The Recession Continues to Bite.

The news continues to be dominated by failing companies, unemployment and toxic financial institutions. Added to this are all the various scams that were covered up by market growth and are now coming to light because of the financial crisis. It’s ironic that Mr Madoff made off with so much money and was only found out because of the broader problems in the markets. Walking through Alton High Street during the week, I was shocked by the number of shops that had closed down. The Car Parts shop has gone, along with a Card Shop, Woolworths, a clothing shop and another four or five that six months ago were doing fine. With the exception of Woolies, these are small businesses, just like you and me. What should we be doing to ensure that we stay in business and don’t end up sleeping under bridges and getting to know the Salvation Army soup kitchen volunteers?

Remember that recessions do eventually come to an end. When the upturn comes, the usual market rules will again once apply and the companies that people know about understand and respect will be the first to do well. Companies that have cut their marketing now will be starting from a lower base and will take longer to recover. It is likely that the end of the recession will be marked by tax rises, VAT back to 17½%, price rises and interest rate increases. Keeping visible will make it much easier to bounce back. Rule 1. Keep marketing. That said, be sensible where you spend and try to exploit low cost channels.

Cut unnecessary costs. Most companies will have already done this, however take a close look at every expense. Is it adding the value you need? If not cut it.

Ensure you have access to a sympathetic and a friendly bank manager. Over the past couple of weeks there have been an increasing number of stories about banks and credit card companies withdrawing credit lines to companies and individuals on the flimsiest of excuses. If you have the slightest inkling that your bank is going to do this to you, be proactive and move your account now. There are plenty of good commercial bankers out there that want to see you survive the downturn. If yours isn’t one of them, move your account while you are in control.

Understand your customer needs and make sure you deliver something they want to buy. This sounds simple minded but your customers are suffering in the same way you are. They are looking for better deals, better value and more efficient suppliers that fit in with their requirements and make it easier for them to do their business. Get close to your customers and deliver what they need. Keep in mind that the stone-age didn’t end because the cave dwellers ran out of rocks. They found better ways to do things and so will your customers. Make sure you are the better way.

On the subject of being a good supplier, be sure that your suppliers are going to stay in business. Zavvi went into administration because its suppliers were dependent on Woolworths. Several companies I know of have been unable to meet large customer orders because of their supplier’s financial troubles, and have lost business as a consequence. Stay on top of how your suppliers are faring, and don’t be afraid to find alternatives, they can easily take your business with them if they fail. This will mean getting closer to your suppliers to better understand them, which may well lead to new opportunities for you.

In all the doom and gloom it is tempting to simply try to keep your head down and concentrate on doing what you do as well as you can. However you should be willing to invest in new ventures that will create new revenue streams. Be prepared to write a business plan to evaluate new opportunities, and where that leads to a new source of income, invest. The better bank managers and business angels are still looking for solid ideas to invest in, especially given the low interest rates. Good ideas will still find a market.

I wish you all a stress free and prosperous 2009. If you would like to discuss any of the points I have raised feel free to give me a call.