A recession can be extremely damaging to a business, particularly a newer small business. After all, during a recession, customers and clients may be spending less even as business costs go up. As Kavan Choksi points out, a recession is a natural stage of an (economic) life cycle. Hence, much like how any season can produce extreme weather, managing a business in a recession can present unique challenges for business owners. However, there also are practices one can follow to help their business stay afloat during the times of such economic turbulence.
Kavan Choksi provides valuable pointers on managing a business during recession
Managing a business during a recession can be pretty challenging. It, however, is possible to navigate through difficult economic times successfully with careful planning and strategic decision. Here are some of the approaches and steps one can follow to make sure that their business survives and even thrives during a recession:
- Review and adjust the business strategy: First of all, one has to review their existing business plan, and make proper adjustments to align with the changing economic landscape. They need to analyze their competitors, market, and customers to identify potential risks and opportunities. Based on the anticipated impact of a recession, one needs to consider modifying their financial targets, sales projections, and market goals. Doing so would be quite helpful in setting realistic market expectations and developing strategies that are adaptable to the current economic conditions.
- Prioritize customer relationships: The existing customers of a business are likely to be among their biggest assets during a recession. Business owners should strengthen customer relationships by demonstrating empathy, delivering value-added solutions, and offering exceptional customer service. During economically turbulent times, businesses may provide flexible payment options to the customers and consider loyalty programs to encourage repeat business. It would also be a good idea to identify and leverage opportunities for up-selling or cross-selling. Building customer loyalty can be helpful in stabilizing revenue streams and positioning a business for growth when the economy recovers.
- Focus on cash flow management: Maintaining a smooth cash flow becomes pretty vital during a recession. One must evaluate their cash flow forecast and implement measures to improve liquidity. They should try to lower the business expenses as much as possible and negotiate contracts. Proper inventory management and effective accounts receivable management can also be helpful in optimizing cash flow.
- Optimize operational efficiency: When the market is turbulent, business owners should try to explore ways to improve operational efficiency and reduce costs without compromising quality. They must focus on streamlining processes, eliminating unnecessary expenses, and seeking opportunities for automation or outsourcing. It would also be prudent to review the supply chain of the business in order to identify potential cost savings or alternative sourcing options. The employees must also be engaged in identifying cost-saving measures and encourage innovation to drive operational excellence.
As Kavan Choksi mentions, in addition to following the strategies discussed above, businesses can consider introducing lower-cost alternatives or value-added packages that appeal to price-sensitive customers during recessions. They should look for opportunities to diversify their offerings or expand into new markets that are historically more resilient during a recession.