Global economy already is in doldrum amidst COVID-19 lockdowns. According to World Economic Outlook(April’20) global growth in 2020 to fall to -3%, while IMF (April’20) projects Asia’s growth to stall at 0%. This is the worst growth performance in almost 60 years. It’s going to be tough for all businesses especially for Micro, Small, and Medium Enterprises (MSMEs). Would like to share 5 survival strategies for businesses during this economic downturn.
- Watch your cash flow very diligently.
- Forecast your next three months receivables vs expenses.
- Maintain only required inventories. More inventories tie up your cash flow, at the same time, less inventories may lead to loss of sales.
- Negotiate with suppliers, contractors and landlords for short-term reductions. Take advantage of supplier discounts for prompt payment, and avoid paying before they’re due. If cash crunch is there, talk to creditors before it becomes due and seek extension. Assure them prompt payment in future.
- Separate the “nice to do” from the “have to do,” and eliminate nonessential expenses as much as possible. Ask yourself, is that activity necessary now? If not, don’t do it.
- Get aggressive with collections. Have a step-up process of reminders. Being tough with customers may be unpleasant, but it’s an important safeguard against the effects of a prolonged economic slowdown. Remember in economic slow down, no one will pay without reminders and follow ups.
- Relook at capital spending. Consider delaying both the purchase of big ticket items and expansion plans that take a long time to pay off. At the same time, make sure you have adequate capacity to start filling orders again when the economy stabilizes.
- Be prudently aggressive in the marketplace.
- Stay close to your existing customers. Monitor the credit- worthiness of your customers. Remaining close to existing customers, and checking to see how they are getting on during the economic downturn, not only helps avoid unpleasant surprises but could also lead to new opportunities apart from strengthening the relationship. This may prevent losing customers to competition.
- In strategizing to raise revenues from the current customers, the importance of on-time quality service cannot be overstressed especially as their buying power or willingness to spend is lessened during tough economic times. Researches show that perception of service is fixed primarily in terms of TIME in a customer’s mind. Three examples are: waiting time to obtain service; reaction time to deliver service; and length of time of the service.
- Actively seek out new business opportunities, and perhaps add a salesperson or two or an extra service to give you an edge over competition.
- Historically, many businesses reduce promotional expenditures rather than slash fixed costs during tough times. However, studies have shown that those maintaining or increasing promotional activities that are innovative during slowdowns end up outselling rivals who cut back.
- Relook at your organisation structure and up-skil.
- Quite often due to lack of standardisation, process improvements and employee engagement we would have added additional layers in the organisation. Biggest organisations in the world have only three layers like Business Head, Functional Heads and Frontline staff. It’s a right time to create lean structure through Self-Managed Lean Teams (SMLTs).
- Consider freelancers, consultants and part-time employees for specific projects. This reduces your fixed cost and quite often projects are completed on-time, quite often with better quality.
- Organisations with long-term objective continue to train their staff and implement initiatives that will boost business and profitability.
- Implement Breakthrough Process Improvements.
- Unless tough targets are set for the improvements, breakthrough improvements never happen. For example, 100% productivity improvement, Zero rejection, Zero customer complaints etc.
- This helps in keeping the employees engaged and focused, while it will help the organisation significantly to manage the crisis.
- Strengthen your banking relationships.
- Let them know the company’s financial position. Make use of moratorium or any other benefits that the government or central bank offers.
- Seeking additional credit during a recession is not advisable.
True it is a tough time. Remember it’s tough for all. This too will pass away. Never lose hope. At the end of economic slowdown businesses will peak both domestically and globally. Above strategies are for surviving the slowdown. Wish you all only the best always. Your comments are welcome!