How to Recession-Proof Your Business for 2020
Currently, the financial and political climate is changeable and uncertain. According economists such as David Blanchflower, if we continue the direction we are heading, we will encounter a recession likened to that of the 2008 banking crash. Both the national and international financial landscape is facing turbulent times. In response to this, it is essential that you do everything you can to prepare your business for every eventuality. Read on to discover what you can do to safeguard your business, and if you are still facing uncertainty, contact an accountancy from that specialises in audits, tax advice, and small business VAT.
Will the UK suffer at the hands of a recession?
Unfortunately, the UK won’t be able to avoid the financial implication of a global recession. The US trade war with China has caused a larger drag on global growth than anticipated, and the UK will be on the receiving end of the economic repercussions. What’s more, the looming prospect of Brexit poses different threats to the UK’s economy. At best, the uncertainty caused by Brexit has created a hesitant consumer base in the UK. Customers are spending less and are more cautious of businesses than ever. It is a difficult time to maintain customer loyalty, as would-be consumers are tightening their purses in the fear of a looming financial disaster.
Whichever deal allows us to exit the EU, it will have financial repercussions. According to expert forecasts from Andrew Sentence and David Blanchflower, leaving the EU with no deal will plunge the UK into its first recession in a decade. Boris Johnson’s new deal might negate this threat, but after the transition period (which will last around a year), we could still end up in a no deal situation if a free trade agreement isn’t decided.
Currently, there’s no way of knowing for certain what Brexit will lead to. Expert speculations have ranged from optimistic to dire, but it is important for business owners to prepare for the worst nonetheless.
The international recession
Due to the weaker growth in both advanced an developing countries, the UN warns that a global recession is on the horizon. Factors such as trade wars, currency fluctuations, and Brexit are all amounting to an uncertain global economy. According to the Unctad report, “global growth will fall from 3% in 2018 to 2.3% this year – its weakest since the 1.7% contraction in 2009”. Because of this global strain on economy, we are expected to encounter rising levels of debt (in both developing and advanced countries), as well as a “global downturn that could increase unemployment and inequality” (as stated by Kristalina Georgieva of the International Monetary Fund). Redundancies and a decline in job vacancies on an international basis are expected to follow such a crash, with unemployment rates increasing at an alarming rate.
Focus on your business
It may seem like an up-hill battle, but there are many ways you can prepare your business. Businesses that prepare for every eventuality are the ones that survive and thrive in the face of adversity. Leaving it too late to implement a recession strategy could be your undoing, so get ahead of the game and prepare for a post-Brexit Britain. Here are some key strategies that will help your business face economic uncertainty:
- Focus on existing customers — as we have discussed, consumers aren’t spending as much due to lack of trust and growing apprehension. Because of this, it is essential that you focus on your existing customer base during testing financial times. This will increase brand loyalty and grow customer confidence. Offer them benefits and reasons to stay true to your brand.
- Put some adjacency and extension strategies in motion — a recession is not the time to start looking into completely new avenues of profit. However, you can’t let your services become stagnant. Adjacency strategy is the optimum solution to this — find an area adjacent to your core product or services to expand into. Extension strategy is similar: take your current service a little further and offer new and exciting opportunities or products to existing customers. Ensure that you have a flexed forecast so that the business is fully prepared for all possible outcomes of this new strategy.
- Forge some powerful alliances — mergers, acquisitions, and alliances are all key strategies during a recession. Alliances offer a great way to expand your business without investing in anything completely new during times of uncertainty.
- Don’t be afraid to outsource — outsourcing key elements of your business can save you time, money, and financial anxiety during a recession. Outsourcing your accounts department may allow you create scale and flexibility within your organisation.
- Reduce inventory costs — look to see if your business has the leeway to reduce costs without sacrificing the quality of the services or products it provides. This will help to take the pressure off your finances.
- Don’t sacrifice your marketing budget — often, brands make cuts to their marketing budgets in response to financial anxiety. However, this will spell disaster for your company. There is no time more crucial to maintain your marketing efforts and show customers that your brand is tackling the recession and winning.
- Tighten up on your corporate governance – companies that see a downturn in performance are more likely to survive if they have good corporate governance embedded into their culture. Part of this is ensuring that the company has had a financial audit.