We are in an economic downturn and managing a business through an economic recession may be the toughest challenge an entrepreneur is ever faced with; however, if you do not fall prey to panic, a downturn also presents an opportunity to the business to confront its ineffective areas and remedy them.
“Businesses should be able to do more than simply accept stagnating levels of growth, or even decline. In fact some businesses grow at surprising rates during economic recession. If there was ever a time to adopt a positive, opportunity-based mindset, it is now, and is one of the best things you can do to lead your business through challenging circumstances” says Heather Lowe, Head of Enterprise Development at FNB.
To come out a better business at the end of any downturn, you need to carefully consider your business model and context in order to devise your strategy going forward.
Lowe shares some elements you should think about in this time:
- What are the drivers of growth in your business? If your business is a disruptive one that displaces traditional market participants like Uber disrupted the transport industry, you may find yourself less affected, however if your business growth is based on market growth or market tailwinds, a downturn could require you to adjust your plans.
- What industry are you in and how has that industry reacted in downturn economic conditions historically?
- What legislation protects your business or provides competitive advantage? In order to grow the economy, emphasis is being placed on the SME sector, with regulations requiring increased procurement by corporates from this sector. Research the opportunities this may present.
- Who are your customers and how sensitive are they? Typically businesses supplying other businesses will be affected less and slower than those that serve the public, with subsequent changes in buying behaviour being more predictable.
- What is your competitive advantage based on? If your business is a “headache tablet”, it may remain buoyant, but if your offering is a “nice to have – a vitamin tablet”, you will likely encounter headwinds. This may mean you need to focus on your levels of service provision and quality to retain your clients.
“Before taking obvious decisions to avoid difficulty in a downturn, rather analyse your business model diligently and identify where the opportunities are to execute the core of what you do better, faster and more efficiently. With the right attitude in leadership, the current downturn could result in you strengthening your business as opposed to killing it” concludes Lowe.