Entrepreneur survival is vital to ensure the growth of an economy. But with the looming recession, we need to look at some Business Survival Strategies. Nearly every business has felt the impact of the recession.
Business Survival Strategies 101
There has been no escaping. In 2022, the word ‘recession’ was used in nearly every newspaper and online news. South Africa is in a technical recession. Nearly every day, South Africans are inundated with negative news on both the economic and political fronts. But small business owners and entrepreneurs can do nothing about this bad news. It is what it is!
Whether you look at market indicators like the stock market, GDP growth, load shedding, increased energy prices, or whether you focus on the political turmoil and corruption, recession or not, this ‘recessionary-type’ market is, in my opinion, here to stay for a while longer.
There’s no getting around it; the current economy isn’t great, and some Business Survival Strategies will be required. The financial crisis that began in 2020 due to the COVID-19 pandemic has continued to wreak havoc on businesses and financial markets. Many small businesses have closed their doors, while others have had to lay off employees or reduce staff hours. Entrepreneurship is a risky proposition at the best of times, but it seems even riskier during the recession. Fortunately, however, not all doom and gloom.
Many entrepreneurs who started businesses during recessions went on to thrive in the years that followed. Some of these entrepreneurs thrived because they started their businesses during recessions rather than waiting for better economic conditions. So if you’re thinking about launching your own business or growing your existing one in this climate, here are 15 tips and Business Survival Strategies to help you succeed as an entrepreneur and thrive through this recession.
Entrepreneur Success Factors #1: Plan Your Business Strategy in Advance
Planning your business strategy in advance will help you minimise business risks associated with launching a business during a recession. Before launching your business, you should research the industry and your competitors. You should also map your financial plan, including your projected cash flow, profit and loss statement, and sales forecast.
This will help you identify potential weak spots in your business model and allow you to make necessary adjustments before you start your business. This will also help you to accurately forecast when your business will become profitable and how much you’ll need to borrow. If you’re applying for loans or financing to start your business, the sooner you can provide lenders with this information, the better. Lenders and investors will expect a long payback period if your business is a startup. Lenders and investors will expect a shorter payback period if your business is established.
Entrepreneur Success Factors #2: Build a Network of Partners
One of the advantages of launching a business during a recession is that you’ll have a strong network of partners to help you get your business off the ground. Entrepreneurs who started their businesses during recessions often did so with a network of partners and joint ventures. If you need to, don’t hesitate to contact family members and friends for help.
Partners may come from investors, joint venture partners, or even suppliers. Partners can also be your customers. Using partnerships and joint ventures to fund your new business, you can reduce your personal risk and create a safety net as your business gets off the ground. This is especially important if your business is in a high-risk category or will be very capital-intensive.
Don’t be afraid to reach out to people you know and trust. Many entrepreneurs who started their businesses during recessions did so with the help of family members and friends with the necessary skills and experience to get the business off the ground.
Entrepreneur Success Factors #3: Don’t Be Afraid to Shake Things Up
As an entrepreneur, you’ll need certain abilities. Integral to entrepreneurial success factors is that you’ll have plenty of opportunities to shake things up and turn challenges into opportunities. People are less likely to change jobs or try new things when the economy is booming. This means you’ll have a lot more competition during better economic times. In a recession, however, people are more likely to try new things differently.
This makes it a great time to shake things up, try new things, and launch new products and services. Don’t be afraid to shake things up and try new things. You may not know exactly where your business will be in one year or five, but if you commit to continuous improvement, you can ride out any economic storm.
Entrepreneur Success Factors #4: Commit to Continuous Improvement
One of the most important Business Survival Strategies is a commitment to continuous improvement that will help you ride out any economic storm. When the economy is booming, it’s easy to get complacent. When your business is doing well, and the money is flowing, it’s easy to get lazy. A commitment to continuous improvement will help you avoid this trap and keep your business growing when others are struggling. If your business is struggling during a recession, don’t give up. Keep working hard, keep improving your products and services, and don’t be afraid to shake things up.
Entrepreneur Success Factors #5: Don’t Assume Everyone Will Cut Back on Spending
Some people will, of course, but not everyone. A few groups of people will increase their spending during a recession. For example, retirees who have saved up enough to last them throughout their retirement may decide to spend more during a recession because they have nothing to save. Similarly, people with a significant amount of unsecured debt may decide to stop paying their credit cards and other unsecured debts because they don’t want to risk losing their assets in bankruptcy.
Businesses that rely on large or infrequent purchases may decide to cut back on spending in a recession. Vacation companies, for example, may see fewer bookings as people decide to stay closer to home. This may affect your business if you rely on large, infrequent purchases from these customers.
Entrepreneurial Success Factors #6: Focus on Your Core Product or Service
When the economy is booming, it’s easy to get distracted by shiny new things. However, when the economy is struggling, it’s important to focus on your core product or service. You may get away with offering various products and services during good economic times, but you won’t be able to do this when the economy is struggling. Customers will be less willing to try new things and less willing to take a risk on new products or services. You should focus on your core product or service during a recession to help ensure your business survives.
Entrepreneurial Success Factors #7: Consider Mergers and Acquisitions
When the economy is booming, it’s easier to attract new customers and increase sales. When the economy is struggling, it’s much harder. You may find you have more free time in a recession as customers cut back on their purchases and your sales fall.
It may be a good idea to consider mergers and acquisitions in this situation. This can help you increase the size of your business and reduce the time your sales and employees spend on sales. It’s important to choose the right combination, however. You don’t want to be too small or too large for the new company. You also want to choose a partner with compatible goals and values. This can greatly reduce your reliance on sales, increase your cash flow, and help your business survive and thrive during a recession.
Entrepreneurial Success Factors #8: Go Lean – Just Enough Employees, Equipment, and Space
You’ll want your business to be lean and mean during a recession, but not in the same way you do during good economic times. When the economy is booming, you want your company to be lean and mean because it’s a good way to improve your profit margin.
However, when the economy is struggling, you need to go above and beyond what you would do during good economic times to ensure your business survives. You want to keep your costs as low as possible. You don’t want to have too many employees or too much equipment. You also don’t want to have too much space. Ideally, you want to cut your costs without cutting into the quality of your product or service. If you can do this, your business will be able to ride out the storm and emerge even stronger than before.
Entrepreneurial Success Factors #9: Be Proactive About Marketing and Advertising
Marketing and advertising are important regardless of the state of the economy, but they become even more important during a recession. You’ll want to be proactive about marketing and advertising during a recession because when people need your products and services the most, they are least likely to buy them. People will be more likely to cut back on their spending during a recession, and they’ll be less likely to purchase your products and services.
You can offset this by being proactive about marketing and advertising. You may have to spend more money on advertising and marketing than you would when the economy is booming, but it will be worth it when your sales increase.
Entrepreneurial Success Factors #10: Know When to Quit
All of the tips on how to survive the recession as an entrepreneur are great, but they won’t do you any good if you don’t know when to quit. You don’t want to stay in a business that is no longer profitable. When your business is no longer profitable, it’s time.
Entrepreneur Abilities #11: Defeat the Downturn
During such times, it’s easy to panic. Panic, which is fear-driven and not based on fact but on emotion, has tremendous power to change the business’s direction. But do you want to give in to panic, throw your hands in the air and accept self-destruction, accelerating it, becoming a part of the panic, stimulating more?
There’s an alternative to panicking. We are confronting change, and change is an opportunity for advancement. Now you have the choice to take advantage of changing it or allow yourself to be buried by it. Make the right choices today and see the results tomorrow. It’s not just about adjusting prices – you need to broadcast your differences, tell people why they should shop with you, provide them with added value, and not discounts, and watch your business grow in a down market. Be a leader, and the people will follow.
You can help lead the way out of the recession as a small-business owner. Start with your employees, move to your vendors, and then support your customers and market area. Announce the good news, and everyone will line up.
Entrepreneur Abilities #12: Evaluate and Eliminate Excessive Debt
If your revenues have dropped, you may not be able to service the debt you took on when your revenues were much higher. Any debt can be worked out – secured debt, business loans, asset finance, trade finance, lines of credit, and even leases.
Entrepreneur Abilities #13: Train and Cross-Train your Staff
If every job or task is learned by at least one additional person, when the primary person is out, the secondary person cross-trained to perform the task can leap in and save the day. And so, work continues, and productivity remains high despite the absence of a key player. Smoother production, greater productivity, and happier customers mean a better bottom line.
Entrepreneur Abilities #14: Focus, Focus, Focus
- Resist profit-eating sales and discounts. Don’t give away your product; instead, compete with service, quality and uniqueness. Create a niche and have a competitive advantage.
- Manage effectively. This means tracking and analysing key indicators, financial reports and productivity. Get smaller first and more profitable, then grow slowly and carefully.
- Focus on quality. That’s what wins in the long run. Never forsake this principle. Get better, get smaller or be forced out. It’s your choice.
Entrepreneur Abilities #15: Drop Unprofitable Customers
The natural urge is to hang onto every customer, but use the spare time the recession provides to analyse your customer base and find out which are the most profitable and which are costing you money. Read more about the importance of Customer Analysis and, Tips on How to Deal with Different Difficult Customer Types.