Is it possible to recession-proof your business?

Over the weekend we visited visited a shopping centre in Northcliff, Johannesburg, where one shop owner told us that another 26 stores had closed down. Many other shops had closed in a shopping centre in Rosebank. These are big shopping centres but if you visit the smaller shopping centres the picture is also bleak.

As businesses shut their doors, not only retail outfits but also smaller service businesses and even medium-sized industrial businesses, are killed off because of the recession, it makes one think whether it is possible to recession-proof a business?

The experts say that to survive an economic downturn you need to build strong cash reserves, pay down debt, cut discretionary spending, keep track of receivables, keep your inventory lean and diversify your sources of income.

But is it enough? Other experts say one should focus on selling necessity-based products or services, use guerrilla marketing to get the word out, run a tight budget, sign on a few big customers at a discount and outsource work to keep costs down.

Yet you could do all of this and still find that your business doesn’t survive. Is it just about running a tight ship that will pull you through bad economic times?

It doesn’t seem that there is one silver bullet that will work for all businesses when demand contracts. An entrepreneur needs to also be aware of the changing demographic and demand patterns.

Yes, consumers and business buyers will seek substitutes at a lower cost and will speak to purchasing essentials. But at the same time buying habits are changing with the Internet. If a product or service is not available in your neighbourhood, you can go online and find some store online elsewhere in the world that will deliver the product within a few days or a week just with shipping costs added.

Location is also important because it can mean trading at a cost level that is not sustainable for a business. This is why in recent times smaller retailers and restaurants have left the larger shopping centres for smaller neighbourhood centres and even moved into houses nearby areas where other businesses and retail outlets congregate.

In Pretoria recently we were surprised when a ballet and dance shop had left a small shopping centre in Groenkloof and is now operating out of a house down the road where they have more space at a much lower rental cost. Customers who purchase ballet and dance items won’t necessarily find it inconvenient because there are not too many dance and ballet shops around.

Ultimately, surviving the recession is more about innovation in your business, reading the market closely and adapting to changing consumer and buyer demand.

This approach requires new skills, both analytical thinking and generative or creative thinking. Doing the same old thing and expecting the same results could spell disaster for the entrepreneur, the small business owner who doesn’t realise the need to innovate.

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