Current Economic Condition
The global economy is defined by the goods and services exchanged internationally. During the course of history, our financial system broke down several times due to banking panics, recessions, stock market crashes, and several other factors. Economists have developed several theories on the rise of a financial crisis and their prevention. In the modern 21st century, there was Global financial crisis even in the largest economies in the world – the USA during 2007-08, Turkish economic crisis in 2001, dot-com-bubble (Internet Company’s crisis) in 2001, the credit crunch in 2008 and the infamous Russian crisis in 2014.
One way or another, economical breakdown leads to the failure of business and declines in consumer wealth which further causes unemployment and instability. So what can an entrepreneur do to safeguard their company considering that these events are unpredictable and unavoidable?
Here are some do’s and don’ts that every entrepreneur in today’s current global economy must take to safeguard them from a global economic breakdown to lead to world economic development.
DO’S
King of Finance? Really? Re-Evaluate!
Start off by asking yourself some basic questions: Are you spending more than you earn in the current global economy? How long would your assets last if you cannot generate income out of your company? Is your level of debt suitable for you? How long your cash reserves would last? Are your investments safe if there is another breakdown in the stock market in the current global economic situation? If the answer to any of these questions is a big NO, then you are in real trouble! So keep asking the above questions repeatedly to yourself and ensure you are diverting at least 30 percent of your profit towards saving.
Red Alert for Crisis Management and Contingency Plans!
Gather your senior managers, legal and communication advisors who will execute crisis scenario and keep the team unified during the crisis. Identify all the potential risk factors related to your business. Map out scenarios and assign specific people to target the specific problems at the time of crisis. Always have a strong crisis management policy.
Funds Please!!!
When you are done calculating your expenses and debts, you’ll have a rough estimate of your expenditure in a month. You need to save roughly twelve times the same amount in an emergency fund, as during crisis, the cost of everything shoots up the sky. The same goes for every businessman, make sure that your funds are enough to run your company smoothly for the next few months. It is very important that you have enough money to safely lead at least six months down the road during the crisis.
Debts! Oh NO!
A lot of people argue that systems will shut down so we shouldn’t bother about paying off our debts. Newsflash!! Banks won’t suddenly trip down a rabbit hole and disappear into another world. Their existence will still be valid and so would those debts of yours. So, getting out of debt is a big relief unless you love a cat and a mouse chase or you’re Usain Bolt.
Eureka!
Start setting up new structures and ideas to utilize the economic breakdown for our advantage. In the past, many companies did that. Spare some time, do a case study of those companies, analyze what made them stand out from the rest of the companies and win hands down or at least survive through tough times. Have a think tank or be one!
Can You Be Warren Buffett?
As an entrepreneur, you should also think about investing–and successful investing depends a lot on timing. You want your money to be in the right place at the right time in order to obtain the best results. So you should also think about investing in different areas.
- Don’t overweight bonds. Everyone should own some bonds or bond funds for stability and protection against the effects of a 2008-style market crash. But don’t overdo it.
- If buying gold-jewelry is your idea of investment then wake up. Many people consider investing in other precious metals like platinum and palladium as their demand may go high during a crisis.
- Diversify globally. Try out global investment options where you can gain a competitive advantage. A stock market is a good option but beware of stock failures.
If you have a well thought out portfolio of stocks and bonds, you’re in a good position to ride things out. Selling now may protect you from further near-term losses, but you run a huge risk of missing the market turnaround. You don’t see the bottom until it’s already happened.
Cost Cutting
Probably the easiest thing to say, but working on it is pretty much what you have been doing ever since you started your company. You have to push forcefully and identify what you need and do not need, ignore the things you do not want for the time being. Laying off may look like a good option, but ensure you already have automated systems for better efficiency.
Stay Optimistic
Optimism open doors and windows of opportunity in your life. Believe in yourself and you will win through any situation during hard times. Be the determined person you are, have a strong passion to tear through anything and face everything!
DON’Ts:
I Need Family and Relationships! Nope!
Everyone loves a big office and those growing number of employees. But during a crisis, focus on reducing the headcount. There is no point for relationships during a crisis. You have to let it go! Keep your product quality the same by increasing productivity only with less number of people.
Reports? Are They Necessary? No, Once Again!
Track your finance daily, weekly, monthly to keep track of all the expenditures and profits. Indicate the products and services that are more profitable and shift your attention towards them. You will have valuable insights only through the reports.
Conventional Methods? Are You Kidding Me?
Expand your company not demographically but on the internet. Find out better ways to provide those services to your clients by using affordable internet methods. This will save extra expenditures which can be redirected to use more staff or in quality management.
No Priorities in Life! Are You Sure?
The main motto of your company through the crisis must be to make a profit by retaining existing clients. Choose projects based on how much profit you can gain out of it rather than working on useless stuff. If you want your investors to be happy, you must have all your focus on profit.
Bad Quality! In Your Face!
During the global breakdown, don’t let go of your principles. Get smaller and more profitable by delivering the right quality. Nobody will care about your services if they don’t get the finest stuff. The finance will be tight during these times. Have a mantra to be more productive and stay positive.
Approach a Business consultant company so that they can guide you with their expertise during your tougher times. Market Research at these times can guide you through your strength and weaknesses. A market research company can help you with the process.
In the end, remember:
“Life is like riding a bicycle. To keep your balance, you must keep moving”– Albert Einstein
Ourbusinessladder is a Business Consultant and a Market Research Company in Pune, Mumbai and PAN India. We help existing businesses and startups for their exponential business growth.
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