Here are a few ways to beat recession:

1. Get the most of your fixed costs - Fixed costs are also called ‘Sunk Cost’, meaning that one has to spend them even if revenue size has reduced. Look for opportunities to spread fixed costs over more revenue streams, or look for ways to absorb fixed costs. For example, if the rent for your office premises is Rs.40,000, find if you can sublet a part of the space, say a room, or table spaces to non-complete businesses. If you have extra telephone lines, look to see if you can surrender a line that has a higher fixed monthly charge payable to the service provider. Negotiate with your various service providers to cooperate with you and accept a lowered fee. It works.

2. Make every single rupee expense count - Its not likely you'll find one big cut. What's very likely is that you'll find several smaller cuts that will add up to significant amounts, and every three rupee you save can be the equivalent of a topline of ten before tax earnings. You can't save your way to prosperity, but this exercise will help you find ways to free up operational cash.

3. Reduce inventory - How much can you reduce your inventory? Inventory listed as an asset, but it also ties up operating capital. Don't carry larger inventories than you need, and research just-in-time delivery with your suppliers. If you need to have stock, try to stock up items that turn quickly, and reduce your holdings in low demand items.

4. Treat Cash with respect - Make a projected cash flow statement for the coming 12 months. Make sure you add all possible expenses, including drawings, yearly taxes, FBT on expenses, and capital payments. Then spend only as per projected cash flow. The key reason why people spend too much cash and often cash they can’t afford is because they are not in control of their cash flow or money. Once you take charge of your cash flow this way, you will not be left with surprises that may affect the liquidity of your business.

5. Use Cash Or Debit Cards – As a business owner, this is the most trying of times and personal financial discipline will certainly go a long way to tide the times. Dscipline would include reducing unwanted spends. A simple way of saving cash is to use a debit card or cash when making purchases. If you use cash then this will probably make you think hard about buying things as it will significantly reduce the cash you have in your pocket.

6. Your Best Employees needs to be nurtured - In recessionary times, your best employees have financial problems of their own, and their first priority is to take care of their families – through a raise from you or through a job change to one of your competitors. Losing well-trained quality workers is something that you can afford to let happen. Make sure you keep your best employees through bonus programs – but make sure that they are tied to performance.

7. Avoid falling behind on your mortgage repayments - Whether its corporate loan or personal loan, and there is threat of loss of business looming large, it makes sense to consider making overpayments now - this way you can make underpayments or even take a payment holiday later if you have a cash crunch later. You could also re-negotiate the interest on loans should interest rates fall, although lending banks need not agree to cut their interest rates when RBI reduces the base rate, because the credit crunch has increased their funding costs and put pressure on their own finances. But there is no harm in trying!

8. Delayed payment of mortgage repayments could be negotiated - Contact lenders as soon as you realise you may have a problem keeping up repayments. You may be able to reach agreement on freezing interest or paying an affordable amount. If lenders can see you making an effort to pay at least something, you are much more likely to get a helpful reaction.

9. Increase marketing spends - A common mistake that companies make is cut your marketing budget. However, if ever customer intelligence was important it's now.The key is to look at your marketing rupee as an investment not an expense. Use the customer knowledge that you have and implement smart ways of spending on marketing costs.

10. Make every job count - With less money in circulation, focus on revenue. Contemplate smaller jobs that wouldn't normally excite you. In a slowdown your staff is likely to have less to do. Keep them busy with whatever business there is. Lose the “OK, we'll even do this, now” attitude. You'll be competing for those jobs, and the competition is likely to be stiff.

11. Outsourcing during recession? Yes! - The rules of how business is done are changing. Focus your attention on maximizing revenue and on leveraging your intellectual capital. How much do you need to be in control? Think about outsourcing work that doesn't create revenue. For example, if you have been spending valuable time overseeing accounting data, you should consider outsourcing your accounting services to an outsourced partner. Another possibility is to work with part time college students as interns or trainees while ensuring the outputs and deliverables are clearly defined for this model to be successful. Outsourcing also allows you to “demand” output from the service provider, thereby paying only for the services received.

12. Losing Clients? Focus on those with you - Service them - With fewer customers you'll be tempted to reduce the number of customer service personnel. Many of your competitors will. Don't do it. Of course now is the time to cut expenses, but not in ways that touch the customer.

13. Change perceptions for a healthy business – and planet – The current perception in the business community is that addressing sustainability is a cost bringing no return; and that where issues are framed in terms of moral values and reputation, you can’t show real ROI. With fears of an even deeper economic downturn, everyone is looking to their bottom line. However, Corporate India and companies abroad have consistently demonstrated that companies with corporate social responsibilities have done well even in times of recession. Integrating sustainability across your business processes can bring real returns to business profitability, because eco-efficiency gains go straight to your bottom line. A lean, green business is a healthy business both for profit and planet. The message is – spend on sustainable model of running business and in indulge in activities that engage the employees and stakeholders in conserving the green on earth. Maybe take up tree planting.

By using the above methods, you can not only survive the recessionary phase in your small business, but thrive once it passes.



The Author Jayashree P K is a CA, and currently heads iBAS Consulting, a company providing outsourced accounting and CFO services to clients in India and Abroad. She can be contacted at jayashree@bas-corp.com