Staying afloat in business is a must, and the strategies of survival in recession is a factor that business owners must imbibe
At this time in Nigeria, small and medium scale ventures are vulnerable, they are struggling to remain alive and in credit. Many are spending more than they are making. This article will attempt to make some suggestions of what we can do to remain in business till better times come round. Recessions are perfectly normal and are to be expected; they occur regularly and are a part of the business scene. This means the well-informed business person has to learn to cope with them and indeed profit from them. Firstly, we will for the purpose of clarity define survival and recession to put them in the context of this article. Secondly, we will enumerate some practical ways to deal with the situations. Next, we will use some examples to buttress our point. Lastly, we would conclude with some pointers to keep our focus on.
In defining survival and recession, survival is to continue to live or exist in spite of difficulties such as the absence of an enabling environment. The ability to survive can be attributed to one’s ability to recognize and understand prevailing conditions and the ventures ability to adapt to the environment on the one hand, while recession can be described as difficult times in an economy of a country, when there is less trade and industrial activity than usual and more people are unemployed than is deemed normal. For small and medium-sized venture owners, we have to employ personal policies for our business to survive and even thrive, despite prevailing conditions on the other hand.
To remain in business during a recession, one must think with the following questions in view: how else can I exploit the current business line I am in? What else can I do with what I have on ground? How can I spend less, thereby improving my bottom line? What are the resources I have on ground that I am not maximizing fully? A venture that has this capacity will find it can emerge from recessions financially stronger and better placed than might otherwise be the case. If it achieves this more successfully than its competitors, by suffering less than they do, it should be able to gain market opportunity and gain market share. In such circumstances, recessions are almost welcome.
Most ventures only path is to go forward in growth, they react to falling sales by cutting prices, increasing costs and by trying to sell more, which hastens one’s business death, which is what they are trying hard to avoid. One of the practical things to do if this fits with your business model is to learn to scale back. Those who weather the storm are those who know how to close a loss-making gap by selling less rather than selling more. They reduce overheads and exposures. This could be by opting to render your services from home without rent costs. The reduced cost of providing your service may help you reduce your profit margin and selling price, giving an advantage you did not have prior to the recession, the improved lower prices may attract customers away from your competitors, causing improved sales volumes for your enterprise.
Another example of steps that can be taken are to exploit the same channel you have built in your business life. If you trade in a particular commodity, what else can you offer in the same line that can add value to your offerings without adding costs to your venture? Should your shop costs N600,000 per annum, this translates to about N2,100 per day for a six day week in a four week month. Once sufficient products have been sold to cover the daily “overhead” of N2,100, prices can sharply be altered. They can be altered downward if more is earned by selling the rest in quantity at low prices than by holding prices and selling less. They can be altered upward if there is more to be gained by selling less at higher prices, even if goods are left on the shelf at the end of the day. There is a clear relationship between price and volume, which needs to be clearly identified if the right decisions are to be made.
If you are a trader of perhaps electronics and there is a slump in purchase, a good thing to do may be to contact all old purchasers and spend quality time assisting them with maintenance or repairs. Better still, in this same situation, you could offer to buy parts of equipment that are obsolete to that customer but will be bought by another in a different economic bracket, all those old equipment lying dormant in stores and garages. The contact details of old clients are available without a cost, and past relationships are there to exploit at minimal costs but with maximum benefits to reap.
If you are a jeweler, it is likely that in a recession, many are not inspired to spend extravagantly on purchases. This may be the time to offer special services to clients in areas such as sorting their stock, cleaning, resetting old jewelry, repairs etc. and even selling old pieces that are outdated, rarely worn or unmatched. If it’s furniture you sell, it could be time to approach old clients to re-upholster their old furniture while you suggest the purchase of one or two new pieces to augment what already exists. These are examples of ways to generate a steady flow of business and cash during a recession.
In conclusion, we need to keep our eyes on our money cycle and the cash. Cash is king and needs to be generated as quickly as possible and continuously. Though many events in the economy are not within our control, however, your markets and levels of sales are largely within your control.