It now seems beyond doubt. Call it a “credit crunch”, call it a recession, call it something worse, a hard time is coming.
No need to panic. For those of us who see it coming, there is time to prepare. There are a few simple precautions that can be taken now, before the worst hits.
1. Think about what areas of your business are most likely to survive and consider jettisoning everything else.
2. Build a cash reserve by liquidising everything surplus to your core business.
3. Replace variable rate overdrafts with fixed loans.
4. Look at your warehouses: is there scope for replacing large stockpiles with “just in time” systems.
5. Place a moratorium on new recruitment: use short-term contracts as much as possible.
6. Do not start dumping customers but start imposing discipline on their credit: make it clear before the trouble starts that you will expect prompt payment.
7. Cutting marketing budgets is a false economy: if anything, you must be more aggressive going after new business.
8. Be positive but frank with banks, investors, suppliers, and customers.
9. Look carefully at every item of expenditure and cut everything that is not essential.
10. Be aware that there are opportunities even in bad times.
The last may seem counter-intuitive, but there is money to be made in recession. Some businesses thrive in hard times – when people cannot afford cake, they buy more bread – and even sectors that are hit hard are rarely destroyed, so that those who manage to survive may come out stronger than before.
However, the first priority is to survive.