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THE SWEDISH BUSINESS cycle is heading towards a dip and prospects look gloomy. Even though most businesses haven’t observed the bad times, it is wise to review your business and be prepared, says Ingela Hemming.
THE ADVICES BELOW range from practical to concrete measures. Obviously all advices do not apply to every company.
1. Streamline your business
Try to find a way of streamlining your business. Are there other ways to facilitate and allocate resources? If possible, concentrate on strengths and high margin areas in your business. Contact your bank specialists to make payment routines more efficient.
2. Prepare for various business cycle scenarios
Plan for future scenarios and make alternative budgets to be prepared for possible future problems.
3. Reduce risk
In foreign business, review your risk exposure and eliminate unnecessary currency risks. A strategy to reduce recession risk is to investigate business opportunities in different markets. This may reduce risk if all markets dip simultaneously.
4. Review investments and cash requirement
Make sure the company has a good cash position. Regarding investments, it is important not to invest too much long term in case you need future cash. In addition, review your risk exposure, depending on your investment horizon – have a close dialogue with your bank.
5. Market your company
Review your marketing plan. Marketing and customer care often increase in importance in a weak economic climate. Customers don’t always come uncompelled. Right marketing could make the difference between a good and a less profitable business. Sometimes it is easier to increase market share during a recession than during a boom. Maybe you could add some services?
6. Reduce costs and stock
Cost-awareness is essential during a recession. Review your costs, eliminate unnecessary costs and choose cheaper alternatives, if possible. You may also want to review costs associated with production. If your company has a stock, it is a good idea to review your warehouse charges. Try to reduce stock without affecting sales.
7. Be cautious with investments
Be cautious with investments. Postpone investments and carefully review actual investments. Discuss your situation with the bank.
8. Inspire personnel
When economic reports are bad, it is extremely important to encourage your employees without spreading unrealistic forecasts about the company. Try to inspire your personnel to keep up the good work and their enthusiasm.
9. Try to find opportunities in a weak economic climate
Bad times often lead to market elimination of less profitable companies. When competitors disappear, windows of opportunities open up. During a recession it might also be easier to employ skilled people. In general, salary increases decline during a recession.
10. Prepare for the next boom
There will be better times soon. Don’t forget to prepare for the next boom. Make sure your company is in the right market position, with the right skills when the business cycle turns.
Ingela Hemming,
Företagsekonom på SEB