Euro Finans AB | Jun 27, 2023 1:37:03 PM

Prepare your business for tougher times

Business has been smooth sailing for a few years in a world with low interest rates and constant growth. The pandemic brought the first major shock in a long time. Soon thereafter, war broke out in Europe and caused an energy crisis. Now, the world is preparing for a recession. How should businesses think in order to be successful in challenging periods?

Adapt to the future, not the past

The only thing we have really known for sure about the business climate over the past ten years, is that it was not going to last forever. Interest rates go up and down. Growth cannot continue indefinitely. Business cycles come and go. What is certain is that the day will come when an unpredictable situation or a crisis will be upon us, and then it will be a relief to have a good plan in place.

Every time has its present, its conditions. It is important to try to understand where we find ourselves right now, in order to look into the future – not to lean on how things have been in the past. Plan not for the things that have already happened, but for what could actually happen. Today, many business owners worry about higher interest rates and energy prices, inflation, lower global demand, and a generally uncertain political and geopolitical climate. What could this mean for your business going forward?

What happens if...

Develop a few probable scenarios that may arise for the company. What do we do if suppliers fail to deliver, if costs for transport becomes too expensive, if the energy supply crashes or if technological development Also try to think in broader terms than just finances. What are the global trends and how can the crisis accelerate different types of change that may affect our company? Are these changes, in that case, something that might be a drawback for us, or perhaps something that will be a boon? When things get tighter, we are much more inclined to make far reaching changes and actually implement them.

"When things get tighter, we are much more inclined to make far reaching changes and actually implement them."

It may also be a good idea to have a look around in the more immediate area. What do your competitors do, and how should your business act if the competitors go out of business, if they lay off staff or perhaps start losing customers?

Quick-footed people often come out of the crisis stronger

The worst thing you can do as a company in a crisis, is to stick your head in the sand. Once the crisis is upon us, it is often difficult to navigate under the new conditions, and it often takes time before Start by getting a clear idea of your revenues and expenses. You will need liquid funds in order to be able to cope with temporary challenges. If there are other measures that can immediately help the business, you can delay certain investments. Make sure that you have both the resources and measures ready that can act as shock absorbers. Prepare the business so that everyone knows what happens in a crisis situation. The first thing we have to do is ensure that the business will survive. When the urgent measures are put in place, you need a concrete list of measures that suits the situation in particular and enables the company to get back on its feet. After that, there needs to be a roadmap to let the company flourish again.

Everyone needs to put their back into it

When the numbers start going into the red, it is easy to be gripped by panic. When that happens, it’s particularly important to understand which things are not working for the business, and which things continue to work. Implement the changes that are really needed, but be wary of changing the things that still perform well. It is also important that everyone in the company understands what is going on, and there is an understanding of the things that need to change. Be transparent and honest. When the crisis arrives, everyone will need to help out, and so everyone needs to be included in this process.

"Be transparent and honest. When the crisis arrives, everyone will need to help out, and so everyone needs to be included in this process.”

Look up and ahead

The adversities that we are facing in the moment often take the focus away from the long-term vision. Handle the things that need to be dealt with immediately, but do not forget to look up and ahead. What are the forecasts for a couple of years in the future? Has anything fundamentally changed that requires a more comprehensive change of course? Many good strategies have ended up in the rubbish bin, for the wrong reasons. Look at a tougher period as an opportunity to become even more competitive.

Seize the opportunity

A real When many things point downwards, there are often opportunities to take necessary, but perhaps difficult decisions. It may be an excellent opportunity to streamline the company’s core business to focus on the parts that are actually profitable and growing. In periods of lower customer demand, there are opportunities to improve internal processes and slim down production and supply chains. This may, for example, be an excellent time to digitise parts of the company’s processes. Survival is a powerful driving force that can enable the company to emerge stronger from the crisis than it was before.

"In periods of lower customer demand, there are opportunities to improve internal processes and slim down production and supply chains.”

Keep your courage

It may be necessary to save on both staff expenses and investments during tougher periods – but there will come a time after the crisis when all the lights are green again. It can be tempting to put research and expensive development projects on the back burner, but at the same time, these may be just the initiatives that will give the company a head start when business improves. Conduct a thorough analysis and weigh your options. What will be the company's springboard when the fog clears?

Talk to your customers

Even when it’s cold and windy out there, your customers are still the most important thing you have. Seize the opportunity to tie them even closer to you as your competitors cut back on marketing and sales staff. This is the time to think ahead and strengthen your positions together. Thoroughly analyse what your customer needs, so that your offer is also adapted to the prevailing circumstances. This may also be an opportunity to recruit new employees that can bring their network and important customer contacts.

When everyone else is cutting back, take the opportunity

During a recession, most companies cut back on expenses. When there are fewer investors, prices will usually fall as well. Anyone can see this on, for example, the stock market or the housing market. Harsher times often bring opportunities to acquire companies and make important investments, or break into a new market segment. Unfortunately, banks tend to tighten their purses as well, making it more difficult to borrow money. For that reason, make sure that there are extra funds in the piggy bank, and be ready to activate various financing opportunities to increase your room to manoeuvre. This can, for example, be a flexible credit, invoice purchase or a short-term business loan that allows you to make quick profitable decisions when opportunities are given.