How to survive a recession
The UK economy unexpectedly grew by 0.1% in November as consumers headed to the shops in the run-up to Christmas and pubs and bars enjoyed a boost from the men’s World Cup. The CBI however, expects the UK economy to shrink by 0.4% in 2023 — a significant downgrade from the growth of 1% it predicted in June. The economy is forecast to recover to its pre Covid size only in the second quarter of 2024.
While recessions cause hardship and business failure, they are also drivers of innovation and change. To survive, or even thrive, during a recession, businesses must make strategic decisions about how they will face the particular challenges affecting their industry and take advantage of new opportunities.
This article will look at lessons to be learned from previous recessions.
Diversify your customer base
If you are focusing on a demographic who are vulnerable to fluctuations in a recession situation, you may wish to reach out to customers who will be less affected – such as those in the industries that do well in recessions.
It is always easier to retain a customer than acquire a new one, so think now about how to win loyalty for when things get difficult.
Strengthen your operating systems
One of the key factors for businesses that survived the 2008 recession, is that they had a strong operating system. With the supply chain issues becoming a major headache for businesses across industries, running an efficient operation is crucial.
Cash flow is the most important thing about your business. Over 80 percent of businesses that fail, cite cash flow issues as a reason for shutting up shop. In the 2008 crash, the majority of lending was done by banks and when they closed their books, businesses suffered. Today, there are literally hundreds more lenders in the market. With thousands of products, you are more likely to find a solution to a cash flow issue.
Complete a financial audit and be honest about the findings
When the market is on the up and things are going well, it can be easier to spot the underlying issues that might exist within your business. When SMEs are forced to be thriftier and look for ways to save money, wastage areas become more obvious. Being able to conduct a thorough cost-analysis gives firms an opportunity to take proactive and calculated steps to conserve cash flow.
Remember that after the fall comes the recovery
Each of the business owners we spoke to, said that one of the most important ingredients for surviving a recession is an encouraging mindset. There are still opportunities available for growth in a recession. SMEs should avoid falling into the trap of thinking it’s all doom-and-gloom.
If your business needs help with financial audits and fast simple information and advice on how to navigate the current economic climate, please do get in touch with your Swindells partner who will be able to advise you further.
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