How to protect your business and ensure seamless operations during an economic slowdown

08 MARCH, 2021

Uncertainty is an inevitable part of managing a business. Based on national and international economic trends, governmental regulations, political climate, and other macroeconomic factors, your company might experience a cyclical movement in business growth.  

While it is not possible to predict what may trigger a downturn or when it will happen, it is prudent for a business to have a plan in place so that it’s not caught off-guard. Here are eight strategies spread across four categories that will keep you prepared and cushion your business from future economic downturns.

Business strategies

• Prioritise cash cows: If you have certain products/services that do consistently better than others, increase your focus on these profit centres. Simultaneously, consider temporarily reducing efforts from products/services that do not generate profits or have a low RoI (Return on Investment).
  
  
• Collaborate: There is strength in numbers. Seek out collaborations with businesses similar to yours – or up/down the value chain – to help each other out during the bad times with a strategy that is a win-win for everyone.

Management strategies

• Minimise redundancies: Look for opportunities to improve productivity and use human, technological, and financial capital carefully. Ask yourself questions such as: Can certain employees take up more responsibilities? Are there free resources that can be deployed productively? Could certain processes be automated?
  
  
• Build employee morale: During a downturn, employees not only suffer financially but may also be under emotional and interpersonal strain at home. Make it a point to keep them motivated and remind them that they are valued. Offer your employees intangible perks such as flexible working hours or work-from-home options. Create an employee assistance programme that can provide financial and emotional support to those who may be severely struggling.

Customer strategies

• Diversify your customer base: Having a diversified portfolio of customers ensures that your business doesn’t drop drastically if you lose a few customers from a certain demographic or economic background. Look for ways to attract potential customers by offering a specific use or advantage of your product/ service to customer segments that may not be impacted severely by a downturn.
  
  
• Strengthen existing relationships: It costs four times less to retain an existing client than to acquire a new one. If you keep your present customers happy, they will ensure continued business and help out with referrals.

Financial strategies

• Maintain cash reserves: In an ideal situation, having cash reserves equivalent to three months’ working capital ensures that your operations don’t come to a halt if the economy takes a turn for the worse. It can create a buffer if cash flow trickles down in the short term, allowing you to continue with business as usual.
  
  
• Get appropriate financing: If a downturn hits you suddenly, or continues for longer than expected, you may have to consider financing options to keep your business afloat. Look for appropriate financing based on your needs. If your cash flows have reduced, consider options such as a working capital loan. Likewise, a bank guarantee or letter of credit can help you get stock/materials to maintain output.

If you are looking for financing, look no further than Kotak Mahindra Bank.  Kotak Mahindra Bank’s Business Loan & Working Capital Solutions offers a host of credit and lending products that are suitable for different needs and tenures. This ranges from instant cash-credit and overdraft facilities up to Rs.20 lakh, to short-term working capital loans up to Rs.75 lakh, to large-ticket need-based term loans going up to 10 years, to import-export solutions, and more. Kotak Mahindra Bank’s Business Lending Solutions thus can serve a multitude of capital needs, so your business doesn’t merely survive in the event of an economic slowdown; it can also thrive!

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. and its employees. We make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article does not constitute legal advice. Kotak Mahindra Bank, its employees and the contributors are not responsible or liable for any damage or loss resulting from reliance on or use of any information contained herein. Credit at the sole discretion of Kotak Mahindra Bank Ltd and subject to guidelines issued by RBI from time to time. Bank may engage the services of marketing agents for the purpose of sourcing loans