Survival guide for your business in the looming 2023 recession
The Covid-19 Pandemic hit the economy harder than anticipated. Analysts had forecast that the world economy would have recovered by now but that has not been the case. While a few sectors of the economy have been on an upward trajectory post-pandemic, other critical areas have been spiraling downhill. The World Bank has cut its 2023 forecast and warned of a global recession. David Malpass, the World Bank President, mentioned that GDP (Gross Domestic Product) in emerging markets and developing economies at the end of next year will be about 6% below the level expected on the eve of the Covid-19 pandemic. A situation that is likely to throw the world economy into a recession.
What is a Recession?
A recession refers to a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. This sustained period of weak or negative growth in real GDP output is usually accompanied by a significant rise in the unemployment rate and prolonged downturn in economic activity.
Are we in a recession? Technically, we are easing into the recession! This year, only businesses with a recession proof strategy will see the light at the end of the tunnel.
Recession-Proof Guide for Your Business
- Cut Costs
This is usually the first cause of action any business considers during tough times. Have a second look at your budget and see where you can tighten the belt. You can cut costs while still maintaining operational efficiencies through ways such as:
- Doing away with redundant positions/non-performing employees in the company.
- Going on a hiring freeze.
- Find cheaper vendors for utilities.
- Re-introducing work from home so as to save on office rent costs.
- Delay payables and collect receivables sooner
- Automate and streamline most of your departments. For instance, you can automate your HR Department using our FaidiHR Platform and cut down on the man power required.
However necessary budget cuts, do not always offer a sustainable solution to the predicament at hand. You need to couple this with other strategies.
- Guard Cash flow
Cash flow refers to the amount of cash or cash-equivalent which the company receives or gives out by the way of payment(s) to creditors. Cash flow analysis is often used to evaluate the liquidity position of the company. You have probably heard the statement “Cash is King.” While this phrase is used mostly in investment circles, it is important for businesses to adopt this as well because of how precious cash can be during times of financial stress. Having liquid funds available can be vital because of the flexibility it provides during a crisis.
You can do things like fundraising or applying for government grants to ensure your business has dependable cash flow.
- Maintain your existing Clientele
Remember your customers are the backbone of your business. In a recession, most of your customers’ purchasing power goes down. They are also likely to do budget cuts and you do not want your service to be among those axed from their priority list. Understand your current clientele needs, address any bugging issues whatsoever and offer them great value for their money. Listen to them, offer prompt and efficient customer service. Cultivating loyalty this way might lead to them referring their networks to you.
- Focus on your best selling products
Direct your marketing efforts towards your best performing products. This is because you are likely to generate more revenue from this. Dividing your resources across a variety of products with little to negligible market demand will lead to dismal returns. Hone in and bring it back to those core competencies of your business that are tried, tested and guaranteed to sell.
- Support the employees you’re retaining
Declaring some positions redundant and letting your poorest-performing employees go may be a necessary step. If so, build morale and motivation in the employees you’re retaining by clearly communicating with your staff what is happening within the business. Involve them in the decision-making process, so they can feel included and part of the solution. Let them know where the company stands financially and what each of them needs to do to ensure the company weathers through the storm.
It’s better to be safe than sorry. Smart businesses have already started employing recession-proofing tactics. What other strategies do you think entrepreneurs can use to ensure their businesses stay afloat?