What’s next? – Locusts?
You’ve made it this far! You’ve weathered the storm of a global pandemic and the following onslaught of supply chain issues, a labour shortage, record inflation and a cyclone and now we’re facing more uncertainty as the economy starts to slow.
With interest rates continuing to increase in an attempt to curb spending, and everyone talking about a recession, now is a good time to take stock of the great things in your business that you can leverage and where adjustments need to be made to get through the next storm.
Predictions from economists are that this recession will be shorter than some, with the bite expected later this year and the recovery starting in late 2024, but it may be quite deep. This means keeping momentum and driving forward will be challenging for many businesses and households.
Business and the economy are cyclical. The impact of Covid-19 has led to a longer growth cycle than would typically be expected for some industries, think construction and housing, and shorter for others such as hospitality and tourism that took an early hit. Hopes were that hospitality and tourism would get a chance to bounce back once our borders opened but the impact of global inflation and recession have also weakened its recovery too.
Those businesses who have grown through the pandemic may now face some challenges as the economy slows and contracts, but the good news is that if you can survive the tough years, you’ll be able to thrive when the economy and business picks up again.
Let’s take a look at what you can do to ride out the perfect storm and deal with the impact on your business.
Knowing your business inside out. What’s been working well for you, what hasn’t, and are there steps you can take now that will help you through these turbulent times? Remember all the things you do well and use them to your advantage.
Customers & Relationships
Are you great at building relationships and going above and beyond for your clients? Keep doing the things you love doing and do well. Make sure your team is behind you and remind them of the great work they do each day. Keeping positive keeps you going even in the toughest times.
Consider how your customers may be affected by any downturn. You may already be seeing changes to their buying patterns or hear anecdotally that demand is reducing. Inflation and recession impact every person or business differently. Take a look at your customers to consider how they might be affected and if feasible talk to them about how you might be able to help each other.
What are your margins like, and how might a drop in revenue impact your business. Take a look at different scenarios – in accounting terms we call it ‘scenario planning’ – what would things look like if your sales dropped by 10%, 20% or more?
What are the true costs of your overheads such as rent and vehicles, and paying your staff? Make sure you have a good understanding of each of these to see where any efficiencies could be made. Are there ways to reduce costs or save money through cheaper suppliers or not upgrading your plant or equipment right now?
Are there any areas of your business that are essentially recession-proof – can you offer more services or after-care to existing clients? Are there products that you could increase prices on without losing too many customers?
Can you improve your margins through greater efficiency or less wastage? The changes might be small but they can make a big impact when it’s all put together. Are there product lines you can remove altogether as they just don’t make you enough money, can you sell more of your more profitable lines?
Think about steps you can take to improve your cash flow. Can you offer discounts for upfront or early payments or negotiate longer payment terms with your suppliers?
Keep an eye on your staff, even in the current climate our labour market is expected to remain tight, you need to keep hold of your best employees and get the most from them. See our blog “Finding and keeping top talent in a tight labour market”.
At the same time if your only option becomes making staff cuts, there are strict rules and regulations on what you can and can’t do when it comes to restructuring so seek advice from an HR Professional if you need to.
See the positive
Running a successful business requires resilience even in the best of times and without the challenges we have all faced over the past 3+ years. The good news is that if you’ve survived through this and you take smart steps now you can survive the next couple of years too, and that we can be thankful for.
If you need any support making financial decisions or just need someone to reach out to for advice, please get in touch. Making a plan early will give you confidence in dealing with whatever is thrown at you next and help you and your business get through.