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Five tips to survive in a rapidly changing economic climate

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An economic downturn or recession is never going to be a pleasant experience. It reflects a low point in business confidence resulting in job losses, discretionary spending cuts, additional workloads, higher stress and uncertainty as roles and priorities change.

However, for those with foresight, it can provide a real opportunity for restructuring organisations into a more efficient business models that are better equipped for survival and future growth.

During his 30 year career in the property industry, Martin Hill, Founder/Director of Estate Master and Managing Principal of Hill PDA, has lived through four major economic slides.

"While a recession is a fact of economic life and it can be viewed as an auspicious time for better positioning your business for the recovery phase," he says.

Martin Hill's Top Five Tips for Surviving an Economic Downturn are:

Tip #1: Read the Signs

Be Prepared. The faster the climb, the harder the fall. All recessions follow a similar pattern. Telltale signs include: sharp stock market gains, increased volatility and troubling predictions from the Reserve Bank. The current recession had its roots firmly imbedded in the sub-prime crisis late in 2007 even though the actual stock market didn't crash until 10 months later. The signs first emerged in early 2008 that it was the time to:

  • Resist expanding staff levels and/or move into a hyper growth phase of increased expenditure and reduced margins because the market appeared to be booming;
  • Avoid costly long term commitments and seek out clauses if a change was required;
  • Increase cash reserves and develop business strategies to maintain cash flow should a crash occur and revenues fall;
  • Communicate your concerns with all key staff and seek a collaborative approach to agreed trigger points; and
  • Be mentally prepared for a change and action.

Tip #2: Stay Calm and Informed

Filter Fact from Fiction and Act to Preserve Cash Reserves and Core Staff. Fear tends to grip a market faster than greed does. Once the recession word hits the headlines most businesses panic by putting a hold on all discretionary expenditure including training and advertising. Staff cuts are made in non-revenue generating areas. All this can be predicted. Fact needs to be filtered from fiction in order to act on an informed basis.

  • Set guidelines for action based on protecting cash reserves and implementing sensible cost cutting measures to protect the minimum bottom line. Adjust to the changing circumstances by minimising reductions in cash reserves;
  • Identify the core team you have selected to move forward with and protect their employment as you would for yourself;
  • Consider rolling out workplace agreements that reduce base salaries but offering generous bonuses if revised targets are achieved. Discuss openly with key staff options and trigger points for action;
  • Seek and encourage input from all key staff members across all issues of improvement in a harmonious and agreeable way. This communication of change needs to be reiterated frequently to enforce ownership and instil confidence in the company's new direction;
  • List your strengths (service/products) in the changed market. Develop a long term strategy that enables you to communicate this message effectively with your customers during the tougher economic climate. Messages reiterating your strengths and product benefits need to be constantly repeated; and
  • Use empathy. Put yourself in your customer's shoes. Learn and see what it is they need. Work together to find a solution you both believe is of benefit to them.

Tip #3: Stay Focused on Service, Communication and Development

Keep the core elements of your business functional. While slashing costs and jobs (or introducing job sharing) may be required across all areas of the business, avoid disproportional cutting in non-revenue areas such as:

  • Front line service/support for customers as this is your direct link to sales recovery.
  • R&D because this is key to innovation. Priorities should be constantly monitored with greater input contributed by the sales and support staff.
  • Marketing so new messages can be clearly and effectively communicated.

Tip #4: Watch for Opportunities and Adapt

While an economic downturn leads to an overall reduction in business activity, there are also increased opportunities for certain market sectors and products. Businesses must listen to what the market needs and be flexible to adapt quickly.

Cash becomes king needing:

  • Greater monitoring of cash flow along with the need for innovations in order to reduce costs. This may be in the form of IT enhanced business processes or innovations in product development or manufacturing making products more cost effective;
  • Investment choices to be more conservative, with yields on investment increasing while interest rates drop. This creates opportunities for making strategic investments and growing market share more cost effectively; and
  • Business to be happy with reduced profit margins for establishing or improving long term business relations and avoiding loss lenders. Pay back times cannot afford to be too long unless there are surplus cash reserves.

Tip #5: Build on Your Success to Thrive with a More Resilient Business Model

Working through challenging economic times requires greater team work and collaboration in order to develop a better business model based on improved efficiency, innovation and cost flexibility. Favourable outcomes are:

  • Improved loyalty and staff morale.
  • Better business intelligence about your strengths.
  • New ideas as necessity is the Mother of Invention.
  • Improved business knowledge to read the signals and survive another downturn.

Date Published: 25 Nov 2009
Category: White Papers

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