Guest blog by: Jennifer Warren
Recession is an opportunity in wolf’s clothing, they say.
Opportunity or not, only time will tell.
Nevertheless, businesses are bracing up for a reality that they may or may not have experienced before.
With mass shutdowns becoming the new norm, coronavirus-led recession is right at our door. So, no matter what, businesses all over the world will have to really roll up their sleeves and work on their do-or-die strategies if they ever wish to recover from this downturn, which is being considered worse than the 2009 recession.
The situation reminds me of two Stoic philosophies that sit perfectly with the current scenario: One is “premeditatio malorum'' which is all about premeditation of evils - that is, things could go wrong or could be taken away from us, anytime. In short, be prepared for the worst.
And the second one says to determine what is under your control and what isn’t.
This post circles around the other philosophy, what is under your control and what isn’t. To put this in the business perspective, what strategies are under your control, and how could you optimally implement them to ensure your business does not lose its momentum in these tough times?
Here is a list of strategies that are under our control, which, when implemented, will help you successfully navigate the downturn.
- Keep an eye on your cash flow
- Retain your employees and upskill them
- Look for strategic acquisitions
- Work out on multiple revenue streams
- Re-work on inventory management practices
- Step up marketing efforts
- Count on your current customers for more sales
#1 Keep an eye on your cash flow
Like it or not, a majority of the business owners are clueless about their cash flow. In fact, according to a businessinsider report, 82% of the businesses fail because of cash flow issues. So, before it’s too late, get your acts together and get a hold on your numbers. This, in turn, will help you to map out your profit plans for the future, helping you identify the ‘lever points’ - to pull or push resources based on the economic situation. Best 7 Free and Open Source Business Budgeting Software will give you an idea about different budgeting software to get a handle over your cash flow.
#2 Retain your employees and Upskill them
Businesses are desperate to cut their losses during recessions. And it’s understood because customer spending is drastically low during such times. So, it comes as no surprise that businesses tend to drop their axe on the employees. Yes, like it or not, layoffs are pretty much common during recessions.
However, according to Harvard Business Review, companies that focus on cutting their workforce have only an 11% chance of recovering post-recession as it lowers the morale of the existing employees.
Businesses need to respond to such situations with empathy, not indifference. This, in turn, would make employees feel invested in the company. Businesses should also realize that unlike machines, employees have a heart and soul and wish to make a difference in their own lives and that of their family. So, instead of showing them the door, focus on upskilling your employees during the recession.
By investing in people, specifically during the recession, you are, in a way, encouraging your employees to take care of your customers better.
Furthermore, by showing your human side, businesses could boost employee morale, and at the same time, push employees to put their best foot forward when the recession ends. Check out a few e-learning softwares to upskill your employees.
#3 Step up marketing efforts
During slowdowns, it has been generally observed that small businesses make the mistake of cutting their marketing budgets to a higher degree and sometimes eliminating the cost. Irrespective of how marketing is fairing, the lean times should be the times when your small business needs to invest more in marketing because consumers are looking for products at economical rates. So you need to offer them such products. For this, you need to get your brand name out there through various marketing efforts. So don’t shy away from marketing, instead step it up.
#4 Re-work on inventory management practices
Can inventory costs be reduced? If it's possible, good. However, make sure you don't have to compromise on quality or customer experience.
Also, find out whether you are ordering too many of the same items. Can any of these be sourced for a lower price from elsewhere? What about a drop shipping alternative? This could eliminate your shipping and warehousing costs in entirety.
Just because you have been doing things in a certain way, doesn’t mean you should carry them out, unquestionably, in the same way during difficult times.
#5 Count on your current customers
Finding new customers means additional costs. This is not the case with current customers. In fact, established customers might offer you many more sales opportunities as opposed to new customers. So, no matter what, make sure that you don’t lose your existing customers. Treat them differently by offering better discounts, setting up customer reward programs, and more.
The graph shows the performance of CX Leaders and CX Laggards during the period of the last U.S. recession, 2007-2009.
The graph clearly cites that CX leaders notched positive returns during contraction compared to CX laggards.
Going by these previous experiences it would always be better to reallocate the funds meant for product development and innovation to improving the customer experience because only customer experience initiatives would be able to drive revenues and build customer loyalty for brands during slump periods.
#6 Work on multiple revenue streams
Having multiple revenue streams is also an ideal way to beat the recession. With revenue flowing in from various directions, you will be able to maintain good momentum.
You can think of offering consultancy services, ad revenue, sponsored content, affiliate marketing, digital and physical products, and more. Investing all your efforts in a single direction won’t be of much help because you won’t be able to shift or pivot. So, by multiplying your revenue streams, you’ll be able to keep your business flexible.
#7 Look for Strategic Acquisitions
This seems risky, but when done right, it could have a significant impact on the organization. In the past, several companies have used active M&A programs to grow. But then, this strategy is widely applicable to larger businesses.
According to McKinsey’s analysis, between 1999 to 2010, 75% of the top 500 companies relied on active M&A for growth. The idea is to take a proactive stance rather than a reactive one. So, look out for businesses that could propel your business growth further.
There you go! Top 7 strategies that could help you maintain your momentum in these corona-hit times. What’s your business up to? How do you plan to cope with corona crises in the coming days?