Small business management need to stay well on their tippy-toes during deep, prolonged recessions – during such times, many SMEs will face a squeeze on credit lines, reduced demand often all in the face of surging inflation on compulsory purchases such as fuel and rates. If your own business is edging perilously nearer to towards the red, here are some ideas and strategies to draw it back from the brink:
- Cut down on excess staff supply. One of the biggest draws upon a company P/L will be employee salaries. If you’ve experienced a significant slowdown in consumer demand, then you may need to re-organize and restructure your employees accordingly. Handing out P45’s can be a soul destroyingly difficult task for SME owners, but at times it’s a necessary evil to safeguard the greater good of the company and the majority of its workforce and stakeholders.
- Consider offering reduced hours and pay instead of redundancies. Most staff members in the private sector understand that during tough times, sacrifices need to be made by everyone. As a group, your staff may accept a combination of wage reductions and reduced working times rather than layoffs. This can also help foster a feeling of camaraderie and team spirit among the ranks, knowing that everyone is pitching in to help save jobs. Where possible, you can try and offer improved work life balance (such as introducing remote working as an option) to help make up for the reduction in staff wages.
- Barter harder and better. No business is an island. The majority of UK businesses will feel some level of pinch, and every company you’re buying your supplies and services from are likely to want to keep you on their books. Just as your customers are likely to want a little extra from you, try and squeeze out the most that you possibly can from your suppliers. Barter for better terms – reduced price, more elastic credit, or any other tid bits that can help your business. If suppliers don’t want to haggle, research alternatives who can provide a better deal.
- Understand your key spends. While identifying cost cutting opportunities and increased efficiencies are fundamental processes when surviving an ugly recession, don’t cut back on areas that you know are providing value. Good measurement metrics will help you isolate the spending areas that contribute to positive ROI, while allowing you to cut loose any wastage. It means you need to be on top of measuring your advertising and marketing campaigns, keeping only those ones that are getting you new business.
- Should you relocate? If you find that your rents and rates are just too sapping, and you find yourself in a location that’s just a smudge too expensive for what you’re getting back, you could consider moving to a cheaper area, possibly shifting cities altogether. This can be especially apt for companies who can operate from pretty much anywhere in the country without it affecting their demand.
While a recession is often a choppy and unsettling period for SME’s, those that make it through to better times are likely to reap great rewards and potentially better market shares when the recovery finally takes hold – because, of course not all of the competition will have read this article and survived.