How to Survive a Recession & Thrive
That once-in-a-thousand-years economic flood has hit again, predictably close to its typical cycle of 10 to 12 years. People were taken aback in 2008, 2001, 1987, 1973, and... well, you get the picture. And, once again, there will be a lot of people out there who haven't saved much for a rainy day, have a lot of credit card debt, have seen their 401(k) turn into a 201(k), and are now facing long-term unemployment or dramatic underemployment, or the failure of the business with personal guarantees being called.
So let’s take a look at how can you survive an economic depression and the thrive that arrives afterward. #TWN
How did leading multinationals such as Samsung, Costco, and Honeywell weather prior downturns and use them to fuel growth? We've found the proven tactics employed by leading organizations to effectively navigate through a slump and thrive after it, based on studies from Harvard, McKinsey, Deloitte, and Bain & Company, and combined them into this vital report. The main points are stated here. At the bottom of the page, you can download the entire report!
Let’s take a look at how to survive the recession and thrive afterward.
1. STAY CALM, BALANCED, AND FUTURE-FOCUSED
What do you want your business to look like when the recession is over? What about three years later? The answers to these questions should help you create your resilience strategy and make all of your decisions easier if the economy deteriorates.
According to Bain & Company, taking a 'future-back' approach allows your management team to lay out a strategy for outperforming your competition throughout and after the crisis.
2. ASSESS YOUR CURRENT POSITION
To profit from a downturn in the economy, you must first examine your company's financial and strategic position realistically. If your company has a solid financial position but a weak market position, for example, this gives an opportunity to focus the company on a defensible core offering, invest to grow this space, and reduce costs to fund this future business path.
3. TREAT CASH AS A KING
Lower sales and less cash are unavoidable during a recession. The first, and possibly most crucial, measure you can take to ensure you come out on the other side in excellent shape is to strengthen your company's financial health in advance of difficult times.
Fortunately, you have some influence over a few variables.
4. PRACTICE PRUDENT PRUNING OVER AGGRESSIVE COST-CUTTING
'Losing' companies behaved under the misconception that dramatic cost-cutting would be enough to withstand the storm,' according to a Bain & Company research of nearly 3900 corporations during and after the global financial crisis. They harmed themselves by attempting to slash and burn their way to the other side,' taking desperate steps to conserve money such as lowering R&D, ruling out acquisitions, reducing marketing and sales, and laying off key personnel.
Consider how you may reduce fixed expenses and manage working capital effectively to improve cash flow and develop resilience against demand volatility.
5. BALANCE YOUR FINANCES
In a survey conducted by Delloite of over 1,000 CFOs, one of the biggest priority activities in anticipation of an economic crisis was to stabilize their finances. Apart from that, a McKinsey research study conducted on the performance of various companies post-GFC came out with a common result that said a common theme amongst winners was an organizational focus on the management of the balance sheet. There are a number of practical actions that can be taken by you now to reduce your debt, consolidate your position, and improve your overall financial condition.
6. LOOK BEYOND LAYOFFS
Unfortunately, layoffs and redundancies have become inextricably linked to economic downturns. It doesn't have to be this. Layoffs hurt both people and businesses. This is correct for several reasons. To begin with, redundancy and pay-out costs immediately deplete cash reserves. Second, as the economy improves, employing and training new personnel is a substantial expense that businesses should avoid. Third, the long-term societal ramifications of such a shift may be even more costly.
According to a Harvard Business Review research, companies that relied less on layoffs and more on trimming operating costs to decrease overheads fared better than their counterparts during the Great Recession. Companies should also explore hour reductions, furloughs, or performance compensation, according to HBR.
7. STREAMLINE AND FINE-TUNE
During the global financial crisis, Bain & Company investigated discount retailer Costco's strategic approach to streamlining operations and processes. Using smart streamlining techniques like these will help you not only stay afloat but also grow your revenues and earnings during and after the recession, just like Costco did.
8. PAY ATTENTION TO CUSTOMER RETENTION
Even a 5% increase in client retention can boost profitability by 25–95 percent.
Some business leaders become panicked during a recession and stretch their businesses in an attempt to gain new clients. Concentrating your efforts on improving relationships with existing clients and maintaining focus on your core audience, on the other hand, is a more profitable strategy that will not jeopardize your company's future.
9. FOCUS ON ESSENTIAL SKILLS
During the previous crisis, underperforming companies tended to panic and expand outside of their main industry, chasing investments in the trendiest trends and services before they completely burned out.
Diversification has its place, but in a time when efficiency is crucial, focusing on perfecting your core product and focusing on what you know is successful is the best way to recession-proof your business.
10. BE A ‘MUST-HAVE’
During an economic crisis, individuals and organizations are forced to cut down their budgets to survive. If you offer a “must-have” product or service, the recession is very less likely to impact your organization. So work on this question, how can I make myself “essential”?
If you have a large sum of money stashed away in a high-interest, FDIC-insured account, it will not only retain its full value during market volatility, but it will also be incredibly liquid, allowing you quick access to funds if you lose your job or are forced to take a pay reduction.
You will also be less reliant on borrowing to meet unforeseen bills or the loss of a job if you have your own money. When a recession strikes, credit becomes scarce very quickly. When these circumstances happen, use your emergency fund to meet critical expenses while keeping your discretionary spending low in order to make your emergency fund last and restore it as soon as possible.