Don’t let your business suffer more than necessary
The year is 2017. I’ve just finished the last leg of my masters program at the London School of Economics. My face is still dotted with acne, as it has been for the last seven years, but things are finally starting to look up. I’ve been avidly exploring my newfound interest in skincare and formulating cosmetics for myself, and for the first time, I can see that my skin is improving.
Excited, I launched a small brand for the products I’ve created, hoping to help others who’ve been in my situation — stuck suffering with acne with no clear way out.
Back in Pakistan, I had a small launch and began selling products online as a side hustle while pursuing a full-time role at a large tech company. Eventually, my brand began to take off, and I decided to leave the job market for good. All in all, things were great. Then COVID struck; ironically, for everyone in the e-commerce space, including me, things got even better. Sales shot through the roof, and I was making more money in a month as a 20-something operating my brand from home than most people in my country would see in a year working well-paid, full-time jobs.
As COVID ended, I decided that with my growing team, setting up an office would be the best course to take. I had a spacious house, but I could only fit so many people into it. Setting up an office meant I could hire more people — which I did — but it also meant an immediate uptick in my costs. But I was convinced that the team synergies created by having everyone in a shared space would pay for themselves. While the first few months were a struggle, compounded by the discovery that some employees from my core team had been embezzling funds from me, revenue eventually began to creep up.
Despite an uptick in revenue, profits didn’t keep up and still aren’t doing so. Part of that can be attributed to my shift into an office space — setting up the space required a hefty investment, and my fixed costs have also gone up. The other part, however, has to do with factors beyond my control. My country’s economy is failing; COVID may have initially yielded an uptick in e-commerce revenue, but the inflation that followed it has come back to bite everyone. It doesn’t help that the rupee is in free-fall (to put things into context, the GBP cost less than PKR 150 when I returned to Pakistan but is currently selling above PKR 300 in the open market), which has resulted in a sharp increase in all raw material prices since almost everything is imported. At the same time, there has been a sharp decline in the buying power of consumers as inflation has caused the prices of everyday goods and utility bills to explode.
As I look ahead, things don’t seem to be getting better. Growth has stagnated because people don’t have money to buy. The cost of advertising and raw materials has increased, and inflation is at an all-time high. In my country, these issues are compounded by a near-complete ban on imports because it has dangerously low foreign exchange reserves, which doesn’t bode well for businesses like mine that depend on imported raw materials.
While I’ve started trying to diversify my sources of income to be prepared in case things go south, the hard reality is that nothing gets built overnight. The uncertainty that the future holds, alongside my lack of control over economic conditions that significantly affect me, is jarring.
Running a business can be challenging at the best of times — and there’s nothing like a recession to make your life even harder. Many companies experience a dip in their sales. Lower sales often mean fewer jobs and higher unemployment rates as companies cannot afford to keep employees on staff. This leads to further economic decline as people don’t have money to spend either because they don’t have jobs or fear losing them.
Being in such a situation is truly demoralising. But it doesn’t have to be a time to throw your hands in the air and give up.
Try to focus on what you can control instead of what you can’t.
Here are some steps you can take to help your business survive a recession:
- Cost-cutting is the hardest thing to do, but probably the most important to stay afloat. Take a hard look at your income statement and identify and cut costs that won’t generate returns till the economy begins to grow again and consumer confidence returns.
- Don’t be quick to slash your marketing budget before everything else when cutting costs. Carefully assess and revise your marketing strategy to help ensure that when people start spending again, your company will be top of mind.
- Look at ways to reduce expenses while maintaining quality service levels; consider renegotiating contracts with vendors and suppliers or outsourcing work that doesn’t require full-time employees. Be careful not to compromise on customer service so, at the very least, you can retain existing customers, even if it’s challenging to acquire new ones.
- Carefully consider your sources of funding. Where can you turn if you need extra funds to help weather the storm?
- Move quickly — this is essential in recessionary periods; if you wait too long, it could already be too late. Be aware of where the market is heading and what others in your industry are doing, and adjust accordingly to stay ahead of the curve.
- Take a look at your current offerings and consider how you could adapt them to appeal to customers in a recessionary market. Can you offer lower-priced or discounted items? Can you offer additional value through bundling or free shipping?
- Lastly, and perhaps most importantly, diversify your revenue streams — this is especially important if you’re from a country like mine that’s close to a sovereign debt default, where the latest covid-fuelled recession is unlikely to be a temporary glitch. Try branching out into other markets or industries where you think there might be potential for growth; this could mean launching new products or services or expanding into different geographic markets. It could also mean starting a low-cost side hustle with your core business, something akin to either a YouTube channel or drop-shipping, where you have to deploy little to no capital to get things running.
Recessions have always been part of our economic landscape, and there’s no reason why your business should suffer more than necessary through tough times.
How has the current economic landscape affected you, and how have you been dealing or planning to deal with it? I’d love to know in the comments.