Staying Strong in a Recession

From Entrepedia: The Entrepreneurship Wiki

Economic downturns are difficult to cope with and keeping your business in shape becomes more important than ever. How can you make sure that your business is in shape to survive a downturn? Here are some suggestions.

Contents 1 Trimming the Fat 2 Triage 3 Marketing 4 Suggestions 5 References

Trimming the Fat

Downturns offer opportunities to rationalize your business and lower your cost-base, but this doesn’t necessarily mean cutting staff. There are two key ways in which you can do this. One is by focussing your energies where they are required, ensuring that all the activities of your business are productive; the other is by trimming the fat, removing all the unnecessary extras from your operating costs. The first is simply just reviewing you business activities in order to check that they add value to your business. The second, however, presents opportunities to take advantage of free services and new technologies in order to allow you to lower your cost base.

In an article entitled on surviving the recession, the Pajama Entrepreneur gives some tips, summarized below:

1. Make use of Skype: Internet telephony is much cheaper and can often be free!
2. Prepaid SIM cards: Will you be spending a lot of time in another country? If so, it may be cheaper to purchase a pay-as-you-go SIM card for a network in that country and make use of it when you are there.
3. MaxRoam: Doing business in multiple countries? MaxRoam lets you route all your calls through one of its SIM cards which can offer considerable savings. [4]
4. Truephone: Similar to Maxroam but works using the Internet. [5]
5. Zoho Invoiving: A free online application which allows you to do all your invoicing on-line.
6. Google Apps: Save you money on expensive Microsoft products and allow for increased collaboration. (See the video for an introduction to Google Docs.)
7. Make use of free wi-fi: Free wi-fi is available in many public places such as coffee shops and libraries. Why not make use of it to check you email or make phone calls when you are between meetings?
8. Use you car less: It's not the most economical mode of transport, so why not consider hoy you could make use of public transport, car sharing services, or even a bicycle?
9. Free entry to conferences: Are you an expert in some field? Why not try and get a slot speaking at a confrence, that way you'll get in for free.

For more tips on saving money, see the Entrepedia article

Triage

If your venture faces some of the more serious consequences of the economic downturn, then trimming the fat may not be enough to see it through the eventual rebound. In this situation you may need to start performing triage on the different facets of your business, assessing their value, their importance, and their necessity to your venture as a whole. In his blog, The Unfolding Mirror, technology entrepreneur Masoud Loghmani describes the ability to survive the inevitable economic rebound as dependant on three basic principles which you should keep in mind:

1. Intellectual Property (IP) focused ventures, to quote Loghmani, "live and die on the strength of their IP," so if you need to make changes to your team, take IP into serious consideration when deciding who stays and who goes. ^[2]
2. Losing customers in the current recession can be particularly painful to startup ventures and SME's, and at this time customers will not want to take a risk on a venture they perceive to be weak. You need to closely examine the image that your venture is projecting to avoid sending the wrong message, Loghmani says. ^[2]
3. Finally, he describes the importance of triage to planning properly for this triage, assessing IP ownership, customers and prospects, and resources in order to establish where your venture can afford to take losses, and what aspects of your operations you cannot survive a rebound without.

Loghmani describes these three forms of triage in more detail: as an entrepreneur you will need to "prioritize and assign $ value to the IP in the short term and the medium term," including marketing know-how and manufacturing processes as well as technologies and formulas.^[2] Identify what you can afford to lose forever, what you can reinvent, and what it is absolutely crucial that you keep. ^[2]

A similar assessment must be made regarding your customer base and future prospects; as much as it may seem contradictory, Loghmani asserts that sometimes losing customers is an essential part of survival in a recession.^[2] Finally, when running a triage of your resources, it is important to include the executive in this consideration. Cutting back on managers and "worker-bees," according to Loghmani, is the obvious go-to point, but he advises entrepreneurs to ask whether they are "keeping all the c-level guys around" based on necessity. ^[2]

Marketing

Marketing during a recession can be a tricky concept to manage - do you cut your marketing budget? Increase it? It can be tempting to pull back from marketing campaigns in an economic climate where everyone is spending less and less often, however Internet Marketing Specialist Damon Segal recommends quite the opposite. "A downturn is the time to refocus your marketing budgets, not cut them," Segal advises.^[3] He points to internet marketing as the ideal opportunity to re-focus or even increase your marketing presence during a recession because, he says, "internet marketing is far more cost efficient than traditional methods and it is far easier to measure your return on investment." ^[3]

Segal emphasises that the current economic situation is in fact a huge reason why ventures should increase their marketing presence, pointing out that when the market does pick up your efforts will pay off big time when you are ahead of the curve rather than struggling to re-allocate funds to a marketing budget. ^[3] However, the recession should encourage entrepreneurs to become more creative and efficient when it comes to marketing strategy, to avoid paying big money for advert schemes that may not yield as high results as certain lower-cost, non-traditional strategies.

Suggestions

There are plenty of other ways to cut down on unnecessary costs, all it takes is a little bit of creative thinking. Do you have any other ideas you can share? Why not edit this page and add them to the list below?

• Yammer Winner of the Crunchies 2008 award for Best Enterprise Startup, allows you to create your own secure, private social networking site for your company. --James 10:33, 20 February 2009 (UTC)

References

1. ↑ The entrepreneur’s recession survival guide: top 10 tips on how to cut costs, The Pajama Entrepreneur 02/10/2008, [1]
2. ↑ ^{2.0 2.1 2.2 2.3 2.4 2.5} Masoud Loghmani. Tactical moves, strategic consequences: Will you survive the famine to die at the feast?, The Unfolding Mirror 27-02-2009 [2]
3. ↑ ^{3.0 3.1 3.2 3.3} Damon Segal, Marketing in a downturn economy, LaunchLab.co.uk - 17-11-08 [3]

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