The next global recession is here…well, maybe not officially, but it is here. The lockdowns imposed by governments around the world, in response to the coronavirus pandemic, are bound to result in a global recession, and United Nations Development Programme (UNDP) estimates that the pandemic will devastate the economies of developing countries.
Small business owners, whether in developing countries or in developed countries, will undoubtedly bear the brunt of the economic downturn.
The world has changed. Overnight, it seems. Traditional business models that rely on physical interaction with customers, such as those in the tourism sector will struggle to survive.
Despite this, most industries, per se, are still viable, and some are actually resilient to the current shutdowns. Businesses offering services in the food industry, healthcare, online education, remote conferencing, online entertainment, mobile payments, etc. should see immediate opportunities for growth at this time.
Likewise, when we consider the effects of the global downturn on countries, the impact will differ depending on the structure of the economies. For example, gold producers can expect to benefit from the uncertainty, as gold is the usual store of value for investors in turbulent times. On the other hand, oil producers will be hard hit, with oil prices at historic lows.
So, if you are small business owner, how can you survive this turbulence? How can you identify and grab the opportunities that inevitably crop up during turbulent times? Here are some tried and tested ideas to weather this storm.
1. Improve your cash flows urgently
Perhaps, the most important thing for a business to stay afloat in turbulent times is to have good cash flows. As said by the American investor, Robert Herjavec, “Cash is the lifeblood of your business. There are very few things in business that will kill you, but running out of cash is one of those things. You can recover from almost any other mistake, but if you run out of cash, you’re dead.” This is especially true during a recession.
Unfortunately, most small and medium sized businesses (SMEs) typically have tight cash flows. The theory is simple: reduce or slow down your cash outflows (payments), while simultaneously increasing or speeding up your cash inflows (revenues, for example). But what does this mean in practice?
Well, you must take a critical look at all normal and planned expenditure, and decide what must be cut and what can be restructured. For example, do you need to buy 2 new laptops or will 1 refurbished laptop do? Do you need to buy the daily newspapers? Can current or new suppliers extend you better credit terms? Can you reduce inventory without hurting the customer experience? Can you review your staff cost? A quick word of caution here: don’t take any decision on staff and marketing costs until you finish reading this article.
After reviewing expenditure, you should then review your cash inflow. You want to ensure that more money is flowing into the business than is flowing out. How can you get your customers to pay you more money more quickly? Can you get a partner to inject new capital into the company?
2. Review your service delivery model
The world has changed, most likely forever. The longer COVID-19 lasts, the worse the impact on businesses that rely on physical interactions will be. Social distancing, lockdowns, closed borders and fear of asymptomatic COVID-19 patients suggest that fewer customers will be available or willing to have physical interactions in order to make purchases.
Customers are afraid. They’re staying home.
Well, all is not lost, thankfully. Take restaurants, for example, where social distancing has resulted in a crash of the traditional eat-in model. Many restaurants still remain in business, however, having pivoted their service delivery models to focus on home deliveries. Or take churches, where congregants are barred from attending services as a result of social distancing guidelines. Many congregations are now fellowshipping via streaming services such as YouTube and Facebook Live, and sending in offerings and tithes through online payments or mobile money.
So how can you sell to customers who are unwilling or unable to visit your premises? How can you make or receive payments while observing social distancing guidelines? It doesn’t matter what business you are in. You must revolutionize your business model, or you will be a dinosaur.
3. Rationalize your products/services offerings
As you review your service delivery model, you must almost simultaneously review your products/services. Most SMEs offer multiple products or services. If you are one of those, now is the time to review your offering to determine which are your most profitable product or service lines. Focus on those.
This understandably runs counter to the accepted logic of diversifying to reduce risk, but if you are focused on trying to gain breadth in trying times, you’re unlikely to have the focus and cash flow to properly promote your most profitable products/services. Worse still, your cash cows could end up subsidizing less profitable products.
Remember that the most critical near-term goal is to ensure that the business has strong cash flows, so drop the fringe products or services – focus on your cash cows.
4. Increase your marketing effort, but in an impactful way
Wait. Before you proceed, read the title of this section again. Did you get it? Yes, the goal here is not about increasing expense. It is about increasing efforts or activities. Will that result in increased marketing and advertising expenditure? Maybe…but then again, marketing and advertising more smartly may result in greater impact without an associated increase in cost.
So how do you do this? It helps if you understand your key customers, their demographics, and why they purchase from you. Then you can target your marketing and advertising effort to where similar demographics are likely to be.
The key is to ramp up on smart but low-budget marketing activities. Radio and TV adverts can be expensive, but consider online marketing campaigns – Instagram, LinkedIn, Facebook, WhatsApp, etc. For most of these, there is the added benefit of receiving diagnostics of how well your advert is doing. In addition to online marketing, you should also look for networking and public speaking opportunities with any business or trade groups you are able to access.
5. Focus on staff morale
In these uncertain and troubling times, you must bear in mind that your employees are very worried. They are worried about their health and that of their families during the COVID-19 pandemic; they’re worried about their job security; they’re worried about feeding their families, paying school fees, paying rent, etc. And for a number of these worries, they are looking to you for cues.
It is therefore very important that you project a positive attitude and lead by example in all things. If staff salaries must be cut, start by taking a pay cut yourself. If staff must work longer hours, start by working longer hours yourself.
Unfortunately, you may ultimately reach the conclusion that you have to reduce your headcount. Before you do that, however, explore all other options such as performance-based pay.
You must also maintain your employees’ trust, especially as you take unpleasant but necessary decisions. There are several ways to do this. In addition to leading by example, you should also communicate honestly with your staff. Let them understand the situation the company faces. Very importantly, solicit ideas and market intelligence from your staff. Front-line staff tend to get a sense of customer and competitor trends before management does, and staff morale tends to get a boost where employees see that their ideas are valued by management.
Finally, look for non-monetary ways to motivate staff and to recognize exemplary performance. An occasional day off will be appreciated by an over-stretched employee; a monthly best worker award, implemented fairly, can also be very motivating; and if you have communicated the challenges faced by the business clearly to your staff, they will recognize that the business is operating in difficult times – make the economic situation the common enemy, and focus your staff on defeating that common enemy.
Remember, it is your job to improve staff morale.
6. Get close to your (best) customers
Another really important thing to do is manage your customer relationships. Hopefully, prior to this period, you have ensured that your customers always have a good experience when they transact with your business. It’s always easier to get close to customers that enjoy doing business with you. You need to train and retrain your employees to understand the importance of great customer service.
Your goal in getting close to your customers is to understand their buying decisions, get ideas on future needs, get some insight into their unmet needs, and get repeat sales. A delighted customer is also more likely to refer your business to potential customers.
It is frequently believed that it costs five times more to attract new customers than to retain existing customers. While there is some doubt as to the accuracy of that belief, there can be little doubt that there is great value in customer retention. Remember that your competitors are looking for opportunities to poach your customers. You should do the same to them, while still retaining your existing customers.
Also remember that the customer is king. If you fail to delight her every single time, your business will not survive this downturn.
7. Consider expanding…carefully
The simple truth is that a lot of businesses will not survive this economic turmoil. That may not be a good thing, but it provides an opportunity for those firms that have their act together to expand their business by winning new customers, grabbing market share, or even expanding into new geographies.
How can you differentiate your business from your competitors? What can you offer to draw in new customers?
Remember, your competitors are facing the same economic turmoil as you, and not all of them will have the right strategies to survive. Forbes has an excellent article on strategies to grow your business during recessions.
COVID-19 is here, and it has hit the business community hard. A lot of businesses are going to collapse. As a small business owner, your goal is to ensure that your business survives these uncertain times. With the right decisions, your business can even thrive.
Source: Kofi N. Andah
|Disclaimer: Opinions expressed here are those of the writers and do not reflect those of Peacefmonline.com. Peacefmonline.com accepts no responsibility legal or otherwise for their accuracy of content. Please report any inappropriate content to us, and we will evaluate it as a matter of priority.|