Small business tips for coping in a downtime

Recession or none, every business can count on having periods when sales are slower than others. Good business management is the key to surviving these periods, which means taking prompt but carefully considered action. Here are some tips to help you navigate your way through the storm.

Develop a new business plan
When tough times hit, you may want to formulate a new business plan to guide operations through this period. The plan should be based around the reduction in sales expected, and the steps needed to compensate for this profit loss. You must discuss the new plan with your banker and ensure you have their full support – they may then be willing to lengthen the terms of debt repayment.

Talk to your accountant
Having a good accountant is essential to any business, as it could be their advice that saves you. You should talk to your accountant as soon as business starts to slow, and it is vital that you be completely honest with them about your situation. Your accountant may advise you on how best to improve your cash flow, or they may suggest that you call it quits. Either way, their advice should be taken seriously.

Avoid price reductions.
Although competitors may be reducing prices, you should avoid reducing the base rate of your products if possible. The reason for this is that you may need to raise prices again when things pick up, which is much more noticeable to a customer than a reduction. A good alternative is to offer discounts for preordering, ordering additional items, or ordering online. If you must reduce prices, choose products that are overstocked or slow-moving.

Don’t stop advertising
Keeping your brand in the marketplace is essential during a downtime, so don’t be too ruthless with advertising cutbacks. An inexpensive option is to run a direct mail promotion, which could be a brochure advertising a special or offering a discount to your current customers. Many businesses choose to halt advertising and promotion when times get tough, but this can often hurt sales.

Chase up accounts owing
Improving cash flow is vital during a downtime, so calling in overdue debts is a must. Call your past-due customers and try to arrange some sort of payment-plan if they are unable to pay the entire balance. For further advice on this matter, see our guide: control your credit and beat the crunch.

Negotiate terms with your suppliers
If you have a good relationship with your suppliers, you may be able to negotiate longer terms of credit with them. They will most likely be experiencing slower times as well, and so your continued business with them will be important. Longer credit terms will free up cash flow

Reduce the normal business hours
If your staff are working 40 hour weeks, consider whether this could be reduced to 32 hours without hindering the business. This is a good way to avoid losing valuable staff through lay-offs, though lay-offs may be necessary if business is particularly bad. If lay-offs must be made, it’s best to make cuts in one fell swoop rather than making repeated reductions – as this will make the staff you have retained uneasy.

Communicate with your employees
Whatever changes you decide to make to your business in order to deal with the downtime, it is vital that you let employees know. You don’t need to tell them everything, just inform them of changes that will affect them – such as a reduction of hours of layoffs. If you do not communicate with them, they may fear for their jobs and start looking for employment elsewhere.

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