In the business cycle, booms and busts keep on happening. No wonder you hear doom and gloom reverberating in stock exchanges and business dailies worldwide.
Economic downturns and recessions often occur in a particular country or most countries in a given period due to a drastic fall in the growth rate and often coincide with inflationary pressure. Due to this, your business strategy to survive an economic downturn becomes important for you and your company. You need to formulate a strategy as an economic downturn necessarily causes a decline in income, a decrease in the volume of production of industrial goods, a fall in both wholesale and retail prices, and erosion of purchasing power following joblessness. You will likely see several such downturns in your business establishment’s lifecycle. You need to formulate need-based strategies to thrive during such a crisis. Several strategies can be formulated to shield your company against economic downturns.
Here are five such important strategies that are time-tested and can help you tide over the crisis phase of a downturn in a national economy:
Minimize Cash Outflow, Maximize Cash Inflow: What matters most is saving money during a downturn. You should make studied moves to restrict corporate spending and enhance savings. At the same time, special emphasis must be given to increasing sales to ensure cash inflow. The best way to meet this goal is to trim the labor size and outsource production jobs to a third party. You should control all unnecessary corporate overhead expenses to save money.
Trim Your Current Debt Size: If the economy is experiencing a downturn, you cannot afford to spend much on debt servicing. This can be possible by avoiding all non-essential new borrowing and reducing the existing debt size. Since a corporate entity should not expand or set up a new production facility during the downturn, follow this rule. Setting up a new facility or business expansion during an economic downturn directly means fresh investment either through internal accrual of funds or borrowing funds. This must be averted.
Upscale Public Relations Activities: You require this strategy to maintain your rapport with suppliers, creditors, existing customers, and prospective customers. You should launch a vigorous PR move. You can do this by circulating your digital business card. You should order Mobilo’s business cards to have impressive e-cards carrying all the information on your business and nicely profiling your products and services.
Walk Extra Miles for Marketing: The downturn phase necessitates vigorous moves for marketing to widen the clientele base to generate more cash. You should try to optimize all new business queries and try to convert them into actual sales. For this, you should resort to one-on-one with the inquirers of your services and products to convert (inquiries) into actual sales. Even if you have to charge less for your products and services, do it to stay competitive in the market. Staying afloat in the market can greatly help you weather the storm of a downturn in the national economy.
Source Raw Materials at a Cheaper Rate: This can be a very effective strategy for you. Cutting down the cost of manufactured goods directly depends on the raw materials required. If you can source the raw materials at a comparatively lower price, you can reduce production costs.
This will help you to keep the pricing level of finished goods and consumer products on the lower side. During a downturn, joblessness and inflation wash away the purchasing power. Naturally, people would jump at products and consumer goods priced on the lower side. This can ensure your sales follow an upward curve.
Adopting these steps can help you survive in business during an economic downturn. Besides these steps, you should also be innovative in creating several new sales streams to generate additional cash. You can invent and market some low-cost consumer goods or concentrate mainly on fast-selling consumer goods. You must temporarily stop producing high-cost consumer goods and lay greater stress on low-cost products.
You can successfully avert the adverse impacts of an economic downturn if you streamline your business operation, cut costs, and optimize sales. Among other methods, you can outsource some jobs to a third party to save money you have paid many employees. By outsourcing to a single entity, your salary bill can decrease drastically. The money you save can go a long way in combating an economic downturn. Mind you, an economic downturn is a temporary phase of the national or international economy. It lasts for a particular period and does not continue lifelong. For this reason, you hardly need to be embarrassed by a downturn.