2016 was a rough period for most Nigerian and African businesses. Construction companies made little to nothing, eCommerce companies remained unprofitable, margins of store owners dropped, and many other ventures slowly folded up.
Several factors contributed to the slow backdrop in profitability; from the unexpected crash of oil prices to the troubling devaluation of local currencies in Africa, like the Nigerian Naira. But with all these events occurring in succession, many business owners remain highly optimistic for a change.
As of this writing, the market exchange rate in Nigeria is N366. This inflated currency value still screams trouble for every business operating in the country. Some startups who were optimistic for a change have started folding up, but as a religious nation and continent, many look towards “grace” and “hope” for a miraculous turn around.
A great man once said “hope is not strategy”, and this element of hope will ruin many businesses.
If you’re looking for ways to survive the recession, here are 10 ways to help your startup survive business failure in a recession in Nigeria, Africa, or everywhere else around the world:
See Also: Top 6 Reasons Nigerian E-Commerce Businesses Are Losing Money
1). Look For Ways To Aggressively Cut Costs:
Expenses will ruin your personal finances and your business if they’re not handled right. It’s time you cut off every unnecessary profit eating agent you’ve got in your business. Is it unnecessary staff, unneeded service, or strange miscellaneous expenses? You should also consider moving from your fancy office space to a much more functionally modest one. Most businesses with fancy offices don’t generate as much revenue as some businesses with a modest work environment. If you don’t adjust your overhead costs, your business might end this year.
You should also consider moving from your fancy office space to a much more functionally modest one. Most businesses with fancy offices don’t generate as much revenue as some businesses with a modest work environment. If you don’t adjust your overhead costs, your business might end this year.
If you don’t adjust your overhead costs, your business may end before the end of the recession.
It’s important to know that uncontrolled expenses are one of the top causes of business failure.
See Also: 7 Sure Ways To Cut Your Small Business Expenses And Increase Your Profit
2). Focus On Cash Flow:
Do everything possible to ensure cash keeps coming in, and faster.
Offer a discount to make customers pay quicker, deliver better customer service, buy or lease used equipment instead of purchasing brand new expensive equipment.
Do everything you can to entice consumers and ensure cash keeps coming into the business because, running a company during a recession will only get tougher since consumers would want to spend less.
Focusing on your cash flow will reduce your chances of experiencing an unexpected business failure.
See Also: The Top 10 Reasons Small Businesses Fail
3). Focus On Staying Afloat, Not Growth:
Now is not the time to focus on growth. Acquiring a lot of diverse new customers means spending a lot of money on creating more awareness. This would backfire because your cost of acquiring newer customers is already weigh higher, considering the abnormal exchange rate value. This would put you in a terrible loss index, and on a path steadily headed to an unavoidable business failure.
Spending a lot more money during a recession to acquire more customers will put you in a terrible loss index, and on a path steadily headed to an unavoidable business failure.
Instead, identify your strengths now. What keeps your customers coming back? What is your business known for? What generates the most income? Staying afloat now is everything, and it would determine which businesses comes out alive after the recession.
Staying afloat during a recession is highly critical, and it would determine which businesses come out alive and strong, long after the recession.
4). Be In Good Terms With Your Creditors:
Falling behind on periodic repayments is a terrible image front for your creditors. When you start to delay on your payments, you start to look unreliable, and long after the recession is over, no one might trust you enough to loan you money or give you products or services on credit.
It’s better you let your creditors know your financial status and how it affects your business, so they can see how they can help you realign your payment schedule. This way, they’d trust you better in the long run.
See also: The most important skill every entrepreneur needs to succeed
5). Outsource A Lot Of Work:
This may seem like an expensive approach, but outsourcing one project at a time will save you costs for the year. Instead of hiring an individual and paying a lot monthly, it’s better to streamline the job roles and outsource the service for a slightly higher amount, but for lesser project counts. This saves you both the emotional stress and cost of managing and maintaining that staff in your organisation.
6). Renegotiate With Your Suppliers:
Explain what’s happening in your business and the economy to your suppliers, especially if they’re based overseas, so they—the few who value customer relationships—can help you a little better by reducing the cost you spend in acquiring their items.
Sometimes, appealing to their emotions may work, but don’t try this under normal circumstances; people mostly only want financial pay-offs. But showing them that a business failure on your end could make them lose one important customer may have them reconsider and offer you better prices.
See Also: 10 Amazing Small Business Growth Strategies
7). Offer A New Service:
Create a new subsidiary for your business. Preferably something that is not capital intensive. Think outside the box when trying to arrive at a new business idea.
For instance, if the service you previously offered was a premium one, introduce a regular service for people that have already cut their expenses and are not willing to spend extravagantly till the economic situation bounces back to normal.
8). Cut Costs For Your Customers:
Offer your customers creative ways to cut their costs when they patronize your business. This way, they’d feel better appreciated and would keep patronizing you, knowing that you care about them and their pockets.
See Also: 10 Ways To Find More Customers For Your Business Without Spending Any Money
9). Retrain All Your Staffs:
Train your staffs to carry on more responsibilities. Enlighten them on the economic situation, and how cross-working in the organisation can ensure their jobs would be saved for the future.
This approach will not only reduce your chances of a business failure and keep your staffs motivated, but would also cut costs of new hires and ensure the majority of their jobs would be secure long after the recession has passed.
10). Embrace Social Media:
Social media is where you could get some free sales. Build your Facebook, Twitter, Instagram, and LinkedIn connections. Show your followers and fans what you’re capable of and drive some potential sales your way while you’re at it.
See Also: 6 Ways Social Media Will Help Your Business
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What are your thoughts on these 10 ways to avoid business failure in a recession? Let me know by leaving a comment below.
I especially agree with #2. Like Mark Cuban says, “Sales cure all”.
Cash flow is king!
I don’t really agree with #3. I believe you need to stay afloat, but at the same time you need to get more customers.
That’s my 2 kobos.
Thank you for the contribution, Tomi.
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