Company Survival Tips during a Recession

They say an economy is in a recession when there is negative growth for 2 or more successive quarters in a year. Credit becomes tight, money doesn’t move and everything becomes scarce.

How do companies survive during a recession? Well there are a couple of things that through the ages companies have practiced in order to be competitive and survive. It usually boils down to reducing cost, maximizing productivity and squeezing every once of profit that you can get till demand goes back up again. Staying Liquid, Cash heavy and Debt Light is a must in these times.

Some Tips for Surviving a Recession

• Reduce Cost - the most easiest thing to do. Do an audit of all things essential then strip the rest. Perks are dropped for only the things that one needs to keep things running. If your business were a car you’d be left with only the engine, one chair, 4 tires, brakes and the gas tank. Simple things as moving to a smaller office, cutting off some of the lights
• Maximize Productivity - Doing more with what you have rather acquiring additional resources. Typical of this is one person taking on the job of 2 or more persons. Its seems manageable as long as the demand is low. Which it usually is during a downturn.
• Maximize Profit - Companies drop prices just to stimulate the movement of their inventory, they feel that the increased volume can augment the lowered profit margin per item.. Some retailers even time their “Sales” to the day of the week when salaries are paid so that people will be inclined to spend more.
• Cut Salaries and Bonuses - Some companies try to renegotiate with workers to lower their salaries so just that they won’t have to lay off people. In Japanese companies, management will usually give up their bonuses so just that the rank and file can have theirs.
• Work Holidays - Cutting work days to reduce cost. Same reason for cutting salaries and bonuses of employees.
• Layoffs - To be fair, some companies use outside auditors, so that nobody will be accused of playing favorites. Some companies ensure that those who were laid off get off to a running start. They look for jobs for them while others spend money in retraining them. Some seem to abuse the recession by using it as an excuse to get rid of employees with higher pay and replace them with cheap new hires.
• Mergers - merging with a competitor or a subcontractor can usually guarantee survival because it consolidates market share and reduces expenses. Though when two companies merge, one company will usually get the short end of the stick and have to lay off some of its workforce.
• Renegotiate Contracts and Debts - This is where you can cash in on your relationship between creditors and suppliers. This is also the reason why you should always try to form a symbiotic relationship with those you deal in business with. Because your growth is their growth and your downfall is their downfall. Some small Chinese family companies have this. When times are tough they close ranks and help support each another.
• Call in Debts - I’ve heard of some companies who have clauses in their contracts that allow them to pull in early the payment schedule of their clients. This is for the reason of staying liquid. Doesn’t do well with strengthening your relationship with your client though.
• Fore go Expansion/Core businesses - Companies will sometimes put a halt to their plans to expand owing to the contracted market environment. Some will also drop non profitable enterprises and stick to their core business. Business that they know do well for them and they are well entrenched in their market. Oursourcing is another way of implementing this, by sticking only to what makes money in your business and letting others whose business it is to do what isn’t money making for you.
• Shift Markets - I admire companies like these, who have the courage to innovate and take risks during a downturn. They see a possible revenue stream in a different market and they go in head first. One reason also is, if you have the cash, a down market would be a good time to invest because almost everything is dirt cheap.