The global pandemic has led to one of the worst economic declines in history. This economic turmoil is unprecedented because the 2020 shutdown was so abrupt and caused by factors not economic in nature. We have no playbook for dealing with a forced shutdown and an inconsistent re-opening process. The CARES Act and economic stimulus is behind us and additional stimulus is unlikely in an election year, and the economy will likely not be “back to normal” for a foreseeable future. So, what are small to mid-sized businesses to do now?
The answer is not simple and will not be consistent for all businesses because the recovery is uneven by industry, geography, and size. Our advice is focused on small to mid-size distributors of discrete products, with sub-specialties of construction supply and US Distributors of foreign manufacturers. Not all tips will apply to your business, but this blog series focuses on a number of different concepts which can hopefully help your business not only survive but thrive as we get through this recession.
- Limit Debt and Preserve Cash - Because a recession usually brings lower sales and therefore less cash to fund operations, surviving a downturn requires financial conservatism. Although taking on debt may create cash, and interest rates are low, unless you are playing with other people's money, avoid taking on debt.
- Keep Marketing – Although you may get a lower return on marketing dollars, keeping your existing customers happy and obtaining new customers is the life blood of any business. During a recession, some of your competitors will fail and their customers need to know you are there to serve them.
- Focus on What You Do Best – Although some diversification of product may be beneficial, trying new things increases risk and is less likely to generate the same return as your proven “special sauce.” As a small to mid-size business, you most likely do not always win opportunities through lowest cost, but on personal touch, product knowledge, or some other aspect of service. Your service specialization is your weapon against the recession.
- Focus on Customer Service – The cost of acquiring a new customer is always higher than keeping your existing customers. During a recession, others will be looking to acquire new customers and will often cut prices (and profits) to generate cash to survive. Keeping your customers close, by knowing what they really want and meeting their needs is critical to your survival and for attracting new customers.
- Empower Your Employees – Employees are working from home, often with children remote leaning alongside them. Employees will require proper tools for effective remote working and need guidance on how to connect with your customers who are also working in this "new normal."
Over the next weeks, we will delve deeper into these concepts and provide concrete examples of how our customers and others are adapting and thriving in the "new normal."
For more information on how you to help your business thrive in these changing times with SAP Distribution "Start Services" and transform to "digital e-Commerce" with business management software powered by SAP Business One, contact us via web form, phone at 678-401-6244, or e-mail at firstname.lastname@example.org.