction of the evolution, many countries are already experiencing economic downturn, along side the health crisis, consumer spending has dropped, working capital is in decrease, companies are closing their business activity or trying to expand their product portfolio to answer the current customer needs and keep their cash flows going. Marketing spending of companies is dropping and the balance sheet for most business people is starting to look like a nightmare. The product categories that drives the cash flow now are starting to change and people are starting to reorganize their spending, preparing for a recession.
What strategies can a company use in an economic downturn?
Reducing Business Debt
Companies should make sure they get their debt levels as low as possible, in order to be able to keep their business going even if downturns make them lose a few clients. Pay off all credits if you have them and keep your debt balance at 0 to minimize the risks.
Build Cash Reserves
During economic downturn, cash reserves is the best choice for your business. Cash reserves are good to have any time but especially when economic downturn is knocking on your door. Make sure that you have a buffer when you get to a tough point.
Don’t Rely on One Big Client
Economic downturn teaches companies not to be pretentious. It is mandatory to diversify your portfolio, have an executive summary reprint. Think about the worst scenario, your best and biggest clients takes a hard hit from recession and gets out of business, what do you think will happen to you? You will also get out of business. Therefore, it is time to get a variety of clients in order not to loose so much of your sales.
Make Your Customers Loyal Now
Keep you clients happy, build a solid relationship with them in order to make them come back to you and recommend you to their family and friends. Even though today, there are a lot of advertising channels and possibilities, word of mouth remains the most powerful one. Moreover, during recession and downturn, people are more likely to buy from a trustworthy company recommended by someone he trusts, rather then a new one, he doesn’t know anything about.
Therefore, even if you are looking to diversify your clients portfolio, it is equally important to make your current customers loyal in order for them to stick with you even during recession. People do not remember what they bought from you, but they do remember how you and your products made them feel, therefore they will want to get that good feeling again, even in economic downturn, and they will for sure, want to spread the word about you. This is how you will keep getting referrals and not loose them as a result of economic downturn.
Build Service Contracts with Future Work
It is essential to build and structure your contracts in a way that will ensure you continuous work. A sustainable business strategy is based on on-going work contract, rather then one-time services. One-time work is the first one to crumble during economic downturn, so if you manage to lock-down on-going work contract you will have less to suffer during economic downturn. And long-term service contract can be made when you keep your customers happy.
Look Out For Your Team
When employers get to the point of economy recession the first measure they tend to take is cutting costs and start firing people. But, if you want to thrive during economic downturn you need to prepare your team accordingly long before the downturn arrives. The biggest problem employers have is finding reliable and competent people to hire and look after them, in order for them to look after you when time get hard. If you start by firing people, you will loose those good employees that you looked so hard for. Therefore, maybe it would be better to gather your people around and try to find cutting costs measures together. For instance, maybe if you involve them in this process they will agree to get one unpaid day per week instead of loosing their jobs. Find out what are they willing to do for your company when economic downturn strikes and get creative. When you are a great leader, they are willing to work with you to solve problems and keep working for you.
Focus on Your Core Competencies
During economic downturn it is best to delegate. You should focus on your main competence in your business and let others do the rest. It is better you do that thing extremely good rather than do all the things bad. Therefore, again, you should gather your people around and delegate activities to every team member in order to keep you above water during a downturn in economy.
Measure the Results
Measure all results and keep a close eye on the marketing ones in order to see what works and where to cut costs. This is not the time to waste money, but if you have a great marketing plan that works, do not cut it down. If you did not manage till now to test and research the best way to market you business, this is mandatory in order to know how to get to your customers and survive during economic downturn.
Inventory Motorization and Diversification
If you activity is based on supplies, during good economy conditions you should make sure that you have a great control of your stocks. It is mandatory that, when economic downturn strikes, you will have enough stocks and a diversified portfolio of suppliers in order to avoid them going bankrupt and you going out of stocks.
In order to be able to bulletproof your business during the next economic downturn, you should read more on How to Get Loyal Customers during a crisis here – https://cluent.net/loyal-customers-during-a-crisis/