An uncertain economic environment poses a multitude of challenges for businesses. Some organizations survive while some buckle under pressure. Entrepreneurs and business owners have become very interested in making their businesses resilient to economic upheavals. Here is a look at some ways to achieve this.
Prioritize short term goals
Conventional wisdom emphasizes long term strategic planning. However, long term vision does not do much good when short term survival is at risk. In a volatile environment it is immediate-term planning that enables businesses to survive. The American Management Association suggests a “tightening of planning horizon” and shifting focus to the short-term. Organizations do this by lowering expectations while bolstering solvency.
In a crisis there is little room for traditional advice. Lowering short term expectations allows businesses to address areas which need urgent attention. It could be a marketing strategy that is not working, or a sales channel which is failing to bring results. The Harvard Business Review recommends going after ‘micro-goals’ rather than chasing ‘big, audacious goals’. This does not mean that businesses should abandon long term planning. That is important too, just not urgent. The core message is to focus on making progress in the short term and overcome the tough times.
Employee well-being
People are at the core of most businesses and their success. Deloitte Consulting advises businesses to strengthen “human resilience” foremost. Employee stress levels can indirectly impact business finances. A rise in health insurance claims, prolonged medical expenses, and costs related to employee absence/attrition tend to add up. High levels of employee stress also impact businesses in other ways. Productivity falls and the quality of customer service declines. Being employee-friendly takes new importance during uncertain times.
American firms employ millions of migrant professionals. These expats regularly send money online as remittances to their families back home. Employers must understand their workers’ needs and priorities. Instead of corrective measures businesses should take a proactive approach. Ensure employee well-being to keep stress-related issues from becoming problems. Take steps to increase workplace satisfaction. Redress grievances timely. Appreciate and engage employees regularly. Keeping employees emotionally invested in the business significantly improves the likelihood of surviving a crisis.
Maintain liquidity
Economic uncertainties can threaten an organization’s cash position. Even profitable businesses can become unsustainable if they fail to keep a close watch on liquidity. Maintaining cash flows in times of crises requires sustainable cash management. KPMG Global suggests tracking important working capital KPIs (Key performance indicators). Identify shortages early by establishing a detailed 3-month forecast on a daily and weekly basis. Track outstanding payments. Relax or tighten credit limits for outstanding invoices. This helps improve cash flows and maintain short term cash positions.
Track the ‘current ratio’. It measures a firm’s current assets and account receivables against its current liabilities and account payables. A current ratio of less than 1 implies an inability to fulfill financial obligations. Businesses must strive to maintain healthy current ratios between 1.5 and 3.
Another financial KPI to monitor is the ‘quick ratio’. It is calculated by measuring cash, account receivables, and short term investments against current liabilities. Quick ratio reflects whether a business has enough to cover near-term liabilities. A quick ratio of 1:1 is considered healthy.
Small businesses which do not conduct extensive financial analyses can track a simple metric called ‘burn rate’. It shows the rate at which a business is spending money on a weekly, monthly, or annual basis. Businesses must strive to maintain a burn rate that ensures cash reserves for 6 months.
Build strategies for customer satisfaction
In times of trouble customers can be valuable stakeholders. The Wall Street Journal encourages building a satisfied customer base as a way to build resilience. Businesses should constantly communicate with customers online. This builds long lasting relationships. In the short term organizations can adopt flexible pricing and generous refund policies. Such measures help preserve the vital customer base in times of crises.
A delighted customer is the best form of promotion. Happy customers keep coming back and bring new ones. This is where social media strategies come in. A recent Harvard Business Review report recommends integrating social media strategy into overall marketing campaigns. The CMO Survey 2020 found that spending on social media marketing surged by 74% between January and June 2020. Businesses are spending more to build better online customer experiences. Actively engaging with customers on social media is essential for building ‘customer resilience’.
About the author:
Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.
