There may be difficult times ahead

Malcolm Williamson
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According to some economists Britain could be in for its third recession after the economy shrank 0.3% in the last quarter of 2012. One thing is certain, we’ll all have to manage the effects of a downturn. Not good news for some, but economic change also creates opportunity. Malcolm Williamson offers his advice on planning for the troughs.

Some businesses are naturally advantaged in an economic downturn because of the nature of their activity - debt collection agencies for example. But even if you're not in a sector that is perhaps expected to do well in a recession, it could still turn out to be a positive time for your enterprise…providing you’re prepared. 

The enterprises that often get into trouble during an economic downturn are invariably those that are unprepared; they think the recession won't affect them or, more commonly, they just don't want to think about the things that might, or might not happen a few months in the future, so they blindly carry on regardless.
 
There’s nothing mysterious about a recession. It’s a period during which the economy gets smaller; trading activity can decline; businesses and consumers buy less, and people worry more. Organisations then look for ways to save money; get better value and conserve cash. The biggest fear of course is that there’ll be insufficient money to pay the bills and that, as a result, the enterprise might fail.
 
Fail to plan, plan to fail
 
It’s a phrase that may appear trite, but would you really embark upon an unfamiliar journey in your car without planning the route? It would be foolish and could be costly if you didn’t. Well, your enterprise journey is no different.
 
If we look back at recent recessions, the organisations that emerged the strongest were those able to swiftly adapt their business models, and as importantly, their attitude to change, in light of new or difficult circumstances. Whereas the organisations with rigid, restricted business models or, as is all too common, no form of business plan at all, were more likely to fail because, as their established market fell away, they had nowhere else to go.
 
Recession also causes the intrinsic value of an enterprise to fall, so the core business needs to be strong.  To survive and thrive you have to turn the situation to your advantage by re-evaluating every aspect of your own enterprise. This means you must either plan or revise your current plan, and in the process mobilise your entire organisation - and I mean everyone, be they full or part-time employees, stakeholder board members, volunteers or family, and then collectively focus on the following fundamental planning elements: 
 
  • Revisit or develop a strategy to retain your current business, maintain market position and expand your customer or user client base - consider low or no-cost marketing and smart PR tactics; also assess opportunities for strategic alliances or tactical partnerships that can provide awareness or channels to market.
  • Assess new and alternative market opportunities - what else can your enterprise do to generate income within its current capability and capacity, or offer the market that it’s not currently doing? Are there organisations or bodies with whom you could or should collaborate to jointly enhance market competitiveness, this for mutual advantage?
  • Focus on smarter business practices; look at ways to maximise the capability, productivity and experience of people - what else can your people do? are there ways of multi-tasking? what other ideas do they have.
  • Streamline processes - what can be done more effectively, cheaper, or faster? – without of course compromising service, quality or social ethos.
  • Increase the opportunity to enhance and drive added value - internally between peers or departments, and externally for customers or users, contracting organisations or with suppliers.
  • Review revenue relationships - are you doing enough to meet the needs, and exceed the expectations of your customers or users?; are you providing value that contributes to the success of those organisations, commissioners and so forth to whom you’re contracted…and are there any you shouldn’t be working with because you’re losing money and therefore effectively subsidising their business or organisation?
  • Rigorously focus on prudent financial management - constantly review, monitor and revise your cash flow; credit control practices and every element of business cost.
  • Review product or service costing and pricing - how can you reduce costs, enabling you to be more competitive in a price sensitive market, yet still retain margin?
  • Review purchases and supply contracts - are you getting the best value, a fair deal or the most appropriate product or service from your suppliers?; could your enterprise, or your customers or users, benefit if you changed suppliers?
  •  Look after your own people, they are your most valuable asset and are key to success - keep them motivated and positive; be open, honest and inclusive. Above all listen to what they have to say, and recognise their contribution and value.
Any facet of your enterprise that doesn’t add value, or is not capable of producing profit, shouldn’t exist and you should consider either scaling down or restructuring accordingly – and for profit don’t just read financial but other key measurable outputs too, be they stakeholder and social objectives or productivity and service targets. 
 
A climate such as this is no time for procrastination. Irrespective of the size of your enterprise you have to be ahead of the competition and ready to capitalise on market opportunity, or you'll lose whatever advantage you gain by being prepared. 
 
Finally, don’t be afraid to take decisions and then action them. And don’t be too proud to seek help!