Surviving an Economic Downturn
The following article, as seen in the May 2009 issue of Northeast Business, discusses the top tips given by small business customers as to how to best ride out a recession.
SURVIVING AN ECONOMIC DOWNTURN
O2 REVEALS TOP TIPS FROM SMALL BUSINESS CUSTOMERS THAT MADE IT THROUGH THE EARLY ‘90S RECESSION
1) Get the Basics Right
Having a 2009 business plan in place early and an accurate set of financial forecasts will allow small businesses to prepare in advance for the effects the downturn is having on business. Getting accurate financial reporting and stringent account management processes set up will be crucial to secure business loans.
2) Cut Costs
Scrutinising expenditure to identify non-essential costs was recommended as amongst the first measures small businesses should take in order to save money. Streamlining costs and looking for easy ways to cut-back such as on expensive office furniture and staff car schemes were the most common non-essential business costs cited by respondents. Giving up office space altogether was also something to consider to reduce monthly overheads especially with developments in affordable mobile technology enabling more flexible working.
3) Careful Cash Flow Management
Ensuring that the business has enough cash to take it forward was identified as a crucial factor for survival. Whilst a business can be fundamentally good, it doesn’t mean it won’t run out of cash especially if all incoming and outgoing costs have not been accurately recorded. The tightening of bank lending criteria makes cash flow management especially important.
4) Spend on Marketing
Despite recommending cost-cutting across most areas of the business, a need to remain competitive and visible is important. Marketing was one area referenced by O2’s small businesses as crucial to generating business during a period of downturn. Take advantage of the recession by negotiating better deals in areas such as advertising where cost of space has dropped or allocate spend to setting up or improving a website which is another cost-effective way of marketing your company. In an increasingly competitive arena, customers need to hear about your product so maintaining marketing spend is a must.
A determination to do whatever it takes to succeed and stay in business was identified as a common trait amongst respondents. Those questioned identified that without question there was not only a need to work harder, but also smarter. As one respondent said ‘If small business was easy then everyone would be doing it.’
6) Hold onto Existing Customers
As spending power diminishes existing customers were highlighted as the most common source of revenue growth during the last recession. Rather than putting all efforts behind winning new business, which is more cost and time heavy, identifying new business opportunities amongst existing customers led to successful organic growth and new revenue.
7) Diversify Your Product and Customer Base
Looking at ways to adapt or broaden the appeal of a product may be a way of maintaining and growing your business. This may be through opportunities arising as a direct result of the economic climate or it could be re-looking at your business and adapting it for a different market. Small businesses should be alert and on the lookout for new ways to market their product in order to grow their customer base.
8) Delivering Excellent Customer Service
With existing customers recognised as the lifeblood for small businesses during a period of downturn, delivering excellent customer service was identified as essential by nine out of ten of the small businesses questioned. Being flexible and reliable to meet their requirements were cited as common methods to help keep current customers loyal as they tighten belts.
9) Credit Check Customers
As the recession bites and customers go under, ensuring they don’t owe large sums of money is key to the financial health and longevity of a business. Keeping a close eye on overdue payments and asking for payment within shorter payment terms or even in advance were frequent measures taken to enable tight control over incoming payments.
10) Invest in the Right Technology
Technology has become essential to business since the last recession but looking at overall spend on technology and how this could be made more effective will not only reduce costs but enable staff to work more efficiently. In November 2008, O2 saw nine out of ten London based small business customers switch to converged devices such as iPhones and Blackberrys compared to a year previously when only two in ten small businesses across the UK were using data devices. The main reason cited by businesses for the change was in order to increase efficiency and flexibility by giving staff the ability to work on the move.
"Surviving an Economic Downturn." Northeast Business May 2009: 36.
|economy, management, recession, small business, technology|
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