Getting Your Business Through Tough Times

Thankfully the economy has now turned a significant corner and it appears that we are well on the road to a full recovery. But that return to growth does not mean that business leaders should be complacent and relax.

It is easy when the good times are here to think that things will always stay the same way but the reality is that the economy is cyclical and the downturns are as inevitable as the upturns.

Too many firms make the fundamental mistake of building their business model around the kind of growth and demand that comes during the good times.

Over the course of my career I have lived through a few recessions. The worst for me was the one in the early 90’s, because I had made the mistake I mentioned above. My recruitment business had experienced nothing but high growth over the previous seven years, and when the recession hit, it was a real shock to the system.

Remember that in a recession the first area to be hit is recruitment – outgoing staff aren’t replaced, layers of management are stripped out, and companies just stop hiring. In 1990 we had made a profit of over ￡500,000. In 1992 that figure stood at ￡1475. To put that into context, I spent more per year on petrol!

Morale and productivity were just as bad as the economy and it really was the toughest time I have personally known. Eventually we recovered by battening down the hatches. What we also did towards the end of that year was look at other markets. We could see that the IT sector was showing signs of growth and recovery so began pushing our brand there. We really went back to basics in terms of calling clients and building up relationships and things began to improve.

However that whole experience taught me the importance of being constantly prepared for any eventuality and to never allow any sense of complacency within an organisation.

The way to avoid any nasty surprises and to ensure you are always fighting fit is by reviewing your business model on a regular basis, and by that I mean every six months. Which are your best and worst performing areas? Can you make your business leaner? Are there departments where you need to add or remove resources?

It might seem obvious but any successful operation should be built on a healthy profit margin.Too many people make the mistake of confusing rapid growth in turnover with making a healthy profit. The reality is that there is no point in bringing in lots of business if you are not making a decent profit.

For a business that has been established for a few years, I would want a profit margin of around 20% along with similar figures in terms of growth, although of course this number can vary slightly depending on your sector.

It is also vital not to build the long-term future of the business around a few key contracts. It makes far more sense to have a wide spread of customers rather than being over reliant on a handful of clients. This way you are less vulnerable to the external factors which you can't control - whether that's a downturn in the economy or one of your key clients.

Finally, remember that everything within the organisation should bring clear value. This of course means that in tough times you should steer clear of unnecessary luxuries, but also review staff roles. Everyone should be contributing to the business in a tangible and measurable way - if they are not then you need to reassign them or take a new look their role.

What I've learnt from tough times is that your mindset can change everything. Rather than getting caught up in the doom and gloom, or complaining, it is far more important to take action and remain vigilant. Get your staff together; be honest about the obstacles facing the business, and you can make it to the other side.

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