Preparing your business for recession
Here we are again. More than two years after the CV19 pandemic first kicked off and the devastation to many businesses has been irrecoverable. Many burdened with debt, falling customer numbers and soaring costs (UK inflation rate today at 10.1%), are now facing the prospect of another recession. Some are predicting 4% interest rates in the coming months and if SMEs and small businesses are to survive, they need to take steps now.
A recession is upon us but perhaps unlike the last, this one is looking to be more severe; longer lasting; and without the bail-outs and support that furlough and grants that were afforded to some last time. It is going to sting and those who are not prepared or ignoring the danger are going to suffer the worst.
So what can you do?
1) Get the debt down (or fix it at a low interest rate where possible). Where rates are expected to rise, refinancing on longer-term, fixed rate may be prudent. Better still, pay down that debt if you can but balance carrying a serviceable amount if necessary.
2) Call in outstanding debter's monies. Far too many SMEs are giving away interest-free credit agreements by default and are not religiously chasing invoice payments or getting money owed to them. You have to dedicate time to do this but it is amazing how much can be done on the phone over an afternoon. You have to be bullish without being rude. You've earnt that money, it's only right you are paid it when asked and as agreed. Draw or review your outstanding list and whoever is responsible in getting it paid, get them focussed on that task.
3) Cut your costs. When was the last time you looked at your P&L and scrutinised the expenditure going out the door? The subs, services and special items you are committed to on a monthly or quarterly basis - are they value for money and could you do without them (even if only for a short while)? Be ruthless without undermining any service or product delivery.
4) Rationalise your workforce. Lay-offs don't mean permanent sackings (contrary to the overuse of the term). They are a temporary provision that some contracts have that allow businesses to reduce workforce numbers at times of need. In today's job market it's tricky to find and retain good staff so be careful about invoking any such clauses. If you really have to, do it with fair consultation, look at all the options and be logical about your decisions. Failing to do this properly may result in damage to your business and the individuals concerned. Think about the medium to long term effects of
action, too - positive and negative.
5) Get organised. Change is coming. It may or may not effect you or your people in ways you've expected or seen before. Have a think and briefly plan out responses to scenarios. Get to it now, do not wait. Trying to come up with a plan when all around you is crumbling is not the time to do it. You know your business and your people, get ahead of the changes and drive them through now with the support of your team, keeping them informed along the way.
The uncertainty brings opportunity, too. Perhaps there are complimentary services your customers or clients need at this time? If so, how can you provide them cost-effectively? How will competitors cope with squeezed margins and higher costs? What about collaborating or offering joint ventures to spread the risk and costs? There is still a lot that can be done so whilst the pressure may be greater at times like this, many will come out stronger and more resilient if they take the right steps.