How Your Business Can Survive a Recession
It’s important to adapt your small business during normal times to succeed, but a recession may require new skills and creativity. A recession due to a pandemic may be different from a pure economic downturn. However, you’ll need to do whatever it takes to survive then thrive the current climate demands.
- COVID-19 Brings New Challenges for Businesses
- What Can We Learn from Past Recessions?
- Seizing New Opportunities During a Downturn
- Staying Adaptable to Market Demands
- Maintaining a Flexible Business Plan to Adapt Fast
- Stay Financially Savvy
- Be Realistic and Objective in Your Approach
- What is Future Economic Outlook Like?
COVID-19 Brings New Challenges for Businesses
WITH news that the UK is now officially in recession due to the economic damage inflicted by the COVID-19 pandemic, there promises to be some extremely tough times ahead for small business.
Lockdowns, consumer uncertainty and a reluctance by companies to spend have dealt a serious blow to SMEs in virtually every sector of the British economy.
But downturns are nothing new and, if handled correctly, small businesses can not only survive during a downturn – they can thrive too.
“Small business owners are highly adaptable” said Mike Cherry, Chairman of the Federation of Small Businesses, adding that he’s already seeing this type of innovative attitude coming to the fore.
“We’re seeing swathes of firms either adapting their models to make them more effective in the current context or embarking on a whole new line of work – manufacturing PPE, for example.”
What Can We Learn from Past Recessions?
The 2008 credit crisis was a financial shock unlike anything that had come before, with household names in the financial sector going to the wall and governments around the globe having to bail out banks that were on the verge of collapse. There were very real concerns at the time that it could upend the West’s entire financial system.
Yet, even in the midst of such chaos and confusion business continued to thrive.
Research by the London School of Economics found that that during the crisis and subsequent recession, between 20% and 30% of SMEs in the UK increased their sales, and between 15-20% increased their workforce.
While this was less than would otherwise have been expected during ‘ordinary’ times, it still shows that it’s not all necessarily doom and gloom when troubled times hit.
Seizing New Opportunities During a Downturn
The chances to innovate and expand may not be as prevalent during a downturn as they are during boom times, but they still exist when opportunities present themselves, decisiveness is key.
One person who knows all about that is entrepreneur Arun Kapil. Having founded his spice company Green Saffron just as the credit crunch was taking hold, not only has he not looked back – with appearances on TV shows such as Masterchef and Channel 4’s Sunday Brunch under his belt – things have gone from strength-to-strength.
“I started Green Saffron in the midst of a financial crisis with not very much of a plan. To a certain extent, I think that naïve blind faith was key!” he told SmallBusinessPro.
Starting with just a market stall with one person helping out, he grew the business and says innovation was key to making the most of the opportunities that presented themselves.
He said: “The business had one core revenue stream when we started, that quickly grew to two streams; our market stalls and local retail outlets.”
“On a market stall, I believe the key to success is to consistently attract new customers with an ever-evolving range of delicious products whilst maintaining core offering.”
Staying Adaptable to Market Demands
Sometimes being smaller than the competition can be an advantage, especially during tough economic times. While larger companies may have the cash and the workforce, SMEs can quickly adapt to the changing business environment.
This is a particular feature during the Covid crisis, with companies switching their advertising and messaging, or changing their manufacturing output to produce items such as PPE and face masks for the public.
Cherry added that in practical terms, it was also easier for SMEs to adapt to changing rules and regulations, with factors such as social distancing having to be incorporated into how many businesses now operate.
For a small company without reams of procedures and layers of management having to sign-off on decisions – being fleet of foot in this way is often far easier than in a large company.
“Being able to do business from a social distance is now absolutely vital and looks set to be so for the foreseeable future.” He said.
“A lot of firms are investing in their ability to sell goods and services online and get them to their clients in a way that protects against virus transmission.”
The need to adapt is something Kapil and his team have themselves embraced.
Kapil added: “We launched new products more fit for Covid purpose, pivoted the business to re-align its focus and followed the HSE and WHO guidance to the letter.”
“I’m really proud of our team and how we all pulled together, getting stuck-in to whatever was needed to be done.”
Maintaining a Flexible Business Plan to Adapt Fast
Having strategic plans in place is always a good idea, but when things take a turn for the worse, having a blueprint to fall back on will be all the more invaluable.
Green Saffron was in the midst of a three-year strategic plan to reorganise its core business model when the pandemic hit and Kapil says the pandemic has allowed them to plan their future even more thoroughly.
“Plan, plan, plan!” is his advice.
“Be prepared to adapt at the drop of a hat. It’s easy to say but I absolutely believe the more agile you remain, the better.”
Stay Financially Savvy
It may go without saying, but while it’s wise to keep an eye open for opportunities SMEs must also remain mindful of their spending during a downturn. Banks are less likely to lend, clients may pay late or perhaps even not at all, long-term contracts may be lost as companies go under, government grants and loans may dry up.
Being financially savvy can include reining in unnecessary expenditure, outsourcing some services and also choosing customers wisely. Better to have a smaller pool of new customers that can survive the downturn and pay what they owe on time, than a larger customer base with uncertain futures
Be Realistic and Objective in Your Approach
Do what you’ve always done, get what you’ve always got – so goes the saying. Nowhere is this more the case than when trying to chart a course through choppy financial waters. But strange times call for creative solutions and sometimes business owners need to take a step back to appreciate how best to steer the ship.
“It’s more a state of mind more than anything.” Kapil said.
“Once you become stuck in rut, content with a certain way of doing things, you’re liable to miss opportunities.
“Stay feisty, work collaboratively and listen to those you trust!”
What is Future Economic Outlook Like?
While there are opportunities to make a success of a business in a downturn, it would be a case of blind optimism not to expect some seismic shocks, at least in the short and medium terms.
Cherry said: “Three quarters of small firms are still saying that coronavirus is weighing on their confidence levels.”
“Certain industries are hurting more than others. For any firm where in-person engagement is key to success – pubs, live music venues, theatres, restaurants and cafes to name just a few – the damage is particularly acute.”
Where the economy heads next is uncertain due to a number of reasons. While the Covid pandemic has hit multiple sectors, conversely, it’s also unleashed a level of stimulus spending across the United States, the Eurozone and the United Kingdom unlike anything seen since the aftermath of the Second World War.
The readiness of governments to step in and support business has been unprecedented. With that new world view in mind, if SMEs can remain alert to the changes the world’s economy is experiencing, they can be among the first to benefit.
Also, as larger companies flounder and fail, it presents an opportunity for SMEs to pick up work in those industries where perhaps they may have found themselves squeezed out previously.
To survive and thrive, companies have to be prepared to adapt and seize any opportunities as and when they arise.