10 ways an SME can manage an economic downturn
Ways to manage an economic downturn
How can you safeguard your business against economic downturn?
Economic downturn is the constant concern of our time and one that should be guarded against by SMEs especially, through the use of contingency plans. It’s always easier to prepare for difficulties in the future than wait for disaster to strike, and then scrabble to sort out a survival plan. Still, if it’s already too late to put together an action plan should the worst occur, we’ve put together a list of tips that will help to see you through the tough times.
Here’s our list of 10 suggestions to help your business ride out an economic downturn
1. Don’t give in to panic – see this situation as an opportunity
It’s easy to see recession on the horizon and feel a wave of panic crash over you. However, SMEs could use this kind of economic downturn as an opportunity to improve their niche, focus on their customers, and succeed intact to the other side. This is a time for consolidation and greater employee interaction – increasing investment on employees by using government grants and streamlining your product line to find the most profitable items for sale. This is also the time to tread where your competitors fear to tread.
2. Look into ways to reduce outstanding debts
Any debts that your company is currently in need to be reduced, re-negotiated, or paid off as soon as possible in order to reduce the pressure hanging over the company. Discuss possibilities with your creditors, like finance plans or instalment payments. Keep future debts down as well, by reducing the amount of stock on order and purchasing products as needed instead of paying for them before you have a customer in mind.
3. Track every expenditure and cost to work out what can be cut
There’re always areas that can be streamlined when going through the books to see every single cost that affects your business finances. Consider everything from changing the light bulbs in your offices to energy-saving bulbs that are switched off at the end of the day, to researching all the tax allowances your business is eligible for. You can also rein in expenses, like allowances for staff; and try downsizing your business premises if at all possible – if not, try renting out the excess space to another company. When an employee leaves your company, consider redistributing that person’s work among the remaining workforce instead of hiring a new replacement. You could even attempt to reduce wages by introducing flexi-time working hours. Read our article “Cost-Saving Methods Your Business Can Try” for more ideas on saving costs.
4. Stop selling products with poor profit margins and reduce stock level
Save money by reducing your inventory, streamlining your product lines into proven best sellers with excellent margins. This increases your niche and elevates the likelihood that customers will continue to return to you again and again. It allows your workforce to be experts in their field instead of being spread thinly across multiple product lines – aiding in great customer service skills. This strategy will work much more effectively than just reducing the prices on all your stock, thereby devaluing your product and your company in the process.
5. Lease equipment and premises instead of buying them
If you require specific equipment for a short duration, look for second-hand deals or rent it for the necessary time-period instead of purchasing it brand new. If you have speciality equipment you’re no longer using as you reduce your product output, consider renting it out or selling it on yourself to generate extra profit for the company coffers. For your office or factory space, if possible, downsize or rent out extra space to other businesses.
6. Lower your marketing costs by taking them online
It’s tempting, but it’d be a mistake to reduce marketing during a downturn. This is the time when companies should increase their marketing activities to win over more customers and business, while their competitors are scrambling to cut back. However, raising your level of marketing may not necessarily mean increasing marketing expenditure proportionately. You just need to explore low-cost or even free avenues. Social media is fantastic for many reasons, and small businesses should really excel as the ones utilising them. As a free method of getting the word out about your products and services, all it takes is a couple of training sessions for some of your workforce to start putting interesting content online. Make sure to interact with your clients online, chatting as a brand and a human, rather than trying to push sales, which is akin to shouting loudly in a large room.
7. Turn to e-commerce by providing clients with a website to buy from
A website is a valuable point of reference for any business, and is particularly useful in an economic downturn as an online sales place. By investing in e-commerce functionality for your website, you reserve the ability to close down a shop and save on premises costs, focusing all buying power to your customers through your website. Even if there’s a need to keep your shop open, with Singaporeans increasingly turning to online stores to make their purchases, you’d be able to expand your customer reach.
8. Give existing clients your focus for great customer service
When times are tough, your customers are going to be putting more and more thought and discretion into how they spend their hard-earned money. Make sure you hold onto them by offering customer service so brilliant that they keep coming back. Make sure all staff understand that efficient and quality service will be noticed and rewarded. Try enhancing communication through newsletters and social media, give some thought to loyalty schemes, and offer bonuses to make your company the more attractive place to buy. Further, get your salesforce properly trained so that they’re absolutely effective. Remember, when business is scant, don’t lose good customers unnecessarily.
9. Increase your workforce’s productivity through training
This is the time when you should extensively explore ways to do more with less – and you needn’t be the only one at it. Empower your employees to look into productivity gains alongside you – by getting them trained on more advanced skills. When you invest in your employees, you not only increase their skillset, you also show that you value them. In the long term, employees would likely be more loyal to your company, more productive, and able to help train more employees – for just the cost of a single workshop. Find out about funding for employer-based training on the website of Singapore Workforce Development Agency.
10. Pit your strengths against large enterprises
Large corporations may look mightier during economic downturns, in fact SMEs have their own set of valuable strengths that appeal to customers. This is the time to really be more personable and improve on customer service, an aspect that larger companies will find hard to invest time in due to their large workforce. Create a sense of togetherness for your employees, a company-wide goal to improve productivity, creativity, and customer-focused service.