Stories by Uche Usim
As Nigeria faces recession, many businesses, especially small importers, are in dire straits. In tough economic times, with consumer demand in the pits and banks refusing to extend credit, businesses struggle to survive. Then, when conditions start to improve, they get shouldered aside by larger companies, who snap up all the available capital and make it hard to secure the cash needed to get production rolling again. It becomes a lose-lose situation. However, all hopes are not lost. Here are some survival tips.
Focus on building your business
In time of recession, the words of Andrew Carnegie become applicable: “The wise man puts all his eggs in one basket and watches the basket.”
He said that was the first step he took when the 2008 recession set in. “Immediately the signs of an impending recession filtered in, I sold majority of the stocks I owned and used some of the cash to tighten up my personal financial statements.
“I also made sure my companies sold majority of the stakes they own in quoted companies and the cash pulled out was used to strengthen our balance sheet. Now, what was the motive behind this strategic move? We took this move because we knew a severe drop in stock prices and value is usually what followed a recession, so instead of sitting and watching the value of our investments go zero, we exited.
“Secondly, we exited all other investments because we wanted to make sure our businesses were well positioned to adapt to the economic changes that follow every recession and for that to be achieved, we needed to be focused on our business.
The third reason we made that move is this; if we could keep our business strong through the recession, then our business will grow stronger with the recovery of the economy and we will be able to buy back much more investments than we sold.
“Like Warren Buffet said, should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks. So business survival strategy number one is to exit all other investments and focus on your business. If you do this diligently and strategically, your business will survive any recession and provide you enough cash flow to buy back twice the investments you sold.
Keep and maintain an eagle eye on the business cash flow
The next small business survival strategy my team implemented during the recession was to gain a stronger control of our cash flow. To survive a recession, it is advisable you keep an eagle eye on your cash flow.
My team and I made sure that our cash flow stays positive throughout the recession. We worked closely with our customers to make sure they meet their credit obligation. We strived to make sure cash continuously flowed into our businesses. Cash flow is the life blood of business so I am sure you don’t want to joke with it.
Cut back on unnecessary expenses
The third recession survival strategy is to cut back on all unnecessary business expenses. To survive a recession, you must be careful with respect to business expenditures. If your business spends money on frivolous things such as parties, bonuses, vacations, incentives and any other things that have no direct impact on your company’s growth, then it’s time to cut back on them.
Increase marketing/advertising spend
One of the silly mistakes made by most managers during a recession or decline in sales is to cut back on the marketing budget. Instead of cutting back on the marketing budget, spend more on marketing. Instead of going into hiding, do some marketing and let your customers know you will stand by them even in the face of a recession.
Most times, I also apply this business survival strategy to my personal life. Whenever I am strapped for cash, instead of reducing my expenses and hoarding some cash for emergency purposes, I expand my means. All I do is to look for quality products at affordable prices and hit the roads to do some marketing. So a good thumb of rule to surviving a recession is to spend more on marketing and advertising when strapped for cash, be it in your personal life or business.
Run your business on pay as you go
This strategy is really important if you have your business survival at heart. During a recession, you should make sure all miscellaneous business expenses are made based on corresponding sales.
Some experts prefer to call this technique “bootstrapping.” For instance, suppose you need some new office equipment or you need to pay certain bills, you should strive to make sure that such expenses are made from the sales generated within that period of time.
Never pull out money from your reserve to settle such bills or expenses. If the sales are not forthcoming, then you need to put in more effort with respect to marketing.
Business survival as key strategic plan
Most small businesses operate without strategic plans. If your business operates without a strategic plan, then I am sorry your business cannot survive a recession. There is always a big difference between businesses that operate on strategic plans and those that don’t. So the earlier you begin to run your business on strategic plans, the better for you.
Take care of your existing customers
Do you know that your customers are your company’s greatest assets? Without them, your business will not be in existence. From analysis carried out by marketing experts, it has been revealed that it costs more effort and resources to find new customers than to retain existing ones.
What if your customers abandon your business during a recession, will your business stay afloat? I leave you to answer the question. If you must know, existing customers are the most important key to surviving a recession. Treat them with care and they will spread the word about the wonderful experience you gave them.
Inspire your employees with fallouts of recession
This is not only applicable during a recession but also when you are experiencing difficulties in business. When the effect of the global economic recession became too severe, companies started laying off thousands of workers. I felt compelled to do the same but I didn’t. I called a meeting of all my employees. I explained to them the present situation on ground and the need to take drastic measures. Most of my employees were expecting me to announce their laying off since they had already seen it take place in other companies.
Instead of acting the way they expected, I told them my company was committed to their social security and welfare. I told them that everyone, including myself, was going to take a salary cut but I also added a catch to it and the catch was this: “if they worked hard with me to help the business survive the trying period, all outstanding balance resulting from the salary cut will be compiled and paid to them gradually when the business recovers.”
Source: Mytopbusinessideas
