Seven Rules to Survive and Thrive in An Economic Downturn

Seven Rules to Survive and Thrive in An Economic Downturn

By Jeremy Sorensen, Commercial Banking Market President, Fortis Bank & Jon Moir, Managing Director Commercial Banking, Fortis Bank

1. Focus on customer retention: During difficult economic times, customer loyalty becomes increasingly important. Enhanced focus on customer retention is paramount to maintaining your historical performance. This is a time your customers are also evaluating how they are spending their money and are looking to reduce expenses wherever possible. One of the biggest mistakes we see is the assumption a customer’s drop in purchases is due to the economy when in reality, they are most likely shopping for the best price available. Don’t be content with existing customers; seriously consider what continues to drive that relationship. Seek to have customers who will actively spread the word about your business. This level of loyalty will not only allow you to keep your customers, but also pick up market share.

2. Maintain Cash Flow and take advantage of liquidity: The old adage that “cash is king” has never been truer than in uncertain times. Proper liquidity certainly helps in any downturn but also maintaining good cash flow with liquidity can enhance buying power as well. We are hearing more and more production facilities are offering improved terms if larger orders are contracted. When not using liquidity to capitalize on economies of scale, don’t overlook secured deposit returns. The current market is paying the largest percentage returns on deposits we have seen in the last couple of decades. Let those funds work for you.

3. Keep/Develop strong financial relationships: This is a good time to solidify relationships with banks and investors and to be aware of government grants and loans. Unfortunately, the best time to get funding is when you don’t need it. Even if cash flow is sufficient, this may be a good time to sure things up with a line of credit or working capital. Having access to capital will put the business in a position to handle any short-term issues or, better yet, take advantage of opportunities that are often created by economic downturns.

4. Cut costs: Just as your customers are certainly reviewing their operating expenses and making reduction where possible, you should do the same. It’s easy to review large expenses and consider where you may find the greatest impact to cost cutting. Don’t overlook how quickly smaller transaction add up. This is a good time to evaluate subscriptions and services that have been in place for some time to make sure fees haven’t crept up over time or you may even identify items you are paying for you haven’t used in years.

5. Seek to keep good employees: Employee morale and retention always exist together. Cutting a labor force has significantly more impact than just the immediate reduction in expenses. Those companies who can retain employees during an economic downturn are able to recover at a faster rate. In addition, employees end up more invested and loyal. A short-term expense of an employee is significantly cheaper than needing to rehire and retrain a year later.

6. Embrace technology: While technology can’t replace employees in every position, embracing technology for efficiency is critical to long term and short-term success. Many technological offerings can reduce costs, even with a larger upfront fee, while over time the auxiliary benefits can be surprising. Employee morale, time savings, health benefits, and happiness increase when you can improve the quality of work being performed. This could mean investing in new software, automating processes, or shifting to digital marketing channels (another reason to adhere to rule three) just to name a few.

7. Stay proactive and flexible: Opportunity abounds! Most of these points are about protecting your base and being prepared for uncertain times. What can be overlooked is the opportunity available because you are prepared. Remain focused on your core business and what has made you successful, and when opportunity arises be ready to jump on it, if it fits your target market. New opportunities and growth can come from the most unlikely places. Be sure to have trusted advisors who know you and your goals. Your best opportunities could be right in front of you, are you ready to act on them?