Succeeding in a Receding Economy

This ADVENTURE CAPITALIST by U. Mahesh Prabhu was first published in Business Goa

If you are concerned about the adverse effects of recession then the following parable is just for you:

Long time ago in Middle-east a traveller met a curious looking fellow. “Who are you? Where are you headed?” he asked. “I am Cholera. I am going to kill five thousand people in Egypt”, said the stranger and resumed his journey. Few years passed and they happened to meet again. The former asked the latter, “You had said that you’d kill only five thousand people; but you killed fifty thousand, instead.” “No, No”, said Cholera, “I killed only five thousand people; the rest died of fear.”

The bad (or worst?) thing about recession is the fear it generates in the minds of people. Business people are worried about their profits, employees are concerned about the jobs and government is apprehensive about their political capital. As a result, they all curb their spending which make markets less lucrative and several business suffer.

But then is recession really bad? On a philosophical terms, like Life, Economy too is cyclical. Boom and Recession are two phases of economic cycle. None can reverse this fact. Until recently the People’s Republic of China did try to run an economy by an iron fist but eventually they too realized that it was futile effort. When they loosed their grip and let people sell and buy according to their whims and fancies the entire stock market collapsed like a pack of cards.

Recessions aren’t that bad. Some of the biggest and most successful companies in the world, including Microsoft, FedEx, GE, Revlon Cosmetics and Hyatt, were started during the recession. From GE in the 1800s to FedEx in the 1970s, these businesses are still going strong.

All business leaders and managers must understand that during recession it’s easy to panic. Panic, which is essentially a fear driven and not fact based emotion, has significant negative impact. You don’t want to give into panic and throw your hands in the air and get into a self-destruction mode. So you’ve to take the alternate route; rather than giving yourself to fear and flowing with negative emotions you can consider the event as a change. By this you’ll be able to see opportunities, make the right choices and realize the due positive results.

It doesn’t matter which business you own or run the following are 9 key points you’d need to adhere to:

  1. Eliminate debts: If your revenues are falling you’d have to balance by curbing your expenses. But more importantly you’d have to make sure you aren’t running into more debts. Austerity is the key to survival during recession.
  2. Right size your team: If there are unproductive, or even less productive, workers now is the time to make them perform or given them their marching orders.
  3. Track finances daily: You must take over the reign of financial control and know the financial status on a day to day business. In recession you’d have to rely less on your accountant and more on yourself.
  4. Reduce inventories: If you’ve things that have been rotting in your warehouse for more than a stipulated time get rid of them by either returning them to the supplier or selling them to the customer. Never stock too much of inventories in expectation for better margins albeit for extended repayment period.
  5. Upgrade your staff: See if you can get your staff to do more productive work. If possible train them or make them learn from each other. Having more skills is beneficial not just for organizations but also for staff.
  6. Focus on marketing: The significant focus must be laid on marketing. You got to find more clients while trying to make the best of existing clients. That’s the ultimate key for profitability during recession.
  7. Focus on quality: When there are many suppliers the one with the best quality and price is often sought for. So ensure that you’ve the right (not cheap) price for your products/services and – more importantly – better quality than your competitors.
  8. Hold on to existing customers: Many studies have proved that when spending power diminishes existing customers were highlighted as the most common source of revenue growth during previous recession. Identifying new business opportunities amongst existing customers often led to successful organic growth and revenue.
  9. Deliver excellent customer service: At any rate customer service quality of organization will determine the longevity of any enterprise. Being flexible and reliable to meet their requirements were cited as common methods to help retain existing customers loyal as they tighten their belts.

Author is Hon. Director – CGRI, Consultant – BW | Businessworld, Adviser – Exchange4media and President of Technoved Consulting Pty Ltd (Australia). He can be reached via email:

Author | Investor | Painter | Media, Management & Political Consultant

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