When times get tough large businesses typically make it through and even achieve growth by leveraging their superior capacity to secure capital, bargain better terms, and pursue a greater scope of investment options. Needless to say, few succumb to the effects of financial doldrums because they already have hefty cash reserves, financial markets access, and enough foresight to make sufficient prior arrangements.
A small business on the other hand has to do all it can to avoid going down during a financial slump. Ill-advised knee-jerk reactions to such a scenario may include the prompt laying off of some employees or shutting down of some branches.
More prudent small business owners will however be more intuitive in their responses. They’ll want to know what measures can be implemented to keep the business afloat until profitable winds start blowing again.
By adopting a survival mentality there is a good chance that your business will remain intact through crisis times. You will also find it easier to pick up and continue when the economy rebounds.
This is unlike a business that opted for rash responses, such as the ones above, which are really last resort measures. Such a business will no doubt lose momentum seeing as time, money and other resources will have to be expended in hiring new employees, securing premises, winning back lost clients, etc.
What therefore are some of the strategies you can embrace to cope with crisis times?
1. Reinventing your business
When times are good many small business owners direct all their focus on making the most of the currently available opportunities. This is all good but it’s done at the expense of diversifying the scope of focus.
For such a business, a slump in demand and sales has an almost crippling effect on operations and the owner may be at a loss about how to proceed.
How about reinventing the business?
Start by analyzing your strengths and weaknesses and then think about another sector of market where you can be a fit. You then need to answer the following questions:
- Consider your current products/services; does demand still exist or have customers preferences changed?
- What are the new trends in your industry; have you kept up?
- What steps can you take to become relevant again?
- Do you need to develop new products/services?
- What is required?
- Do you know what customers need and how much they are willing to pay?
- What new products/services can you develop?
- How will you best reach the new clients?
- Do some of your old clients fit in your new target market? Can you use them to get more customers?
- Will these products/services earn you maximum profit?
Revamping your business and getting back on track may take some time.
Take heart though.
The course of action you opt for will most likely be quite familiar to you (thanks to your experience so far) such that making inroads won’t be too difficult.
2. Create other revenue streams
You must start thinking about how else you can earn new and more revenue in addition to what you are doing currently. This is about finding out what else you can do with the current resources at your disposal.
If, for instance, you own a barber shop and business is slow because three new barber shops have opened up on your street, why not think about offering other men’s grooming services. Many men are now warming up to manicures and pedicures. How about making your shop a one-stop grooming shop by partnering with personal beauty pros?
3. Seek out your former customers
You never know; what harm can there be in finding out?
Who says a former customer can’t be convinced to start buying again?
Perhaps he or she is disappointed with a current supplier’s quality.
Are there customers who left because their priorities changed? Might they have changed again? Why not find out if their current preferences are within your scope? Perhaps they can even refer new clients your way.
Maintaining a professional relationship does have its perks. From now on you need to implement a healthy customer relationship management strategy.
4. Find former prospects and other people on your contact list
When times were good and demand was booming you probably had several cases where potential business deals fell through for one reason or another.
Perhaps some projects you were eyeing didn’t materialize because the prospects had to put them on ice at the last minute.
Now is the time to get out your contact list and try getting in touch with such prospects to find out if such opportunities still exist.
5. Make strategic alliances
It is worth exploring the industry to find businesses that you can work together with for strategic benefits. (Read this article to find out how this can be done successfully).
Alliances can expand your scope of exploitable opportunities meaning that you’ll still be in work even when your core area’s prospects become lean. Sooner or later you’ll be the one extending the favor.
Also, having a strategic partner will help to propel your market penetration efforts considering that you are most likely facing off against bigger competitors.
6. Explore the online marketplace
Many offline businesses owners may be surprised to find out that there are lots more potential customers online.
Don’t be ignorant; simply find out if this is the case and how you can exploit the potential.
Perhaps you already sell online but you are experiencing declining sales. Now is the time to find out if your previously successful strategy has been too limited in scope and if there are new channels to discover.
7. Make the most of free publicity
8. Start doing more on social media
Simply having a social media presence is not enough – you must get active in these channels.
Start interacting better with your target audience. Take time to post comments regularly. Ensure that clients’ questions and comments are responded to promptly.
Engage your audience by discussing matters related to your products/services and the industry at large.
Don’t forget to promote your product/service on social media.
9. Make your business mobile-friendly
An increasing number of people (read your target audience) are becoming accessible via tablet and smartphone for a greater part of the day.
As a matter of fact, web access via mobile devices topped the number of desktop and notebook users for the first time ever in October 2016.
Is your business mobile-friendly yet? It needs to be.
10. Review your business budget
This is very applicable for small businesses that have different departments for handling various operations.
Require your managers and supervisors to list suggestions about how expenditure can be reduced in their respective departments. To motivate them you can pose this as a challenge. You can, for example, promise a handsome reward for the departmental head whose cost-cutting initiatives resulted in the greatest percentage reduction in allocated budget.
You should also consider the operating expenses you can influence directly and immediately. Is it possible to opt for a cheaper package for your telephone and software requirements? Have you been taking advantage of attractive discounts and deals typically offered by service providers?
How about the lease terms for your premises or equipment? Are you being overcharged considering current market rates? Are there cheaper options?
11. Find new ideas for profitability
This should also be done in collaboration with the staff. Now is the time to really brainstorm for viable ideas that can actually be implemented in the short-term to alleviate the crisis. Winning ideas should be well rewarded.
12. Rethink your positioning
Think about how you can uniquely present your business to the target audience.
What are some of the qualities you think that only your business can offer customers?
Re-position accordingly and let your customers and prospects know about the extra value they’ll get by doing business with you.
13. Make your turnover rate faster
Review your business operations to find out what practices are encouraging slow turnover.
Is it that your inventory lies idle for lengthy stretches? Find out if you can purchase less stock instead of tying down too much money at the expense of your profits.
Is it that many of your customers are simply taking too long to pay up? Perhaps offering attractive discounts for prompt payment will help.
Perhaps some of your products are taking too long to sell. Think about reducing package quantities, or end production altogether.
14. Negotiate better terms with your vendors
15. Revise your payroll cycle
This will generally work in the same way as no.14 above.
Perhaps you currently pay your workers weekly – change this to biweekly. In case you currently pay them bimonthly, change the payroll cycle to monthly.
You will not only have better cash flow but it’s possible that current payroll processing costs will be significantly reduced, more so if you have a large workforce.
16. Go green and minimize wastage
Take all the necessary measures to ensure that energy costs are trimmed. Basically, adopt energy-efficient practices at your workplace.
Ensure that all lights are switched off when they are not required. All office equipment must also be unplugged at the end of the day.
According to the ENERGY STAR program 40% of electricity consumption by home electronics happens when they have been turned off but not unplugged. The potential savings that you can make by reducing standby power are evidently quite significant.
The same measures should be taken for everything else including time. Enact a strict policy against lateness and inability to meet deadlines.
17. Cut down on travel expenses
By taking advantage of technology you can significantly trim your travel budget. Have you considered video conferencing?
Again, do you really have to fly first-class? How bad can business class be?
18. Consider making changes to your workforce’s employee status
If you have hired your team on full-time basis you may want to consider making them independent contractors.
Assuming you have been honest with the team about the current situation they will most likely appreciate that they’ll still have jobs.
Their new status means the business will no longer have to pay payroll taxes and/or health insurance benefits, all translating into money saved.
Knowing how to stay afloat during hard economic times is crucial in determining whether your business will survive or go under. Has your business had to ensure such times? What was the crisis like and how did you pull through?