With sharemarkets now crashing around the world and consumer confidence expected to take a massive hit, entrepreneurs are no doubt worried about the future.
But now is not the time for rash decisions. Business owners need to get in control, evaluate their business and then decide on the best strategy for going forward.
Here are 10 things you should be doing in response to the recent market turmoil.
It’s always good to have contingency plans in place. While the fundamental economics of the country are still strong, businesses need to ensure they know what to do if sales drop, costs rise or other unexpected events occur.
For instance, if sales fell 5%, businesses should know how to respond. Perhaps they would need to speak to staff about reducing hours, or maybe you need to bring in a new customer that might be on the edge.
Keeping these plans in place will reduce the shock of any sort of downturn in your industry.
Even during good times, cashflow is king. Sue Prestney from MGI Melbourne says you need to be constantly checking who owes you money and put pressure on them to ensure they are paying as quickly as possible.
“This is the time to engage with people who are really important to your business. It’s about taking control rather than just sitting back and waiting for things to happen. All your financiers are important right now,” says Prestney.
Dun & Bradstreet corporate affairs director Damian Karmelich says you also need to be regularly checking risk profiles in order to determine debtors’ capacity to pay.
You need to be making sure you aren’t spending money on things that aren’t necessary to the business. Don’t cut things out of panic, but instead rationally look over the business and determine if there is anything you can cut.
If things get lean, extras such as staff perks can be examined. But also look over some less obvious areas. One of the areas where businesses commonly spend too much money is stationery – consider switching to a paperless office to save cash.
If you’re nervous, then your suppliers are nervous too. Now is a good time to call them and gauge their view of the market right now. Once you know what they’re doing, you can plan accordingly.
“Remember that you’re someone else’s customer as well,” Prestney says. “The suppliers are thinking the same things, about whether you’ll continue to buy from them or not.”
“This is also a good opportunity for you to start negotiating the best deal you can, whether it’s over prices, payment terms, and so on. You can ensure your business is in good shape.”
The best people you need to talk to are your customers. They form the bulk of your business and will no doubt have more insights into the market, their spending habits and what they want from you. Listen to them and you should be able to get some ideas on how to tinker with your offerings.
“You need to understand how relevant you’re going to be to your customers going forward,” says Prestney. “You want to understand what’s in their minds, and whether there is anything you can do to your business to meet their needs.”
“If you end up just competing on price, you’re going to lose.”
Various studies have shown that morale can affect staff more than anything else. If the sharemarket is tanking, you’re cutting costs and hours are being slashed without warning, your staff will panic and some critical personnel may leave.
Talk to staff, get them involved in what’s going on and ensure they know everything that’s happening. You should be totally transparent and allow staff to ask questions about what’s happening. Many businesses hold Q&A sessions during these times to keep staff informed.
Now is a good time to go back to your investors and report back on what’s happening. They want to know that you’re in control – this is why it’s critical to have contingency plans. Prove that you have everything in control and they’re less likely to be worried.
Banks have said time and time again they will be more willing to work with businesses that approach them straight up and say they’re having problems. “You need to talk to your financiers,” Prestney warns.
You may need some new funding, and banks will be more willing to give that to you if you’re constantly communicating with them. Especially if you need to explore new options, such as debtor finance.
Your mentors have been through more hard times than you have. Speak to them, determine what they did in similar situations and then see if you can adopt their strategies to your own business. Doing so will save you finding out the hard way.
Rest is critical. Your productivity will wane under stress and lack of sleep, and your decision-making skills will not be as sharp. You need a rested, critical mind in order to take the best steps to continue your business.
And try to sleep easy – remember, the economy is still strong. While consumers are still saving and the sharemarket has fallen, Australia is in great shape. GDP is growing, consumers have more cash than ever before and plenty of businesses are still making money. There is still opportunity here – don’t miss out on it.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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