In case you hadn’t noticed, even the world’s largest and most developed economies have teetered on the brink of a recession since the coronavirus outbreak, with many having now officially entered a period of economic contraction.
At the end of last week, Canada was the latest country to endure this fate, joining Germany, France, Japan, Italy, the UK and even the US. Shockingly, Canadian economic output shrank by 11.5% between April and June, with this representing the sharpest decline on records (dating back to 1961).
This has impacted directly on businesses across the globe, many of which will face a challenge to survive and thrive in the coming months. However, here are some steps to help you achieve these objectives!
How to Survive (or More) During a Period of Recession
Make no mistake; a recession has huge consequences for consumers, households and businesses alike, as customer spending levels decline and corporations see their turnovers and profit margins dwindle accordingly.
Over time, economic hardship may trigger sustained job losses nationwide, lowering consumer spending power further and continuing a devastating cycle of contraction and decline.
However, it is possible to minimise the impact of a recession, while potentially seeking out ways of thriving in particular marketplaces.
1. Protect Your Cash Flow
This is the single most important consideration; as cash flow remains the lifeblood of any business that wants to survive and drive sustained growth over time.
There are several ways in which you can safeguard your cash flow during a recession, initially by reviewing your existing income streams and marketing before diversifying these where necessary. In the case where some markets are reduced by a recession, you can develop new products and services to target high-growth alternatives.
You should also consider embracing concepts such as invoice financing, which enables you to effectively leverage your accounts receivable as a way of accessing a short-term loan.
This can be repaid once a client has paid their bill according to 30, 60 or 90-day invoice terms, enabling firms to optimise their cash flow during challenging times.
2. Maximise the Value of Your Existing Customers
Every single customer that you serve has an underlying value, and it’s important to optimise this during times of recession and austerity.
The reason for this is simple; as you may be unable to successfully win new custom during a recession, while it’s inevitable that you’ll lose some of your consumer base if a recession continues indefinitely over time.
There are a number of ways to achieve this; particularly in terms of understanding their needs and tailoring your products and services to deliver higher levels of satisfaction and loyalty.
For example, UK call tracking software can be used to gain a greater insight into consumer behaviour and their motives to contact the brand, providing the type of detailed analysis that can be used to increase customer value over time.
3. Focus on Successful Profit Centres
Things can get pretty hectic during a recession, and this can cause entrepreneurs to take their eyes of the ball during day-to-day operations.
Make no mistake; it’s imperative that business owners remain strategically focused on their bottom line profits during difficult times, rather than becoming obsessed solely with turnover and revenue.
After all, investing in product lines or revenue streams that don’t add to the bottom line is likely to be a waste of resources. So, you’ll need to focus on operational costs and look to make savings in some areas of the business to maintain a desirable profit margin.
Otherwise, you could see margins squeezed incrementally as the recession continues to bite into your business!
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