Many people are hoping for an economic bounce-back once the coronavirus threat has receded. However, it is more likely that the world will enter a period of recession. With many people out of work and the world’s supply chains disrupted, consumer demand will be low, and getting products to market will be challenging. Some economists are even predicting that the post coronavirus recession will be the worst the world has endured since the great depression of the 30s.

Businesses that have already been heavily impacted by the COVID-19 lockdown face a further period of uncertainty. At best, economic recovery will be slow. At worst, businesses could be facing a long period of turbulent trading conditions. Now is not the time for throwing in the towel. Here are some tips on how to prepare your business for a post Covid-19 world.

1. Review Your Current Financial Position

The first step is to assess the current financial health of your business. Look at what resources you have left, look at your available credit, and take stock of your personal assets as well. As a small business owner, your company is likely your sole source of income. So, you will need to work out how you will survive the recession. If your business assets have been significantly diminished by the COVID-19 crisis, you may also have to decide if you are willing to support your company with additional personal financial resources.  You will also need to take into account any subsidies, loans or deferred payments that you may be able to take advantage of.

2. Create What-If Financial Forecasts

In the event of a severe post coronavirus recession, your old financial forecasts will be redundant. Businesses will not be able to assume anything in such an unpredictable economic climate. To help you plan for every eventuality, you will need to create what-if financial forecasts. Then, you will be able to prepare a course of action for the various possible scenarios. You may find that your business could survive a 25% decrease in revenue with only a few changes. A 35% reduction, though, might mean that you have to cut overheads and lay-off staff. It’s all about being prepared for all possible outcomes.

3. Assess the Health of Your Supply Chains

Even if your business can survive a recession, all your planning will be in vain if you cannot source the raw materials and services that you need. Reach out to your existing suppliers and find out what their post coronavirus plans are. When are your suppliers reopening? Will they be working at full capacity? Will deliveries be made in the same timescale as they were before the COVID19 outbreak? If you are heavily reliant on a single supplier, now might be the time to begin looking for alternative suppliers.

4. Revisit Your Pricing

If there is a severe recession, people will lose their jobs, some workers may be forced to take pay cuts, and even those who are still at work will change their spending habits and keep money back for a rainy day. So, consider how a reduction in consumer spending and confidence will affect the demand for products or services. As a part of the what-if forecasting mentioned above, look at how far you could reduce your prices and still have your business break-even. The laws of supply and demand will still apply during a recession, so less demand may mean the need for lower prices.

5. Consider Diversifying

If your business operates in a sector that is likely to be severely impacted by a drop in consumer demand, think about how you can diversify to survive. During the coronavirus lockdown, for example, restaurants have been introducing a takeout service, and car manufacturers have used their spare capacity to manufacture personal protective equipment (PPE). The same type of agile use of your business resources could provide you with sufficient income to see you through the uncertain trading conditions that lie ahead.

6. Renegotiate Terms with Your Suppliers

If your business revenue falls, it will be your fixed costs that cripple the company. The expenses, such as property rental payments, loan repayments, and equipment leasing costs, will continue at the same level, regardless of what you do. As a part of your post coronavirus recession planning, you should be contacting suppliers to negotiate better payment terms and get payment holidays where you can. All businesses will be in the same boat during a recession. So, your landlord, for example, would probably prefer that you pay less rent for six months than see you go out of business and pay no rent at all.

7. Talk to Your Employees

If times get very tough, you will be faced with some difficult decisions concerning the people who work for you. No one wants to lay-off workers when the chances of those people finding alternative employment are slim, but you may have no choice. One way that you might be able to avoid letting people go is to talk to employees about flexible working, taking temporary pay cuts, or implementing shorter working weeks. If you have a loyal workforce, they will want to help you keep your business alive. Workers may also be grateful for continuous employment, even if it means taking home less money at the end of each week.

8. Switch to On-Demand Suppliers

Think hard about any suppliers to whom you pay retainers or pay fixed monthly fees. Consider switching to paying for services on an as-used basis wherever you can. You might, for example, be paying an information technology (IT) company a monthly fee for IT support. If you were to pay for IT support on a case by case basis, each support case might cost you slightly more, but you would have better control over how much you spend. One thing that will be different about this recession is that businesses will have the gig economy to fall back on. You can now hire anything from a data input clerk to a web developer on an ad-hoc basis.

9. Plan for Growth

It may be counterintuitive to even think about business growth with a recession looming. Still, if your business survives the downturn, you will need to be ready to take advantage of the economic bounce-back when it does occur. So, if you can, mothball equipment rather than sell it off. Negotiate reduced rental payments or rental holidays rather than close production premises or stores. And, if your business can support it, consider finding new sources of financing for your company while interest rates are so low. The crucial thing to remember is that you will need a recession exit plan as well as a survival plan.

10. Monitor the Numbers and Be Agile

The biggest challenge facing small businesses in the coming months, and even years, will be the uncertainty. No one knows for sure how deep the recession will be and how long it will last. And no one can predict if there will be further spikes in coronavirus cases, which could lead to a second wave and another lockdown. Businesses of all sizes are going to need to closely monitor their sales, gross margins, and bottom line so that they can quickly adjust their plans according to the changing trading conditions.

Conclusion

As the above points demonstrate, the key to a business surviving the post coronavirus recession is going to be flexibility. The ability to adjust costs to meet fluctuating sales will help enterprises to maintain a positive profit margin.  Those businesses that do come out the other side of the economic downturn will be well-placed to take advantage of an economic bounce-back.