As the economy of our country is in its doll-drum, the businesses suffer great losses but it is a critical milestone, a testament to the grit, creativity, and some desperation. It’s about finding whatever works because now there is no such thing as business as usual. Harvard Business Review looked at which businesses weathered the recession, and which crumbled and were left behind. The results were astonishing. Twenty percent of companies in the study didn’t survive the recession at all and went bankrupt, were acquired, or went private. Meanwhile, 80% were slow to recover, and half of those still had not returned to pre-recession sales or profits during the time period studied. The high levels of debt pose a risk during a recession depends on various factors. Shai Bernstein (of the Stanford Graduate School of Business), Josh Lerner (of Harvard Business School), and Filippo Mezzanotti (of Northwestern University’s Kellogg School of Management) have found that companies owned by private equity firms—which often require the companies they finance to take on debt—fared better during the Great Recession than similarly leveraged non-PE-owned firms. Companies with lots of debt struggle in part because access to capital slows to a trickle during a downturn.
Here are few keys that can help to make a Business Survive In A Struggling Economy.
1)Tracking expenses against the revenue status: During this contagion, it is of utmost importance for businesses to conduct a proper assessment of their fixed and variable expenses as well as the actual revenues.
2) Plan policies ahead of some time: While it gets difficult to gauge how long this epidemic will last, it is important to be prepared for all scenarios. Once it is considered to be a few months problem, an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. However, if the crisis continues for few more months to a year, entrepreneurs will have to reconfigure their business strategy to reduce the variable expenses, renegotiate fixed expenses rent, salaries, equipment lease payments, etc. and also emphasize only on the crucial essentials for survival.
3) By Having multiple income streams One should not put all the fruits in one basket. One of the advantages of businessmen is the freedom to try and implement new ideas. Many operators have expanded their fare by adding catering, delivery, and banquets. Others have been successful by adding brunches or buffets, wine dinners, or special weeknight promotions such as “Steak Night” or “Taste of [Italy, South America, Asia, in one of such businesses. One must try and cater to numerous opportunities that come his way.
4) Ensure liquidity One of the key challenges for small businesses is access to cash. Running any business is a risky endeavor; however, small businesses are particularly vulnerable.
According to a study, only about half of small businesses last longer than five years. Overhead costs like rent, payroll, and utilities leave very little liquid cash to owners, especially in the early years. Add to that the lack of revenue from slowing services and newly required benefits stemming from the pandemic, and our entrepreneurs will be devastated.
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