We often hear that more businesses fail coming out of a recession, rather than during it. So why is that?
During the recession
Recession has a big impact on a business generally. It is certainly challenging to stimulate customers to continue to buy when they themselves are struggling with finances. And we all know that if your sales are down then you need to reduce your costs accordingly, often meaning we also cut our resources and capacity for production.
It’s exhasuting keeping up. So what can we do about it?
As we come out of a recession and there are signs of growth around, there are also opportunities to increase our sales. So why would businesses fail when opportunities for growth are there?
I believe they fall into two main categories:
1. The exhausted ones
The business has cut its costs to a minimum, is bunkering down to weather the storm, but becomes so exhausted at treading water for so long that they are no longer able to identify opportunities or have the energy to go chasing them. And we all know that there is a limit to how long we can tread water.
2. The optimistic ones
Or, alternatively, the business finds the energy to seek and chase opportunities but is so optimistic that they become blinded to risks and over commit themselves financially in order to secure the growth.
So what can we do about it?
There are solutions. During the quieter times, before strong growth returns, it is a great time to get your house in order. How can you streamline your processes to give you greater efficiencies? Get in touch with your best customers and find out what they really value about your service and whether there is anything they would like you to provide that you do not, or any aspect of your service they are not happy with so that you can improve it. This gives you a great opportunity to improve customer service and build a better competitive edge so that you can provide a more consistent and valuable service. And you don’t have to compete on price – instead you can charge a premium becaues you are giving the customer something they really value.
During these times we can focus so much on cutting costs that we forget to prepare for growth. You have to remember that in order to come out of the recession and grow healthily it can be appropriate to spend some money, but wisely.
(Please forgive small sales pitch) There are many business advisors like myself who can help you by providing a fresh pair of eyes that will take an objective view of your business. I often find with clients that it is by an outsider asking the right questions and helping the business refocus on what they really want to achieve and improving the way they do some things, usually a small tweak here and another small tweak there that the business becomes remotivated and in a much healthier position to grow. And we all know that if you are not growing, then you are actually going backwards.
The exhausted ones
Complete the actions above and you will find that you gain some new energy jsut by looking at things differently. If you find it hard to keep motivated, or you are not sure how to approach things then do think seriously about seeking outside help.
The optimistic ones
And for businesses that are overly optimistic about growth, and are considering taking what they think are good risks, again I encourage you to seek advice – either from a business advisor or your accountant – before committing what you have left to the insolvency practitioner.
Morale of the story
Remember, in the words of Machiavelli “Never waste the opportunities offered by a good crisis”
. . . but in my own words “do take advantage of those opportunities wisely”.