With forecasts predicting the UK is facing the longest recession on record, inflation continuing to rise and the cost of living crisis ever widening, as part of our recession resilience series, we consider further steps you can take to help manage your business effectively during a recession.
Many businesses are still struggling to recover from the pandemic and this coupled with an uncertain road ahead, means it’s hard to predict how many will be strong enough to ride out these challenging times.
Who is your customer?
With a continuing drop in consumer spending because of the cost of living crisis, this is impacting a lot of businesses who are having to look to potentially change their focus in order to survive. It is for this reason that it’s vital to know your customer well, know what they are looking for and also how reliable they are. It may be sensible to mitigate risk in some areas by reducing your reliance on customers who potentially have a higher financial risk exposure.
You could look to carry out regular credit checks to monitor customers’ performance and it may be worth considering who your ‘perfect’ customer is, in comparison to those which may be higher maintenance or providing less value because of reduced operating margins. Sales and procurement teams are often able to provide some useful market intelligence.
Mitigate your risks
A recession has the potential to trip some businesses up when it hits at the wrong point in their working capital cycle. Although this depends heavily on your company’s operating model, you could run the risk of being left with excess stock or work in progress that you are unable to realise value from.
To mitigate a further risk, ensuring you have a range of suppliers who are providing any critical products and services can be a wise idea to help lessen the risk of an individual supplier failing.
Keep on top of debt management
One way you can protect your cashflow is to control your debt management and ensure any money that is owed to your business, is paid promptly. If interest rates are to rise and loans paid to the business become more expensive to service, it could be a possibility to consider restructuring debt finance to reduce cost in this area.
Keep morale high
During challenging times, it’s important for business owners to take a proactive approach to leadership and consider ways of motivating team members. By doing this, you are going to be in a better position to retain skilled people and get the most from their abilities. This was vital during the pandemic but is just as important now. You should also think about any additional support team members may need during an economic downturn to increase their morale and general wellbeing.
Seek advice and plan ahead
If you would like any further information or advice on how you can implement any of the above suggestions or help with planning a sensible approach tailored to your business, contact a member of our recession resilience team by calling 01254 679131 or email firstname.lastname@example.org.
A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.