Everyone is feeling the financial squeeze of the coronavirus crisis and given there is substantial talk of an economic downturn and a possible recession in Australia, we decided to delve into why some businesses can ride the wave and others are doomed to drown.
Recessions tend to hurt almost all businesses, however for those clever enough to plan for challenges the impact can be minimal, and historically has led to some serious innovation, businesses rejuvenation and downright insane profit increases. Take everyone’s fav online streaming portal Netflix in 2000 it was almost sold to Blockbuster for only $50mil. However, when Blockbuster dropped out of the buy, Netflix was able to survive the recession by being innovative leading to the transformation into a pioneer in streaming on-demand consumer video. (1)
So how do you survive? Here are our top 3 findings:
Think about innovation before the recession hits.
Firstly, you need to put in the work to develop an innovation plan that forecasts a downturn, its essentially a security blanket so your company can survive and discover new methods to gain a rival edge and improve productivity and profitability during any downturn.
Start by looking into how you can manage your existing company assets during a slowdown to boost creativity, engage your employees, and keep any changes customer-centric. (remember, without your customers you do not exist) Interact with suppliers or other business allies to produce and develop ideas and consider what impact it will have on your business processes and practices during a downturn. You could identify opportunities for innovation by adapting your product or service to the way your industry is changing or decide to completely create a new product. Innovation will not only improve the chances of your business surviving but also help it to thrive and drive increased profits.
View a recession as an opportunity to thrive and grow
Imagine you could flip a recession on its head, what would it look like? For us, we like to think of a downturn as an opportunity to re-envision, refocus and retool within the business.
if you have been smart with cash flow prior to the slowdown, now could be a chance to move on a new product or service or to finally take your business internationally or even hire new talent. All that you need at this moment is a change in mindset, a solid vision and the agility to reinvent in light of changing landscape, consequently, this may diversify your business income and help you stand out from your competitors.
Be Smart and Efficient with money
Yes, financials always matter, but when the downturn hits, you want to remain aprofitable business despite the slump. Start by making every business leader or manager accountable for the business returns, and once you have a strategic response ready to go, make sure its clear and executed fiercely and smartly by everyone. As a small business, your primary consideration should be to overhaul any business overheads as quickly as possible. these could include:
- Renting a space? negotiate a reduced rate with your landlord during the downturn.
- Shop around for better prices on essential in-office services.
- Limit expenses that don’t add significantly to your bottom line or employees wellbeing and morale.
Make sure you continue to be proactive around taxes and have an open line of communication with your tac, legal and financial advisors.
Don’t make careless decisions with your marketing.
According to a 2010 Harvard Review study, Businesses that “cut costs faster and deeper than rivals don’t necessarily flourish. Cost cutting is necessary to survive a recession, but investment is equally essential to spur growth – these must be managed at the same time if an enterprise is to emerge as a postrecession leader. ” (2)
While we know cost-cutting will be required to survive, acting quickly and cutting marketing spend isn’t the right answer. You need to view marketing as an indispensable communication tool with your clients, and should remain a significant engine during a downturn to understand how your customers are reassessing priorities, how and where they spending their money, are they switching between brands based on messaging and are they redefining their values.
Our recommendation is to continue investing in market analysis but to make sure your marketing allows for pivoting and flexibility. This could be switching spend from traditional (generally expensive) advertising to online ads – which is targeted and relatively cheap, and its performance is easily measured and/or shifting messaging, to reinforce an emotional connection with your brand and demonstrate empathy.