As the Coronavirus continues to spread throughout the world, governments have put social distancing and stay-at-home orders in place to try to stop the spread. However, this has caused a disruption in the flow of goods, stopped markets, and is now causing a worldwide recession.
The long-term effects of the COVID-19 pandemic will be felt by businesses of all sizes. Although the situation seems bleak, some people are hopeful that a vaccine or solution will be available soon.
If so, companies can see a rapid rebound. Businesses have a huge opportunity during this downturn to look at what needs to be changed in order to survive and even prosper during these times and in the future.
Below are some tips on how your business can succeed during an economic recession.
1. Don’t Be Too Defensive
There is no need to swing into crisis mode by implementing policies that will reduce operating costs and preserve cash.
Your primary goal should not be preventing your company from getting severely hurt or going under, but instead, look for new opportunities that arise. The opportunities mentioned could help make up for lost sales during this unprecedented time.
The key to success in finding opportunities to improve your business lies in understanding your business strategy well. Recessions can turn contenders into market leaders.
The primary cause of this is a lack of comprehensive plans from leaders to manage an unpredictable event such as the COVID-19 pandemic or an impending recession.
The businesses that are able to adapt and bounce back from difficult situations are the ones that will see the most growth in the long run. These companies have laid a strong foundation for continued success.
Identify New Sales Channels
If you operate solely online, consider expanding to include more platforms. Investigate marketplaces like Amazon or eBay to broaden the scope of your product sales if you mainly sell via your online store.
This is an excellent time for retailers who are mostly offline to develop and promote their websites!
Increase Market Share
There are opportunities for businesses to grow during a recession by capturing market share.
This is a good time for small businesses that are cash-efficient to take over from larger companies that are struggling to keep their employees and inventory levels.
Many people will either spend less money or not spend any money at all during the recession. A look at Lego shows that they expanded into global markets by increasing sales in Asia during a 2009 downturn. By the end of the recession, their profits had soared by 63%.
Losses And Gains Are Permanent
You may think that your business can take losses, recover, and make up for lost ground once the recession is over, but that is often a mistake. The majority of the market share that was lost during the 2001 downturn was not regained by the original companies, according to a study done by Bain & Company.
Finally, don’t freak out and do nothing during an economic downturn, but look for ways to improve your business strategy by finding opportunities to increase your market share. This will lead to future success in the long-term.
2. Invest In Technology
When there is an economic recession, people often save money by cutting back on their spending. One of the best ways to prepare for a recession is to invest in technology.
When the economy is good, businesses are growing and don’t have time to research and implement new systems. Take advantage of this time!
Since social distancing is now mandatory in many places, businesses need to find a way to stay in touch with their customers digitally.
The answer is simply promoting and selling your products! The answer to what this looks like for a product-selling business is promoting and selling your products! This may require working with your team to improve your solution.
This economic decline will provide you with an opportunity to implement and get comfortable with new technology. Once the economy improves, you’ll be able to grow much more quickly.
Moving Your Accounting Online
To be successful during a recession, a business must be able to adapt quickly. If your books aren’t organized, it’ll be difficult to do things like file taxes, apply for relief loans, or pitch to investors.
You can save a lot of time by using a cloud-based accounting software to do your tedious tasks.
Adding A New Or Improving Your E-Commerce Store
It is essential for all businesses that sell goods to have a website. Buyers are doing more research on products than they have in the past.
87% of shoppers now start their product research online, compared to 71% the year before. If you are looking to go online or make the switch to a more robust eCommerce platform, here are a few of the benefits:
- New customer attraction
- Customer convenience
- Increase operations to 24/7
- New market opportunities
- Increase brand awareness
Inventory Management Platform
Inventory is the most important aspect of running a retail, wholesale, or manufacturing business! Are you still using excel spreadsheets? Can this system handle an increase in business?
One of the main reasons why small businesses fail is poor inventory management. Using inventory management software is a key way to make your business more efficient and profitable.
In conclusion, technology assists with reducing expenses and makes your company more clear, adaptable, and competent.
3. Protect Cash By Reviewing Your Inventory Management Practices
Now is a good time to reflect on your inventory management practices. Having quality practices and a cloud-based software is necessary for your business to be efficient.
Lower Inventory Costs
It is always important for businesses to look for ways to reduce costs and during a recession, this is even more critical.
You can reduce your inventory costs without compromising the quality of your products or the convenience of your customers. You should begin stocking more of your best-selling products, as well as inquiring about backordering or drop shipping.
Look Into Backordering And Drop Shipping
Holding costs can be reduced by backordering, while still allowing customization options for customers. Learn more about backordering – definition and best practices.
Drop shipping is a method of order fulfillment that allows you to avoid incurring upfront costs.
The key is working with a dependable vendor because any delays with shipments will tarnish your reputation with your clients. If you master drop shipping, it will significantly reduce your shipping and warehousing costs.
There are multiple ways your business can reduce costs without sacrificing your business or your customers’ experience.
4. Crisis Management Basics
In a crisis, everything changes. The assumptions you made for your planning are no longer valid, and it is uncertain when or how the situation will improve. This means that you need to change your mindset when it comes to strategy.
The first step is to change your planning horizon. This can include projecting sales, setting inventory levels, and forecasting expenses. In a typical market, you would usually do annual planning to set goals for your business.Projecting sales, setting inventory levels, and forecasting expenses would be included in this.
When a crisis strikes, the plan that was in place is no longer relevant and weekly planning should take over. Come up with a new plan within a few weeks.
You shouldn’t plan more than two months into the future because the market is too unstable to predict what will happen beyond that point. As the market begins to level out, you can start to plan further ahead, until the economy begins to rebound and you can once again plan on an annual basis.
Although things may not return to the way they were before, they should be stable enough to be predictable in the future.
What does your new approach to planning look like? You should have more than one plan because there are many unknown factors.
Your original plan may have been too ambitious to realistically achieve during a crisis.
A new conservative plan is needed that can be achieved with the new challenges. There are two different plans: an aggressive plan and a conservative plan.
You should move to the conservative plan as soon as the crisis hits. This will help you save money and keep some of your money back so you can deal with the unknown future.
The goal is not to follow a conservative plan during the crisis as this might lead to your business failing slowly. You should look out for signs that you can be more aggressive and transition to the existing plan over time as the market permits.
At first, move slowly. eventually, move quickly to ensure you are ahead of the competition in preparing for growth.
The majority of founders want to be aggressive and take every opportunity, but this isn’t always the best course of action.
If you’re too aggressive during a crisis, you’ll make costly mistakes that could burn through your available capital, which could be scarce. By looking at the market signals, you’ll be able to see what the best plan is to follow.
5. Fundraising In A Crisis
Crises present a unique set of challenges when it comes to fundraising, as opposed to more stable periods. You can expect to raise less capital, have a lower valuation, and have worse investment terms before, during, and after a crisis.
The best advice if you need to raise financing is to wait until after the crisis has passed. In times of crisis, investors prefer markets that are more stable where they can predict the future more accurately.
You will have a better chance of finding investors and getting better investment terms if you can wait until the crisis is over.
If you want to be successful in raising money, it is important to have a strong and clear fundraising message. Your value proposition, what makes you different, and your long term prospects must be clear from the first slide of your pitch deck to the last.
The investment market will be tough, so you need to be prepared. Since there will be fewer investor meetings, each one will be more valuable and you don’t want to waste the opportunity.
If you are offered investments, it is important to understand how short-term decisions can affect your business in the long run so you can make the best decision for your company.
Many of the terms of financing during a crisis look like terms of investment in businesses that are not doing well. The result of this can be very low valuations for startups, aggressive control terms set by investors, and restrictions on actions that can be taken by startup management without prior approval from investors.
All of the terms represent future liabilities that you will have to deal with if your business survives the crisis and scales. These terms will be a part of your business for the rest of its life. It is better to let your company fail than agree to terms that will waste the next few years of your life.
There are many dangers that can’t be listed here, but any experienced founder or lawyer can talk to you about these in depth.
If you have gone through a crisis before, you know there are some terrible investment terms out there. We want to help you avoid making the same mistakes we did, so we are happy to share what we have learned.
6. Leadership In A Crisis
The most difficult elements of crisis management are providing assistance to your team and remaining concentrated while the market is in turmoil. We should remember that we are all people first and employees second during this crisis, as it affects us emotionally as well as professionally.
Even though your employees may feel secure in their jobs, they probably have friends or family who are losing their jobs, which can add to everyone’s stress.
It may be tempting to avoidance sharing bad news with your team during this time, but being transparent is more important than ever.
If you try to hide bad news from your team, it will only make them trust and morale worse in the future. Being honest about both the good and the bad information builds trust and allows your team to plan better.
The best thing you can give your team is a sense of purpose. Your team wants to focus their energy on something other than the market news.
One way to respond to change is by focusing on new product features, new customer segments, or new offerings. Another way to respond to change is by operating entirely differently than before. These goals are critical to keep your team motivated.
If you do a good job, you might find new opportunities for growth during the crisis. Immediately after a forest fire, there is new plant life that sprouts up.
(Original: You can find these green shoots in your market, which are new opportunities that were not possible before the crisis.) You can find new opportunities in your market that were not possible before the crisis.
For example, since people are spending more time at home due to the pandemic, demand for home decoration products has increased, providing new revenue opportunities for companies that are aware of and take advantage of this trend.
The companies that are able to find and capitalize on new opportunities are often the ones that become the new leaders in the market.
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