The recession of 2008 left many businesses around the world scathed. The current economic signals are pointing to a potential recession, accelerated by the post-pandemic uncertainty, damaged consumer sentiment and rampant inflation. In the scenario of an anticipated economic downturn, agile businesses are taking a step back and re-assessing their strategies and activities. This is necessary in bracing for an upcoming recession and in this article, we shall be discussing a few tips.
Cash is king
Having read the signals that a recession is looming, it is important to analyse how a business can build cash reserves. Liquidity remains an indispensable tool, especially during a recession. The model to achieve this is quite straightforward, meaning that a business will need to save more and spend less. Depending on how the cash reserves of a business will be impacted, debt may also be addressed.
Successful businesses need to weather storms by thinking towards the long-term and make intelligent decisions. Taking decisions and adopting strategies which accommodate only the present may lead to future regrets. It is important that a business does not rush into certain steps, especially when delving into new products and partnerships which may bring about unexpected expenses. It is also necessary to keep tabs on customer needs and how these evolve during a recession.
Manage the situation with employees
A recession forces organisations to re-evaluate the different roles. Businesses may be less inclined to hire full-time staff members and can opt for the services of part-timers and freelancers, keeping payroll costs under control. Using the services of resources that are external to the organisation can allow a business to re-focus its existing employees towards tasks and projects that are of higher priority.
During a recession, it may be tempting for a business to focus most of its efforts on customer acquisition, through price reduction strategies to thwart the competition. Acquiring new customers, even at beneficial pricing may prove too difficult due to the cautious approach adopted. During a recession, it is therefore important to focus on the existing customer base, ensuring satisfaction with the products or services provided to them. Existing customers are likely to have established a certain degree of trust and would therefore be more inclined to make use of a business’ services when a relationship is already in place.
Whilst recessions can be deemed as undesirable economic phases, every challenge may bring about opportunities. Throughout recessions, businesses can innovate and adapt in a manner where they become more relevant to consumers, building resilience for the future along the way.