Tips for surviving a recession
The UK economy has been stagnant throughout 2022 with growth at very low levels for much of the year. On several occasions it has been forecast to tip into recession, only to be saved by adjustments. However, irrespective of whether the economy is officially in recession or not, the combination of lack of economic growth, the energy crisis and rising inflation means that most business owners are concerned about how their business will cope over the next 12 months.
However, a recession or low growth economy need not be a disaster for your business, in fact many SME owners see it as an opportunity to improve the efficiency of their business, seize market share and get ahead of their competitors.
Remember, although the economy might not be growing, it won’t grind to a halt. Life goes on and people will still be spending money in your sector, there might just be less of it to go around. This is when you need to up your game and grow your share of the market, particularly since your more savvy competitors will be trying to do the same.
Those businesses that do struggle will probably have made some of the 10 mistakes outlined below. Make sure that you’re not one of them.
- Pushing the panic button
When a recession hits, stay calm, take a deep breath, plan carefully and take control. Panicking will cloud your logic and feed your stress. Instead of reacting with panic, be proactive and develop a plan. - Ignoring your business’s weaknesses
When the economy is flying and new business is easy to come by, it’s easy to ignore your fundamental business weaknesses. If you know what they are, you need to address them as soon as possible. - Sticking to your pre-recession business plan
Hoping everything will be ok is not a strategy! Revisit your business plan and think about how to become more efficient and better at sales and marketing. Consider diversifying your revenue channels, and improve your communicate with your clients, marketplace, and team. - Focusing on low margin products and services
Don’t just push the easy, quick sale low margin goods. Make the most of your resources, know all your margins and drive sales of higher margin products. - Chasing every sales lead or prospect
Have a clear process in place to qualify prospects. Don’t waste time chasing every lead, focus on the ones with value and opportunity.
- Putting off essential hires
Great employees are very often our most valuable assets. If a great employee leaves, don’t be tempted to save on overheads, instead work out the consequences of their absence and look to replace them either through external recruitment or an internal promotion. - Slashing your marketing spend
Use the recession to increase your market share and be able to bounce back faster than those companies that slash their marketing budgets. Track your marketing spend and the ROI that it generates. - Don’t start a habit of discounting your prices
Track your competitors’ prices and be competitive, but don’t let a recession push you into a discounting habit. Know your margins and focus on delivering value. Discounts destroy your profits and the discounted price then becomes the new price. Do you know the impact of decreasing your prices? How many more units will you have to sell just to maintain your gross profit? - Ignoring the company culture
You look after your team, the team look after the customers and your customers look after your business, which looks after you. Make sure that you are communicating with your team regularly, sharing your objectives with them and demonstrating that you value them. Make sure that everyone is aligned with your quarterly goals and that their goals and performance metrics are aligned to those of your business. - Not knowing the length of your runway
Know how long your runway is. i.e. when will you run out of cash? Predict and monitor your cashflow. Know your Break-even point and make the requisite cuts if necessary.
Remember you can always get great advice from the Federation for Small Businesses. Here’s a link FSB ｜The Federation of Small Businesses | FSB, The Federation of Small Businesses
I’d love to hear the strategies that you use to ensure that your business thrives during periods of inflation and recession.
For further advice or to offer feedback, do get in touch at justincharton-jones@actioncoach.co.uk or click on our Contact page Contact Us – Buckingham – ActionCOACH
