Surviving Slowdown

Businesses which were at their best in the last ten years are searching for ways to survive in the present economic conditions. Some have even termed the recent slowdown as one of the worst of the decade. Others feel that the current slowdown is more of media-created hype and is happening because most of us believe it is.

While many experts claim that the slowdown will last for six months, some have even warned about a full-blown recession. We do not know which of these predictions will come true. The only thing that we can do for now is to face the situation as it is. DQCI did a quick survey among small resellers and gathered a few useful tips on how to survive a business slowdown.

If you are running your business the right way, you don't have to worry about a slowdown. In fact, the best run business will actually make money during a slowdown. A company that is not prepared for such times creates an opportunity for companies that are prepared. Accept the slowdown and take it as a challenge. Nothing will come off by cribbing about the slowing business. So do not panic, but act fast!

Cut cost 

Almost 90 percent of the companies surveyed have accepted that their business has slackened. And most of them agreed that 'cost cutting' is the first step of survival during business slowdown. As far as possible try to eliminate avoidable expenses. Don't just blindly cut all expenses. Cost cutting exercise, if done without proper examination, can be injurious to fiscal health.

Reducing cost need not mean cutting on the employees salary or laying off people. Most big vendors at an international level have resorted to layoff as an option to cut on salary cost. A case in point is HP, which has asked employees to take either a 10 percent slash in salaries or take three days leave. But small businesses should try not to emulate this example. Most

businessmen in Mumbai have indicated that laying off staff is not a feasible option. Besides they cannot afford to do this.

There is a good case study of a non-IT company (name not revealed) which struck upon a novel idea, where it compensated all its employees with their retirement benefit much before they actually retired. The justification was: Why not pay them when the company can. If the company fails to perform in the future at least the employees will not blame the company for its inability to pay compensation package to those who retire.

Controlling waste is another form of cutting cost. If the business is into manufacturing of some sort, there is a chance that some percentage of the production is going waste. Try minimizing these wastes by identifying the flaws in the system. Even the smallest of cost saving accumulated over a period of time can come to the rescue of the company.

Cutting on fixed costs: Put a stop on fixed cost spending. Instead make some temporary arrangements like leasing or renting during such times. Also make use of the concept of hiring people on contract or part-time for the required period. 

Innovate

At times, when the usual tricks of making a quick buck fails, it become necessary to be innovative in what you do. Our survey shows that most businesses have lost interest in the old discounting schemes to push sales. Their justification -- with a razor thin margin, they hardly have space for discounts. 

Even if there exists a good margin, the idea of discounting has led to problems of over-stocking. Expecting a good demand on discounted product, IT traders over-stock goods, which then become obsolete.

Just as the manufacturing community uses a 'just-in-time-inventory' method, even the trading community can make it work by stocking only those goods that have a confirmed order. A reseller sums it up nicely: "Try to avoid over-trading just to come out of the soup".

More customers

Keep increasing your customer base. Look for new customers in addition to your old regular ones. Old ones may give average business, but to stick to the one or two big customers can be most dangerous to your business. You will never know when the 'one-good-customer' sees red and you will have to bite the dust.

Debt recovery

If business is bad, utilize your time on recovering your debts and outstandings. Pay more attention to accounts and payment follow-ups. And in the very little selling you do, insist on strict payment mode such as postdated cheque or cash on delivery.

SWOT

One of the most efficient ways of doing business, the 'management' way, is summed up in the acronym SWOT, which stands for 'Strengths, Weaknesses, Opportunities and Threats'. Every business, however big or small, needs to identify these four elements in its business. Based on this, if a plan is prepared for the next few years, the company will get a a fair idea of the future.

The adage 'Make hay while the sun shine' holds true when a business is performing at its peak. But when there are ups and downs in business, be prepared for the worst. One should look at sales projections, margins, bad debt provisions for every circumstances: both for good and bad days.

Stay awake

Keep yourself informed about what is happening within your community and what your business colleagues foresee. And this can be done only through constant communication with your fellow businessmen, bankers, customers, and the media.

Stay in close contact with your core markets and be conservative with your growth plans for the time being. If you hear a bad news coming, don't believe it, but don't ignore it either. To set up regular monthly meetings with your partners, colleagues and bankers is a good business practice.

Last alternative

It has been found that most resellers have resorted to alternative business as a survival strategy. The trend is towards servicing/repairing business. Many have looked at getting into maintenance services as a profitable business.

We should take lessons from this car garage owner, who does business for ten months of the year, and during the two months when his business usually goes down, he sells Ganesh idols, which coincides with the month in which festival of Ganesh Chaturti is celebrated. Not a bad idea!

With Nasscom predicting a great future for IT-enabled services, this is another area where traders can opt for as an alternative, but have not looked at it seriously. Probably, due to inaccessibility to feasibility studies carried out on ITES.

Similarly, there might be many more alternative businesses which traders can consider during a slowdown. So don't think about downing shutters yet. Lastly, things should not be that difficult after these tips are put into use but without hard work nothing can succeed.

Nelson Johny in Mumbai