Navigating Your Business Through A Recession
There is no doubt that on the back of the worst year the UK economy has faced in decades, we are facing a recession that will prove a challenge for many businesses up and down the country. Alongside the further challenges that business will face in leaving the EU, many business owners must be dreading the thought of trading in 2021 and beyond.
It is true that the pains caused by recession can be excruciating. A recession can mean being forced to lay off staff, some who have been the heart beat of the business for years, losing customers who have not been able to trade through as well as suppliers who you have has a great relationship with and who you have relied upon to make your sales process much easier. So, what should you do to recession proof your business as much as possible?
Financial forecasting
Ensure that you have forecasts for he next 12 months and beyond if possible. Take the time to make them as realistic as you can and create different scenarios to show you what would happen if you were to, for example, lose the business of your biggest customer and what the potential effect on your business would be. Once you have that information available, put in place a plan how you would deal with it. How would you go about replacing the income? If you can’t, would you have to make redundancies? If so, how many and what would the cost be? Having plans in place for various scenarios will give you a head start to be ready for whatever challenges come your way.
Regular financial reporting
Ensure that you real time information and monthly reporting that provides you with the relevant information that enable you to monitor the business and review the key performance indicators to ensure that there are not major variances from what you are expecting. Compare the actual figures to the forecasts that you have prepared to see where there are differences and explore why they have occurred. You will then be in a position to take action as soon as it becomes clear that a particular issue has arisen.
Improve your cashflow
If you can make your cashflow healthy before any challenges arise, your business may be able to ride out the storm that may come your way. That will mean a full review of all your expenses, are you paying out for subscriptions or IT that you don’t need, are there better deals for light and heat or stationery? Make your expenditure as lean as you can. You should also review your debtor procedures; do you have any bad payers who you are constantly chasing? Carry out a review of your customer base for bad payers, are they the right fit for your business and do you really need them? Ensure that you have policies in place that are advised to all customers and ensure that you enforce them. If customers still don’t pay them, they are not good customers, and you don’t need them.
Promote your business strengths
One spend that you may not want to cut is your marketing budget. Make a concerted effort to promote what you are great at and why customers should choose you. There will be plenty of your competitors who fall by the wayside during are recession and their customers will be looking for a new business to replace them. If you are already in their thought process before their existing supplier is no longer there, they will be likely to contact you in the first instance. You never know, they may choose you in any case over their existing supplier in which case it is a win-win situation.
Build a formidable team ethic and leading from the front
Having the right team around you who buy into your core values is key to building any successful business. That is even more important when you have to batten down the hatches, you want everybody pulling in the same direction and knowing what the end goal is. Ensure that you lead from the front and ensure that the whole team know what your plans are and how you plan to get there. Involve the team in the decision making process so that they feel part of it, that will help to get their buy in to whatever happens in the future.
Whilst clearly there are likely to be challenges ahead you will in a position to beat them if you make sure that you plan ahead. With any threat, there will also be opportunities that come your way and you need to also be ready to take them.
If you would like some advice to prepare you for the year ahead, don't hesitate to get in touch with us today.