I spend my working days talking to business owners about their challenges. In the past I tended to dismiss discussions about a weak economy, as an excuse for poor performing businesses. However, I can’t deny that the current economy is hurting a number of business owners. I can sympathise with the situation that many businesses find themselves in. But there are really two choices: become a victim of the weak economy or tackle it head on!
Resources and productivity
To make it through the tough times in a weak economy, businesses need to run a tight ship with no passengers in the team. Every team member needs to make a valuable contribution and maximise productivity. Roles, expectations and responsibilities need to be clearly defined and ownership and accountability to do what is expected becomes key. I am coaching more and more managers and business leaders who are required to step up to the plate at what is a critical time for both their career and for the business’ future.
In order to run a tight ship and a lean team structure, businesses need to automate routine administrative tasks. Despite all the technology at our disposal, I am amazed at how many businesses still employ manual, labour intensive tasks that could be systemised to a click of a button. By automating processes, it frees up you and your team to focus on strategy, new business, customer service and other tasks that generally take up more time and resources in a weak economy.
Managing cash flow
It goes without saying that this is the major challenge for most business owners, even in a growth market. So, in a weak economy, the challenge is exacerbated. Business owners need to keep a tight grip on their finances by minimising spend and maximising revenue. It’s a good time to renegotiate borrowing terms and supplier payment terms. It’s also wise to request deposits and milestone payments for projects that may take time to complete. A weak economy provides the opportunity to fine tune your inventory and stock management. Minimise what money is tied up in stock. I have never been of proponent of discounting your value. However, there comes a time when it might make sense to have a discounted invoice in your bank account now, rather than getting 100% of the invoice in 90 days.
Consumers and businesses have less disposable income and are thinking more pragmatically about how they spend their hard-earned money. Your price, product, service offering and customer experience is more important than ever. In a weak economy, the market is unlikely to grow. The company that retains its existing customers and lures away customers from competitors is the business that will thrive. Look after existing customers and offer something different or something more to attract others. If you don’t, you’ll lose your customers to the businesses that do!
Diversify vs Specialise
You will read many different articles and opinions on whether or not to diversify your products and markets in a weak economy or to stick to your core competencies. When markets are drying up, it makes sense to look for alternative revenue streams and customer bases. I am working with a couple of clients who are creating new products for new markets as a strategy to get through today’s tough economic climate.
On the other hand, in a weak economy, many businesses can’t afford to take the risk of trying something new or different. It takes the focus away from the bread and butter of the business at a critical time. So, I am also working with clients where we have decided to hone in and focus on two or three markets that they can dominate in. There is no right or wrong strategy, and each case is different. However, it’s about having the tough conversations with the right people who can advise and support you through it.