Strategies for Business Survival during Hard Economic Times

 

 By Abigail Grace

  Hard economic times are characterized with reducing revenues, reducing market share and reducing profits.  For a business to survive, it has to register some profits.   This article highlights some of the strategies that businesses may adopt during hard economic times as currently experienced across the world. Business Connections East Africa emphasizes the need to adopt strategies that maintain or increase revenue.  Small and medium sized businesses, which are the biggest employer in the world, are versatile enough to adopt some of the strategies.

  Knowing you Customers and Building a Strong Customer Relationship

 During tough economic times the market shrinks; however, amidst the shrinking market there are loyal customers. Businesses regardless of their size should focus on and stick to them. The rationale is during economic hardships it is hard to get new customers because of the reduction in expenditure; however, there are customers who continuously visit the business. Such customers do not only do business with you, but also refer their acquaintances to the business hence enabling the business to survive. As a business owner or employee, it is important to know the loyal customers and enhance the relationship with them such that they feel valued and can continue supporting your business regardless of the business situation.  In East Africa’s region there is a mild economic hardship that is currently felt; the survival of the small and medium businesses will depend on how they carry on with their loyal customers.  Investing in loyal customers is a superior strategy that business owners and managers should adopt.  Among the investment include customization for customers, creating customer sharing networks, and commitment to customers.

 Investment in Disruptive Marketing

  There is an adage often used by marketers that; “when times are good you should advertise and when times are bad you MUST advertise’’.  The adage literally seems counterproductive because it may not make sense to invest in advertising when there is uncertainty.  A keen analysis of the adage reveals the wisdom in it.   During economic hardship, the uncertainty in the season makes managers to withdraw from advertising. Therefore, when a SMART business manager advertises during the period, the business is able to capture the market share from competitors. The effect of advertising during such period is long-term; when normalcy is attained the business remains on top of the minds of the customers and continues to thrive.

 Diversification of Revenue Streams

  Necessity is the mother of invention, the adage says. In fact most discoveries, innovations, creativity is done during hardships. When there is comfort complacency dominates, there is no thinking outside the box. A business consistently registering billions of dollars as profits may not think of diversifying its product line, but expanding the existing product line.  Diversification of the business’s revenue stream protects the business from losses in some markets.   For example, if making furniture, diversification includes introducing interior design services for homes or fitting curtains and wallpapers.   The same business if it was only operating as a brick and mortar store, it can diversify by introducing e-retail store such that it taps the revenue streams from online shoppers.  Some of the benefits of diversification may not be felt immediately because of some ethical concerns such as trust issues.

 Managing Cash flow

            Reduction of costs is the cheapest option that businesses take to survive during hardships; this was evidenced during the 2020 COVID-19 pandemic when millions of people lost their jobs. However, the option is not the best. It is an option for the lazy business managers.  Instead, businesses should manage their cash flow such that much of the cash is retained in the business and invested in highly productive and beneficial sectors.  Managing cash flow is different from reducing costs; during hard economic times, a business may make an expensive capital investment after assessing its returns.   Some cost reduction tactics such as firing highly paid employees and replacing them with inexperienced cheap employees may be counterproductive to the business.  However, reducing expenditure on non-essentials is a rewarding cash flow management tactic.  Managing cash flow entails ensuring that financial obligations are renegotiated and appropriate payment plans are made.

            Compliance to the Law and Regulations

            Non-compliance to the law has negative effects to the survival of the business regardless of the times. However, it is worse during hard economic times because the business may be closed due to inability to pay the penalties.

            In conclusion   survival during economic hardships requires effective planning, staying focused to the business goals and being agile.  Part of planning entails analyzing the business to determine which sections are most vulnerable to the prevailing economic situation, which costs are not necessary for the survival of the business, which areas can be improved and which investments can be made.

Abigail Grace is a marketing consultant.