Tips to survive the current global financial crisis

During deteriorating economic conditions, businesses often experience reduced revenue as customers strive to limit their discretionary spending. It is critical for business owners to take steps now to minimise the damage to their business.

Here are some practical tips for recession-proofing your business:

1. Control costs

High performing businesses have a willingness to listen to everyone within their organisation. Employees often have powerful ideas and suggestions to cut costs and save money. The best time to implement these measures is during an economic slowdown, but make sure that these reductions do not impact revenue in a negative way.

2. Stay focused on your long term goals

Do not get unduly distracted by the present economic conditions, stay focused.

3. Control inventory

During harder times, the last thing you want to do is get stuck with excess inventory. Inventory on the shop floor is locked up cash.

4. Use effective marketing and communication strategies

The first and easiest reaction for many businesses is to cut marketing and communication expenditure. This can however have a detrimental effect on future revenue streams for the business. During a recession you need to re-assess your marketing strategies to make sure they are cost effective. If you are not seeing a good sales return from every dollar spent on promotions, then you are wasting valuable resources.

5. Maintain prices

During quieter times you may be tempted to slash prices to generate more business. Generally, this is a poor strategy, as it dilutes the value of your product or service and also reduces your profit margin in the process.

6. Deliver outstanding customer service

When money is tight, customers often expect more for their dollar. Taking a customer focused approach and adding value wherever possible will ensure you retain their business. The use of flexible payment arrangements is often regarded positively by customers. You may also like to conduct customer satisfaction surveys in order to make sure your customers' needs are being met.

7. Listen to your customers

During a downturn many of your customers will be feeling the pinch and they may have suggestions for your business. Take them on board, your customer’s suggestions could supply you with new product and service opportunities.

8. Invest in employees

During economic downturns some businesses lay off employees, but what needs to be remembered is that most economic downturns are short-lived. A better approach is considering reduced working hours or bringing forward holidays to ensure valuable and experienced team members are not lost to your competitors. You should also discuss such matters with your employees to help maintain morale and reduce any unnecessary stress.

9. Improve your cash flow

Delay purchasing any non-essential capital items. If liquidity is becoming a problem ask your suppliers for extended payment terms. This is also a time to enthusiastically pursue any outstanding debts. Having cash on hand will help your business meet commitments to staff and suppliers and facilitate the future growth of your business.

10. Streamline and systemise

Create processes and systems that keep your operations flowing smoothly to save time and money in the long run. A debt collection procedure is important to have in times of tight liquidity. A systemised collection procedure can stop slow paying customers from building up large unpaid accounts and will help reduce any pain if they become problem debtors.

If you are worried about the economic downturn and would like to 'recession proof' your business talk to your Chartered Accountant. The quicker you act, the quicker they can help you take action to position your business to not only survive, but prosper during the harder times.

Remember the words of one famous Hawthorn football coach who pleaded with his players when his team was faced with annihilation by the opposition: ‘Do something!’ Taking action in these times is essential to long term success.