I was a bit baffled at first what to write because it looked like we were in a state of beginning recovery in some arenas and still stuck in stagnated growth in other places.
I spent several hours reading on the internet, and came to realize that businesses need to employ tactics as though they were entering a recession, to shore up the business and maintain a presence for your customers, as well as tactics intended to make it easy for your customers to buy from you and keep them as fans of your business as the economy thaws and people start to spend money.
The seven things businesses should be doing now in light of the current economy are:
1. Keep an eye on cash flow … and work closely with your customers and your suppliers to help keep your checking account in the black. If stuck don’t be reluctant to ask suppliers to allow you to extend your payments - smaller amounts over time when short of cash. Be sure, however, to keep up with the new arrangement to avoid souring the relationship. Equally allow others who owe you money to extend payments when you can. Several of my clients showed me that the customers and suppliers that you come-through the recessions will be the ones you can count on also when things get better.
2. Continue to cut back on unnecessary expenses. Continue to go slow on unnecessary expenses to build your cash reserves. The recovery has been called a 2-step one: two steps forward and one back. You’ll want cash for the "one–back" step as well as the "two-forward” steps as the economy improves. A silver lining to a recession is that it helps us get rid of dead wood that seemed to creep up when money was more abundant.
3. Pay as you go. Capital business expenses should be made on corresponding sales. Known as “bootstrapping,” strive to make sure that elective expenses relate to sales generated within that period of time. This is important. As the economy strengthens there may be temptation to spend on things you have wanted, but held off buying. Continue to hold off for now. If sales are not forth coming, then you need to put in more effort with respect to marketing.
4. Strengthen your community. A community’s collective and individual strengths grow from supporting one another. The downturn hit some sectors harder than others. Understand how your customer base was affected, and adjust your strategy accordingly. For example, if your customers are short on inventory, offer a re-stocking promotion. Partnerships built in hard times lead to strong business relationships that last for many years.
5. Spend on marketing and advertising. This is a necessary expense during a recession. Be visible and let your customers know you are still there. Also, people see the product or service they want when they are ready to buy. Even if they were your customers before, when they are ready to buy they won’t unless they see you. Knock on doors now, and be ready for when they are ready to spend.
6. Offer dramatic, attention getting and significant discounts to reward your existing customers and attract new ones that will stay with you. By managing and engineering your cost carefully, a discount will mean thinner profit margins, but will result in increased cash flow and market share. A restaurant, for example, that offered a significantly discounted Sunday dinner saw its weekend revenue more than double.
7. Stick to your knitting. Build on your strengths; don't diversify into areas that stretch your ability or are simply too risky. For most businesses, this is the time to reorganize and improve on what you do best. Seek growth a bit slower than you would have 4 years ago. It is not the time to absorb the financial repercussions of a bad decision.
The principles are the same for a service as well as a retail business: A service business needs to continue to manage cash flow carefully; spend on marketing, so people know you are still out there; offer incentives for clients to buy from you - if selling B2B, help your clients re-ignite their own recovery by offering discounts on materials they need; and importantly build community.
