Increase your business resilience by creating a framework for recognising, assessing, and managing business risks.
Under normal economic conditions, businesses operate under a 'business-as-usual' model. When the economy slows down, companies can have trouble adjusting.
An economic downturn can result in lower sales, lower employee morale, and a general lack of confidence in the company. In comparison with larger corporations, running a small business can be particularly challenging because you lack the resources and capital.
The good news is that there are ways you can build resilience, so your business is prepared for the next economic downturn.
Business resilience refers to the ability of a company to maintain operations while protecting people, assets, and overall value in the face of economic disruptions. By building business resilience, you are ensuring that your business can do the following:
- Survive and even thrive in the face of adversity,
- Be protected with an improved reputation in the eyes of your customers, employees, and other stakeholders,
- Be cost-effective with improved emergency response and recovery efforts,
- Build a competitive advantage by differentiating yourself from your less prepared competitors.
A highly resilient business is ready to deal with challenges coming ahead. Here are some of the ways businesses can build resilience in the face of an economic downturn:
Make sure your business is healthy.
The best way to prepare for an economic downturn is to ensure your business is in good shape. One sign that you may be experiencing a downturn is a drop in sales or customer numbers. If this is the case, it's crucial to take action.
The first step is to closely examine how your business is performing. Make sure you're collecting all the data you need for analysis, as this will allow you to pinpoint the areas of your business that are experiencing problems.
Once you've found the problem areas, you can tackle them head-on. When your sales decline, you should determine the categories selling less and the ones selling the most quickly to address the issue. Additionally, you can adjust the pricing of your product and increase the number of in-store sales.
Build a culture of resilience.
The best way to build resilience in your business is to create a culture of stability, which can be done by encouraging a healthy and open dialogue within your team. The first step to making this culture is acknowledging a problem.
You don't need to pretend everything is fine when it isn't — analyzing the situation, finding the right team, suppliers, and investors, and bringing them into the conversation will help create a culture of resilience within your business.
Protect your assets.
Another way to build business resilience is to protect your assets. This includes your intellectual property, inventory, cash, and customers.
This can help your business to continue operating if a downturn hits. How you go about protecting your assets depends on your business.
In the case of a company producing goods, keeping up-to-date and accurate inventory data is essential. Automation can help you manage and be alerted of the changes.
If a downturn hits and sales decrease, you may need to quickly order additional stock to keep up with demand during the recovery phase of a business cycle. It's also necessary to ensure your customers aren't under too much pressure. If sales are dropping, you may want to slow down your customers' order rates temporarily.
Communication is critical when it comes to building resilience in your business. Building strength begins with regular communication and investing in internal communications while you still can.
There should be a 'culture of conversation' in your company. It should include regular meetings, staff meetings, one-on-one conversations, and more. It's also essential to plan for the future.
Adjusting how your business operates may be necessary for survival when the economy is going through a downturn. Sometimes, communication lines within the company suffer in the middle of a crisis. Therefore, you must communicate with staff regularly, update them on the new sales strategies, and dedicate time and effort to avoid internal disruptions.
Always be learning and adapting.
The best strategy for building business resilience during a downturn is to operate as though there will be a downturn. It means you must be ready for the next recession, which requires an ongoing learning process.
You must continually study your competitors, industry leaders, and current customers, which helps you to gain a competitive advantage. It's also crucial to constantly adapt.
Meaning you must be ready to make immediate changes if the situation shifts. It may be necessary to adjust your stock levels, lower the amount of your advertising, and so on.
Invest in new technology.
You can also build resilience in your business by investing in new technology. Technology can streamline processes and reduce overhead costs, making it easier to tackle problems head-on. Determine which areas of your business could benefit from technology as a first step.
For example, suppose your demand has decreased. As a result, sales efforts may need to be adjusted, or if a customer stops purchasing, you can be alerted and act immediately. In addition, investing in technology may be necessary to assist the operations of your sales team.
Businesses often encounter difficult times during economic downturns, which is why developing business resilience beforehand can assist you in adapting to the circumstances, adjusting how your organization functions, and ensuring the foundation is solid and capable of withstanding any future downturns.
It is a complex undertaking, and not many businesses can escape the economic downturn, but if your business is resilient, it can battle for its future.
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