While many will not agree, recessions are a natural part of the life cycle of an economy. Just like an economy grows and booms, it also contracts and adjusts for shrinking economic conditions.
And just like a business owner must plan for seasonal business flows and lousy weather, they should also be prepared to run their business in a slow economy. An economy is made up of many small components as well as various sizes of companies. These are combined to make a number called the gross domestic product (GDP) of a country. When economies are growing, the GDP grows, and businesses earn money and generate employment. Employment creates demand for products, and businesses grow further.
When growth slows and economic conditions also start slowing, employment declines. GDP growth begins to decline and can shrink in extreme cases. Businesses need to prepare for such conditions and make sure they can survive such a scenario.
1. Finetune Your Business Model
Recessions do not happen without warning. You have to be aware of changes in your customer habits and see where your service or product is declining. Many businesses typically face issues with product quality and employee morale as recessions progress. Manage your business operation flows to see where recession is impacting your business's cycle.
Are supplies being affected? Or delivery channels?
Is the web site inefficient?
Is the order booking process too complicated for clients?
Are employees not helpful enough for inexperienced buyers? Or too helpful?
Ensure that you earn premium rates from your suppliers and cut costs where you can without compromising quality.
Can the production run be improved to cut overhead?
Answering these questions would help your business run on a tighter rein and maintain or even increase profitability on a tighter budget.
2. Recession Proof Your Customers
As a business owner, you need to make sure that you don't lose your steady customers due to their shrinking incomes.
Develop loyalty programs, credit schemes, and incentives to buy more from your business.
Communicate with customers to see what they need from you to keep them coming back. Use short social and email surveys to gather this information.
If you are losing customers to other companies, see what is going wrong with your experience. Determine what your competitors are doing better than you or if they’re merely cutting quality to sell at a lower price.
Make services and add-ons free if it is a decision point for customers.
Know your customers and what they want from your product.
Share with them the problems you are facing.
Get feedback and make sure they know that you take their opinions seriously.
3. Keep Your Employees Motivated
Recessions can be hard on people, particularly if they are feeling insecure about their future and incomes. Motivate your employees, help them share their issues, encourage managers to counsel and support staff. Allow for flexible hours and downtime to learn new skills so that staff can support each other in different tasks. However, make sure that productivity is not hampered.
4. Maximize Efficiencies
Maximizing efficiencies apply to both human and other resources. Enable collaborative task and projects among co-workers. Identify future leaders and managers and ensure that you have a succession track or career plan set up for them over the long term. Ensure they understand that path. Make key staff accessible for all staff and keep them in the loop on business developments. Engaging employees could lead to solutions for small problems that can improve business flow and reduce costs.
5. Make Change Normal
Making change okay in your business model will help resolve workplace stress and allow for a more flexible structure. Being open to change will also allow employees to open up about ideas regarding workflows and operational issues that can create avenues for new business options.
Running a business in a recession is pretty much the same as running it in any other phase of an economy. You need to have your eyes and ears open and common sense in play. Preparing for a slowdown will allow you to fare better than businesses that were not so alert to the changing economic conditions.