How to Survive the Recession as an SME

The UK has officially entered a recession – and one that is projected to be the longest ever experienced by the nation. Recessive periods are not always disastrous for businesses, but nonetheless herald a new era of difficult decisions and shrinking profits. As a new small-medium enterprise with more volatility than established businesses, what can you do to survive?

Protect Cashflow

Firstly, and most importantly of all, you must ensure that your business’ cashflow remains healthy. Cash is king in a recessive period, and being able to demonstrate liquidity will assuage investor and shareholder fears even in times of reduced profits.

Cashflow is not a measure of profits necessarily, but rather a measure of the money flowing in and out of your business. Negative cashflow can occur even in profitable businesses, where income is used to pay off debts or invest in expansion as opposed to kept as an available resource. In a recession, your priority should be to preserve positive cashflow – something which can be done in a number of ways.

For one, you will likely have some generous credit agreements or payment terms with longstanding clients. For a short-term cashflow boost, you could ask your clients and customers to fast-track their payments to you, temporarily shortening your payment terms and bringing more money in immediately.

Minimise Overheads

The less costs your business has to manage, the better. There may be some overheads you can reduce or eliminate altogether, such as the rent and energy costs of your physical premises. Remote working is easier to institute as a policy than ever before; by taking processes such as payroll online with payroll software, you can minimise the amount of in-person administration required in your offices.

Likewise, online HR resources and cloud collaboration software can enable even critical teams to work remotely, with positive impacts on your business’ running costs. Not only this, but you could also stand to benefit from a boost in worker productivity, improving your business’ resilience and effectiveness in times of economic crisis.

Client Retention

With short-term cashflow secured and medium-term overheads reduced, you can now focus on some more long-term methods of ensuring your business’ longevity and survival. Every business’ profits can be divided into key groups of consumers, but the most important group in a recession is your core set of repeat clients or customers.

Even in times of economic prosperity, your core clients can be thought of as the clients that ‘keep the lights on’. Your aim in tougher times is not to win new customers over to your business, but to ‘keep the lights on’ – that is, to ensure your core customer base does not diminish. You can do this by ramping up your customer service, or through offering loyalty incentives and bonuses.