The U.S. economy is fearing a downturn and some sources claim that the recession has already arrived. A poll conducted by BCG (Boston Consulting Group) revealed that senior execs of 101 companies believe that the U.S. economy is in recession or will get into it within next six months. Although there are differing views on arrival of recession at the moment but it cannot be denied that it is very much expected this year.

Recession, if well prepared for, can prove to be beneficial for businesses. Smart entrepreneurs see opportunity for gaining market share in the downturn. Here are specific action items for businesses to survive recession and thrive later.

• Create Cash Reserve This is the first and foremost requirement. Every business needs money to survive and since cash inflow often declines during recession, a cash reserve will give you a shield against the unforeseen. Startups are often cash crunched and can fall into recession trap because of low cash and minimal or near zero sales. They should try to raise enough capital from angels and VCs.

• Diversify While running your core business tightly, try to build multiple income streams which are independent of each other so that failure of one does not affect the other. For example, if you are a web hosting provider, try selling Managed services or support for certain applications.

• Build Operational & Cost Efficiencies With declining sales, it becomes essential to cut costs to turn the bottom line green. Go and find out the areas where you can cut costs, reduce wastes in the process, improve productivity and negotiate contract with your vendors for better pricing. Building operational efficiencies will keep your organization lean thus impacting the overall profitability.

• Improve A/R and A/P Practices During recession, the first hit on your business comes from prolonged A/R cycle as your customers will seek more time to make payments. If your business is heavily dependent on monthly receivables, it will directly impact your sustainability and growth. A prolonged A/R cycle will also extend your A/P cycle and will lead to double stress. To solve A/R related problem, work with your customers and offer innovative and flexible payment plans according to what they can pay. You can also look at restructuring past due balances as long-term debt payable as per agreed schedule. If you face problems on A/P side, try to get these solutions implemented from your suppliers.

• Network & Build Relationships Build as many contacts as possible both online and offline. If you are well networked, chances are that you will get good business leads from contacts. You should also work on building long term relationship with your existing customers. Try meeting your customers in person once in a while or use innovative methods like sending a thank you card so that they can remember you. No other method can beat repeat and referral business in profitability.

• Focus on Service You should continue to provide outstanding customer service to all the customers and don’t let staff reduction impact your responsiveness and service levels.

• Maneuver to Lead If your business health allows, drive yourself to pick up market share by keeping your marketing and advertising activities intact or even accelerate them. It is common for most businesses to cut on marketing and advertising expenditure during recession. It can be a good time for you to keep sending your marketing message out to the customers; you will be remembered by your customers more than the competition when the recession ends.

• Survive Last but perhaps the most important, try to survive. Do whatever you can to survive because once the tough times are over, you will find yourself in a better position as some of your competition would have succumbed to the pressure.

What other aspects can you think of which can hep businesses keep away the effects of recession?

Popularity: 3% [?]