By Adesh Shah
Adesh Shah, son of Priti and Pankaj Shah, successfully completed his B.Com in 2008 from H.R. College, Mumbai.
Today we all are talking about recession and its impact on our businesses, but rather than viewing it as a threat to the business we should find opportunities from this phase of business cycle.
I would like to highlight on some of the points of ‘NAVIGATING BUSINESS IN TIMES OF RECESSION’.
1. Prosperity and Recession are the two phases of business cycle. But maintaining these phases is very vital.
2. In a Business Cycle phase of prosperity and recession are going to be there but how to take advantage of those phases lies with entrepreneurs.
3. The challenge of successfully navigating your business through an economic downturn lies in the realignment of your business with current economic realities.
Here are some practices that will help you to successfully navigate your business through an economic downturn:
• The first and very important point is to stay calm at this time. Get yourself well acquainted with the situation and move according to the need of the time.
• History shows, that economic downturns do not last forever. The key is to refocus your attention on resizing your company to the current economic conditions.
• Focus on what YOU can control… Don’t let the media's rhetoric concerning recessions and economic slowdown deter you from achieving business success. It’s a trap! Why? Because the condition of the economy is beyond your control. Surviving economic downturns requires a focus on what you can control, i.e. your relevant business activities.
• Innovate: It is the need of every business these days! Bring changes in existing product lines. Come up with new ideas of developing businesses. It helps to create new demand in the market.
• Communicate, communicate, and communicate! Beware of the pitfall of trying to do too much on your own. It is a difficult task survive and to grow your business, solely with your own efforts. Solicit ideas and seek the help of other people (your employees, suppliers, lenders, customers, and advisors). Communicate honestly and consistently. Effective two-way communication is the key.
• Negotiate, negotiate, and negotiate! The value of a strong negotiation skill cannot be overstated. Negotiating better deals and contracts is an absolute must for realigning and resizing your company to the current economic conditions. The key to success is not only knowing how to develop a win-win approach in negotiations with all parties, but also keeping in mind the fact that you want a favorable outcome for yourself too.
• Diligently monitor your cash flow: Forecast your cash flow monthly to ensure that expenses and planned expenditures are in line with accounts receivable. Include cash flow statements into your monthly financial reporting. The key is to know how to monitor, protect, control, and put cash to work.
• Carefully convert your inventories: Convert excess, obsolete, and slow-moving inventory items into cash. Consider returning excess and slow-moving items back to the suppliers. Close-out or inventory reduction, work well to resize your inventory. Also, consider narrowing your product offerings. Well-timed order placement helps to reduce excess inventory levels and occasional material shortages. The key is to reduce the amount of your inventory without losing sales.
• Timely collection of your accounts receivable: This asset should be converted to cash as quickly as possible. Offer prompt payment discounts to encourage timely payments. Make changes in the terms of sale for slow paying customers.
• Make customer satisfaction your priority it helps in gaining market share.
• Lenders: Everything in business is negotiable and your relationship with lenders is no exception. The first step to successful renegotiations is to convince your lenders that you can ultimately pay off the renegotiated loan. You must point out to your lenders why it would be in their best interest to agree to a new arrangement, showing them your business plan and your action plan that includes your cost-savings initiatives, along with "the how" and "the when" of the implementation of your plan is the best way to achieve this goal.
• Re-evaluate your staffing requirements: This is a very critical area. Salaries & wages are a major expense of any business. Therefore, any reduction in the hours worked through work schedule changes, short-term layoffs or permanent layoffs has an immediate cost saving benefit. In terms of down-sizing your staff, be very careful not to reduce your staff to a level that forces you to skimp on customer service and quality.
• Motivate the staff: Motivating the staff helps in improving the efficiency of the staff.
Finally, I would like to end it with a beautiful quote, quoted by Robert Schular
“Tough Times do not last but tough people do”
Adesh Shah can be contacted at email@example.com.
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