Prosper in tough times

Grace Nalugwa, the chief executive officer of Gracela Ventures SMC Ltd arranges briquettes on the shelves inside the dryer. Take care of your topline by making sure there is no loss of revenue Photo by ISMAIL KEZAALA

What you need to know:

In every disaster, some survive and thrive while others perish. In the business world, it is the same. When some companies are closing due to economic hardships, new ones are coming up and others expanding, Robert Muhia writes.

In a recent PricewatersCoopers (PwC) Annual Global CEO survey, more than half of the respondents believe that the rate of global Gross Domestic Product growth will decline in 2020. Only 27 percent expressed optimism in the prospect for revenue growth. This is a reflection of the CEOs low confidence in their own organizations’ outlook, drawn from different territories across the globe.
Tough economy comes shrouded in a dark cloud of uncertainties and is typical of declining consumption, high cost of living, high rate of unemployment and loss of investments among other reasons. In business, this condition eventually leads to decline in profits or lack of and the domino effect is often disastrous. Some businesses end up downsizing, while others close shop.

You can thrive
But it is not always gloom and doom for everyone. History has taught us that even in the most depressed economic conditions, you can still thrive as an entrepreneur. Some of the biggest household names today started during the US great depression in 1930s. Disney, HP, General Electric and Microsoft all started during a period of severe economic meltdown. These and many others withered the storm to become one of the greatest business empires in the world.
In every disaster, some survive and thrive while others perish. In the business world, it is the same. When some companies are closing due to economic hardships, new ones are coming up and others expanding. Which one do you want to become? Needless to say, no one wants to perish. We all want to thrive and prosper. So, what can you do as a business to thrive in the hard times?
In a war, when the terrains become difficult for the fight, the best action you can take is to retreat to reenergise and re-strategise. It is often a very effective way of dealing with an unprecedented change in the operating environment. This approach provides an opportunity to develop a new perspective that is aligned to the new circumstances.
A new strategy that is tailored for the tough prevailing economic conditions can help you sail through. You will need survival tactics that can cope with reduced sales, high costs of doing business and a host of other adverse market conditions.

Cash is King
You may have heard that cash is King; this doesn’t make more sense than during the economic hardships that is often synonymous with cash crunch. To survive in this period, you need cash more than never. You must make sure there is no liquidity problem at all. To achieve this, sell on cash and carry basis and if you must sell on credit, collect all the money from your debtors within the shortest time possible.
Tighten credit terms so that you can convert your sales to cash within the shortest time possible.
Customer is the real King. During this period, the last thing you want is to lose, is your clients. You need your customers to be on your side. Keep them happy by meeting their needs. Even in hard times, do not compromise on the quality of the product or services you offer. Remember, just like you, your competition may be targeting your clients. Keep them closer to your heart and make the relationship personal. Happy customers will be loyal to you and they will stick with you throughout the turbulence period.

Improve product
When the market is shrinking, there is only one shrinking pie to share with everyone. To get a bigger share, you must be competitive. Endear yourself to new clients by offering better than your competition. Identify the gaps and improve the product or service, you will end up converting your competitor’s customers to be yours.

FEW READ
Pay your suppliers in good time. Research has shown that creditors can easily bring down your business, especially if you are in the goods business whether manufacturing or trading goods. Unlike in the service industry, your creditors are mainly your suppliers of the goods that you sell or the raw materials you need for production.

The writer is head of finance at Zamara Group.