Most entrepreneurs are reluctant to spend money to make acquisitions, expand capacity or open new markets during an economic downturn. An economic downturn can be an ideal time to invest in your business.
Experience has shown every recession creates opportunities for innovative entrepreneurs. And inaction during a recession doesn’t mean safety for entrepreneurs. Instead of sitting back and simply hope things will get better, you should act to improve your operations and ensure you position yourself for growth when the economy recovers.
Entrepreneurs are most likely to bear the brunt during periods of economic decline, whether it be widespread or cyclical for a particular type of business. The very fact that conditions are changing opens up opportunities for resourceful entrepreneurs and firms to outsmart larger competitors who carry on with business as usual during a downturn in the economy or are unable to adapt quickly.
Check your finances first
Before investing, however, take a close look at your balance sheet so you can be vigilant about spending.
Start by ensuring your finances are in order. You need to determine if you’re simply in survival mode or if you have extra capital to inject in your business for growth and/or realignment.
It’s important to ensure you turn over every stone. For example, go over your lending agreements in detail and see if there’s room for negotiation and more flexibility for repayment. Also, keep an eye on your credit terms with suppliers to make sure you’re getting the full bang for your buck.
The challenge here is to be aggressive and imaginative. In order to survive during hard times, entrepreneurs must be able to look beyond the present, to overcome the constraints of
tradition, to see the situation from a new perspective and to do business differently in order to prosper.
Look for opportunities to overtake the competition
Your competitors are basically in the same boat as you. This is a perfect time to launch a new initiative, take market share from your rivals and place yourself in a position to accelerate through the recovery. (It’s like stepping on the gas to accelerate out of a turn when you are driving.) Now is the perfect time to ramp up your business networking. You will not only get advice from other business owners like you, but staying abreast of the news gives you invaluable knowledge and insight on what’s happening in your industry.
Don’t skimp on service and quality due to being understaffed
Even if you have had to cut staff you still have options such as freelancers, consultants and part-time or casual employees. One good advantage of a slowdown is that hiring gets easier because there are a lot more qualified candidates to choose from as a result of layoffs and other cutbacks.
Be prudently aggressive in the marketplace
Use this time to actively seek out new business and perhaps add a salesperson or two or an extra service that will give you an edge over your competition.
Get lean and mean
Improving your business’s operational efficiency is one of the best ways for you to get cash to invest now and see a payoff down the road. Now is a great time to eliminate waste in your company; this will help free up capital. Ensure your processes are lean and delivering the best results. Because almost all businesses are affected by the recession, there are a lot of good opportunities for you to take advantage of cheaper prices from suppliers of equipment and technology that could help streamline your production/operations.
You also have an opportunity to benefit from investing in external advice to help you to improve your processes and systems. Bringing in an outside perspective enables you to spot areas where you can be more efficient. A consultant will help identify your company’s weaknesses and will be able to suggest how to overcome them.
Sizing up new markets
Another important opportunity is exploring new markets where investment might make sense during an economic downturn. As competitors fold, this is the perfect time to take market share.
If you are planning on doing this, one of the first steps is to assess the market to see where the opportunities lie. Go out and do some research. It might be a good time to consider an acquisition or potential alliances with other companies that will allow you to gain access to new markets.
Launch new products or services
During a recession, launching new products and services, or improving existing ones, can also pay off. Take a good look at your customers’ changing needs and ensure that your products or services are in tune with what they want. Keeping a close eye on your competitors to see where you can outdo them is also a good idea.
Involve your team
Getting employees involved in this process is important during a slowdown. If you encourage your team to brainstorm they can generate new ideas that could help you reach new clients. After all, your employees are on the frontline of your customer service and have a lot of insight into market needs.
This may sound strange, but downturns are the perfect time to advertise because of the following reasons:
- Advertising rates drop during a downturn due to lower demand.
- There is higher customer mindshare as competitors cut back on spending.
- Better brand image because customers see active ads as a sign of corporate stability.
When we are on the brink of an economic downturn, don’t panic – it’s not all doom and gloom. Ultimately, it’s important to keep a positive outlook. Investing in times of uncertainty takes courage, but if you plan and do it strategically and wisely, you’ll see positive results down sooner than you think!
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