While a recession is tough on everyone, it can also present opportunities for small businesses, says Allon Raiz, founder and CEO of business incubator Raizcorp.
“Many business-owners inadvertently become defensive by cutting costs, reducing staff and selling off non-core assets. This is not a bad strategy, but it’s not the right strategy for a company that wants to go somewhere,” he says.
Raiz adds that many of the world’s wealthiest people have built their fortunes, not in good times, but in bad ones. This is because they understood that the best time to attack was when others were already retreating.
“In tough times, the best strategy is to become more aggressive in terms of market share. When the market turns, and it always does, then you will have gleaned significant market share. And in good times, it is the company with a market share that wins,” he says.
Categorise your expenses
- Analyse your expenses: Determine productive and non-productive expenses. Productive expenses, such as the salary of the salesperson, contribute positively to the bottom line. Security, on the other hand, would be considered a non-productive expense. This does not mean it is not necessary.
- Aim to reduce your non-productive expenses: Shop around for better prices or eliminate costs related to office space, office supplies and utilities.
- Adopt a conservative approach to cash flow: Monitor small expenses by keeping a record of all receipts for the petty cash fund. This allows for greater control over all your expenditures, which can mount up almost without realising it.
- Become more aggressive: Double your efforts in sales and triple your efforts in terms of delivery.
- Grow your bottom line: Convert any surplus money from reduced expenses into more productive ones. This will help you grow your market share and is one of the best strategies for a downturn.
- Talk to your employees: During a tough economic climate, it’s natural for employees to feel insecure. It’s critical for management and employees to discuss business strategy, the impact of the recession and any concerns moving forward.
- Keep communication lines open: Communicate deliberately, often and succinctly.