Economists have defined recession in the most sarcastic way as this- if your neighbour gets laid off, it’s a recession. If you get laid off, it’s a depression. Funny right? Right. The economic downturn all over the world is not news. It’s surprising we are still talking about it and it’s biting businesses so bad some companies are folding up.
In it’s worst form, the negative effects include job instability, a decline in consumer spending, which results to low profit streams for businesses, reduced industrial production and manufacturing, just to mention a few. We have continuously seen prices of goods and services sky rocket, while there is a shortage of cash flow in the economy. Consumer attitude towards spending has changed to adapt to the recent economic situation. The naira which was officially at N165 naira to $1 has now almost tripled that price on the parallel market. And everyone is being affected, although these effects vary in the ways they affect people in different socio-economic classes. Entrepreneurs and SMEs are definitely bearing the brunt of this slow economy as it manifests in reduced demand on their products and services. In fact, entrepreneurs and SMEs are the most affected. This is because economic principles such as inflation, gross national product, interest rates and forces of supply and demand have a direct implication on the profitability of entrepreneurs. Below is a brief discourse on how you can survive in the current economic condition.
Turning Lemons Into Lemonades
Adapting to a changing or worse still unstable economy, causes anxiety in the minds of people. And one way to stay safe would be to reduce spending. Simple as it may sound, it is very difficult to put into practice. Smaller businesses can easily apply this due to the minuteness of the team, unlike their larger counterparts with different levels of management and bureaucracy. For you to survive in this jungle of economic collapse as an entrepreneur, you will NEED to reduce your expenses.
Similarly, monitoring your cash flow diligently is also very important. During this period of economic hardship, it is advisable that as an entrepreneur you closely monitor your company's cash flow, making sure that your expenses and planned expenditures are in line with your accounts receivables. Your monthly financial statement should also provide sufficient information about your expenses and income regularly.
Aside monitoring your cash flow, diversifying your source of income is the way to go. At this point, it is not advisable for you to rely on only one source of income. Investing in different businesses - that you’ve diligently monitored and seen little or no negative effect on - allows you to stay afloat even as the economic conditions remain unpredictable.
Finally, instead of laying off staff, you could encourage a part of your team to work from home thereby reducing their work hours.
And operating more from a pro rata or freelance basis. With this method, you’d still be providing security and reducing the amount of money spent on providing infrastructure e.g internet and office space. Peradventure you already own a space or paid rent for a large space, you could sublet it and co-share with other businesses that are also looking to reduce operational cost. There you have it - reduce cost of operations and explore other sources of revenue, while you get to keep your great teammates and everyone stays happy.