Over the past years, several businesses have learnt that there is never a guarantee that the economy will retain an upward trend permanently. As we have seen from the events that transpired over the past months, businesses need to be prepared for rainy days.
Not being able to withstand the challenges brought about by a crisis can eventually lead an organisation to close its doors. The pandemic was a clear and hard example, showing how a crisis can take place abruptly and impact businesses immediately, without warning. This development brought about significant hardships as enterprises and individuals had to find new ways of working, adapting to a reality which many would have deemed unrealistic or unthinkable. It would be folly to assume that we will not face any further crises and not preparing for them can translate to severe consequences.
We sit down with the Founder and CEO of MYC, Simon Attard, to discuss ways how businesses can prepare for challenging macroeconomic developments that are simply out of their control.
Consistent awareness
To ensure that an organisation is constantly prepared for the worst, owners and senior management must be consistently aware of the weaknesses and vulnerabilities. A regular analysis of the shortcomings and threats would allow businesses to understand what can be improved in anticipation of a dip in economic activity. In this respect, it is necessary to equip the business with solid defences, even when things look good. Astute businesspeople with foresight will think about worst case scenarios and will have outlines of plans in place to handle them.
Budgeting
Businesses that invest and plan for financial resilience are more likely to survive a crisis. Several small businesses today run in a manner where they cannot last a long time without income. In this respect, businesses would do well to have an emergency fund in place. Together with this, it would also be prudent to understand where improvements in costs and fund allocations can be made in case a crisis hits. Having these in place will allow the company to continue operating for a certain period of time and might enable it to weather the storm. Whilst many businesses may be against the idea of having large amounts of cash in an idle space, they might need such a fund in case the unexpected comes about.
Source channels of financing
Businesses should always investigate additional sources of financing. Speaking to a financial advisor or bank will enable organisations to understand what leeway they would have in terms of financing. Certain solutions such as overdraft facilities and short term loans might allow businesses the necessary cash flow to maintain their operations during a period of a credit crunch. These solutions might actually serve as a lifeline for businesses during dire times of need.
Have a crisis management plan in place
A crisis management plan will come in handy, especially when a storm hits. The time for planning when faced with a crisis would be quite tight, which is why having a document in place with the necessary actions is vital. Building a crisis management plan is not a straightforward activity. It requires an extensive analysis of the possible crisis scenarios and how each will be mitigated and handled.
Review of marketing strategy
A crisis may imply a necessary shift in marketing initiatives. For one example, the COVID-19 pandemic had accelerated the reliance on digital marketing. Businesses had little option but to invest in their online platforms and digital marketing channels as consumers had to do shopping from their own home. Many have learned that online platforms indeed do have a role to play, and better understand that competing on this front can be make or break. Having online platforms that do not deliver in line with today’s best practices in terms of user interface and experience, is less likely to prepare a business to face rainier days.
Build a solid customer base
One of the signs of a sustainable business that is more likely to withstand a crisis is an established and solid customer base. When having a steady stream of repeat purchases, each sale will cost the business less. This improves the cost to income ratio. In periods of economic uncertainty, customers are more likely to turn towards businesses that they trust, rather than engage new ones. Having an established customer base will also reduce the need of high acquisition, which does come at a cost.
Based on recent events and current happenings, it is impossible for anyone keeping up with the latest news to imagine a world with no problems or downturns. Although it is difficult to predict a crisis, both large and small enterprises should have plans and preparations in place to dilute the impact and minimise risks.