The world is experiencing a great deal of uncertainty as a result of the coronavirus pandemic. Closures and quarantines are creating havoc for communities and businesses everywhere. Business owners are feeling the pressure of trying to protect themselves from this man-made recession. It’s rough out there. However, as the past has taught us, a tough economy doesn’t have to mean the end of your business. Here we will discuss a number of strategies to use to protect your company from going under during a downturn.
Remember, We’ve Been Through This Before
While the current pandemic is very stressful, it’s not the only economic or health crisis we’ve gone through as a country. In the past twenty years, we’ve survived recessions that resulted from the dot.com bust, the 9/11 attacks, the sub-prime housing crisis, and the resulting collapse of Wall Street. We’ve also been through numerous pandemics including the H1N1 bird flu epidemic and Ebola. This is not our first rodeo.
It’s also extremely unlikely this will be our last recession as a result of events beyond our control. The good news is that all of these past events have given us examples of businesses that not only survived, but went on to be far more successful as a result of the action they took during a crisis. Many of those are household names today.
Steps to Take in a Crisis
Know Your Finances
The first thing that any business owner should do during a financial crisis is to take stock of his company’s fiscal health. What are the numbers you should know?
- Your profit and loss
- Your break-even point
- How you’re tracking these against your budget
- How quickly your company can increase revenue and/or decrease costs in a crisis
If you do not have this data and knowledge, you can’t possibly make the kinds of decisions that will turn a negative financial spiral into a positive one.
Remember Your Mission
A recession is a good time to reacquaint yourself with your company’s mission. It’s vital for everyone in the company to understand why the company exists and what they work to accomplish. All of the company’s actions should flow from that mission. If your mission statement isn’t accurate or inspirational, now is the time for you and your management to adjust it so that it does inform what you’re doing. A mission statement doesn’t have to be complicated, but it does need to focus your team toward meeting your set goals.
Focus on Core Competencies
Another part of your examination process should be determining what your company’s strengths are, especially in comparison to your competitors. It can be challenging to be calm and controlled during a crisis. Many owners and managers will be tempted to take a “Throw it at the wall and see what sticks” approach. This is not productive. Instead, determine what products or services your company provides that are in demand and put your focus on delivering them better. This is much more likely to keep cash flowing than creating new products or offering new services that no one wants just because you’re panicking.
Fix Your Weaknesses
As a complementary strategy, it’s important to figure out what isn’t working in your business, and fix those problems. Ineffective management is a very common problem in business. Businesses often lay off workers because of recessions. This can be a net positive if you take the time to figure out which employees aren’t adding value and why. A bad manager in a key position may be the reason a department is not functioning properly. Now is the time to both shed ineffective workers and take on employees who will add something to your team. Another upside of a tough economy is that labor is less expensive to acquire.
Any part of your company can have weaknesses, though. Examine your processes and procedures. Take steps to broaden your customer base or improve your delivery methods. Work to increase your cash flow. Once you’ve determined what the problems are, you can install value drivers that will strengthen your business now and over time.
Ramp up Your Marketing
Marketing is one of the first things that most businesses cut during tough economic times. It makes sense because the complete value of marketing can be hard to quantify. However, there are a number of reasons why increasing marketing during a recession is a better idea. Digital marketing is priced in part by competition. If your competitors cut their marketing and you do not, you will have a broader reach for fewer advertising dollars now. Your audience is less distracted. If you focus on adding content to your website and increasing your social media presence, you can attract customers to your site where you can leverage that traffic to make more sales.
Reach out for Help
Finally, during times of crisis, it’s crucial to ask for help when you need it. For business owners that might mean seeking out other entrepreneurs to bounce ideas off, whether in a peer group or by engaging a mentor. These people may have experience with downturns you do not or ideas you’ve never thought of. A family business architect can also help you identify the weak spots in your business so you can get to work. You don’t have to walk this path alone. Find the support you need – it’s out there.
It goes without saying that all of the above strategies are also very useful for transition planning. The stronger and more resilient you can build your business, the more attractive it will be to buyers when you put it up for sale. The businesses that survive hard times are the ones whose owners take the time to examine what’s functioning well and what’s not and work from there. If you use the tough economy we are currently living through to continue building value, sustainability, and resiliency into your business, there’s a very good chance it will not only survive, but thrive under your leadership and, eventually, your successor’s.