How to Prepare for the Next Economic Upturn
The economic environment in which a business operates significantly affects its performance. One central responsibility of a business owner or manager is to manage the business in a way that makes the most of prevailing circumstances. You might need to trim your non-core expenses and replace fixed costs with a higher variable cost component; this could mean hiring temporary as opposed to full-time staff, or leasing equipment on a pay-per-use basis. Cash flow crunches have ruined many a good business; when business is slow look for unmoved inventory and slow selling products to put up for sale at discounted prices. Replenish merchandise in controlled quantities only as needed. It is also important to maintain price stability; be mindful of how consumers are experiencing the downturn and its impact not only in terms of their buying decisions but also their ability to pay their debts if you sell to them on credit.
What has caused the current economic slump in South Africa? Besides unemployment, inequality, poverty, crime, and HIV/AIDS that continue to plague the country, sectors like agriculture, mining and manufacturing are in decline while the trade and current account deficit (CAD) has widened. Household indebtedness has reached worrying levels in a low-interest rate environment parallel to mounting inflationary pressures. Overall growth has slowed down, which is a risky proposition for South Africa. Luckily, the sound fiscal position has cushioned the economic slowdown somewhat.
Consider how your business can help improve the lives of people struggling to survive. Such families have either limited or no resources, such as money, education, and reliable contacts. If your business is a bakery or grocery store you could incorporate a mobile food truck service to your business and sell goods in low-income areas at discounted prices. As long as you research the feasibility of this kind of venture you can let your creativity soar. You will need to comply with relevant regulations (consult the Department of Health) and obtain the necessary permits. Other worthwhile ideas to help poor communities include sponsoring an amateur sports team (uniform, equipment, coaching); or upgrade a public recreation park (liaise with the local municipality to plant trees and lawn, install children’s playground equipment). These projects will not only contribute to the well being of the community, but will also attract media attention and gain publicity for your business.
There exists a common belief that the development of small-scale industry could become a prime mode of economic growth that will impact positively on poverty alleviation. However, two prime obstacles hamper this vision, namely a shortage of entrepreneurial skills and a scarcity of technological know-how and job skills. An economic downturn offers a business the opportunity to train jobseekers that you may want to employ in the future or equip them with essential skills to pursue self-employment or seek formal employment elsewhere. This gesture to train and develop human capital places your business’ social responsibility in a strong position within your community. Structured on-the-job training must however be cost-effective to the business; the process should ideally be outcomes-based, which means the learner is taught relevant theory that is supported by practical demonstration (through mentoring and feedback), followed by practical application of newly learned skills. Once the learnership is completed, the employer can decide whether to sign the learner on for a new learnership, employ the learner or release the learner for future employment by another organization.
To be successful every business needs a focused strategy, a philosophy of continuous improvement, decisive and resilient management, loyal personnel and top class customer service, more so in an economic slowdown. Yet it is common during a period of economic growth to see some businesses thriving despite an unfocused strategy, weak management, impolite employees and poor service — but this is generally short-lived. One way that firms can sustain their positive reputation is to avoid disappointing their customers; customer perception of quality and satisfaction affects their repurchase behavior. And because consumers are getting smarter as they incorporate new technologies into their daily lives and information becomes more readily available, business owners and managers are duty-bound to communicate face-to-face with consumers as well as interact with them on the Internet (keep your company Web site current; customers browse the Internet to compare prices, print coupons and access their personal accounts), mobile devices (mobile phones to locate the nearest store, compare prices and check that the items they want are in stock before they go to the store), digital TV (in-store infomercials), and in-store kiosks (to review product features, pay for goods and obtain product information). Technological advancement has made it a buyer’s market. Generations X (aged 31-44 years) and Y (aged 20-30 years) are particularly receptive to using new technologies to enhance their shopping experiences.
Provide outstanding customer service; go out of your way to give customers a reason to spend their money in your business. Boost employee productivity by initiating incentives such as small bonuses or sales percentages, coupled with in-house training sessions instead of reducing your workforce. Make sure your employees are aware of any significant changes in store policies and special promotions. It is beneficial to run regular brainstorming sessions to inform and consult with your employees; when employees see their suggestions have actually led to positive changes, they will be eager to contribute ideas again. Make use of these productive meetings to communicate revised budgets to affirm your rationale for the realignment.
Get the attention you deserve! Don’t stop promoting your business, more so in tough economic times; when marketing stops sales plummet even further, creating even greater cash woes, but it’s the failure to maintain a strong company profile that has the most negative effect. If a business is seen to be “off the radar” even loyal customers lose confidence and head elsewhere. When the economic recovery finally arrives it’s easier said than done to restore your previous market position; that’s when the problems really start. During a recession the aim is to modify your marketing plan to reflect the changing economic conditions. Look for unique, low-cost ways to connect with the customer. Find out your customers’ grievances and frustrations; in other words, which expectations are unmet in relation to what you do. Use that principle in your tactics; people immediately notice solutions to their problems.
When economic conditions improve, you will be fully primed to benefit from the next economic upturn. Although most people perceive a downswing in the economy as bad news, a slowdown in the economy has some positive elements. It eliminates weak competition. It forces a business to reassess its position in the marketplace. It forces realignment within the company to cut unnecessary expenditure. It encourages a business to focus on its core competencies to drive change and innovation. It inspires a business to grow its customer service. It provides time to focus on in-house staff training. And eventually, a downturn is always followed by an upswing.
Words by Theresa Lutge-Smith (firstname.lastname@example.org)