Downturn is part of a business cycle. Here's how you survive…

The current economic crisis has affected almost all businesses in every country. The crisis that started in the US, in markets related to the real estate sector, has spread to engulf the entire world.

A Dubai Chamber's study on 'How a business can survive economic downturn' gives ample guidance on how to run a business during a slowdown.

The downturn should be viewed as a short- to medium-term event, with a return to growth in the long-term. It should be viewed as part of a business cycle – periods of relatively rapid growth of output and periods of recession – around a long-term growth trend.

To survive the downturn and even take advantage of it a business needs to reassess its own strengths and weaknesses, assess its competitive position and make changes in certain aspects of its business. Some of these are short-term changes and others long-term. Before considering these measures a business should first be clear about its objectives and vision.

It should involve employees, management and any market research to understand its own strengths and weaknesses and those of its competitors. Once an analysis of the business and its competitors is completed a set of goals and objectives can be produced. Using these one can produce strategies that can help achieve the goals and objectives.

The next step is to make a business plan. Management should ask questions such as what service or product does our business provide? Who are our potential customers and how can we reach them? To develop a business plan, following short-term measures are to be considered: 

- Improve cash-flow: More sales, higher prices and lower costs can boost cash-flow – all of which are possible in a recession.

- Make costs variable: Understand what your cost base is and compare it to your revenue. Avoid long–term costs, review your main costs, hire more temporary workers and consider alternatives.

- Focus on the customer: Businesses need to understand how many customers will be willing to pay given the current situation. This will help in pricing.

- Reduce wasted resources: If you are an executive, subordinate repetitive duties and focus on long-term planning. 

- Scenario planning: When several scenarios are run, a range of choices that identify potential threats and opportunities may come up. These choices go unnoticed if you focus only on your organisation's present-day situation. 

- Consider needs of workers: Manage workers' emotions. Talk through stressful situations.

While implementing these short-term survival measures the business should continue to focus on its long-term objectives.

First long-term strategies should be made. The following is a list of long-term measures a business can take to help survive and even benefit from the current downturn. 

- Retain and motivate staff: Balance any staff reductions with a long-term view to preserve talent. 

- Outsource: Cost saving is an important reason to outsource. However, it is now trumped by strategy, value, and what gets an organisation to its next phase. 

- Improve Corporate Social Responsibility: CSR can also have a positive impact on financial performance by affecting stakeholder satisfaction. 

- Innovate: Coach both junior and senior executives to help them think outside the box. 

- Look for laid-off talent: This is a great time to find performers to help take the firm to a higher level. 

- Segment Analysis: Consider sales and costs value of each division. A side-by-side analysis of each segment's contribution to profit is useful to analyse each division's impact. 

- Build relationships: If you are small or medium enterprise it is important to make meaningful connections with people.

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