HOW CAN BUSINESS

TACKLE ECONOMIC
SLOWDOWN

Group 4
 INDEX

1) INDIAN ECONOMY

2) THE GDP NUMBERS

3) CAUSE FOR CONCERN

4) THE ROAD AHEAD

5) NO DEMAND NO INVESTMENT

6) CORPORATE SECTOR & INDUSTRY CRITICIZE THE

GOVERNMENT

7) HOW TO MAKE BUSINESS THRIVE

8) CONCLUSION
 INDIAN ECONOMY

The economy of India is characterized as a developing market economy.[38][39]

It is the world's fifth-largest economy by nominal GDP and the third-largest by
purchasing power parity (PPP). According to the IMF, on a per capita income
basis, India ranked 142nd by GDP (nominal) and 119th by GDP (PPP) per capita
in 2018.[4] Post 1991 economic liberalisation, the free market oriented reforms
propelled India to achieve 6% to 7% annual average GDP growth.[39] From 2014
to 2019, India's economy was the world's fastest growing major economy,
surpassing China.

The crisis brewing within the Indian economy has gained unanimous acceptance
by now. Even the latest annual report of the RBI for the fiscal year 2018-19 (or
FY19) confirmed that the Indian economy has indeed hit a rough patch. The GDP
growth rate of the economy has slipped to 5 per cent in the first quarter of FY20,
the lowest in over six years. This is an indication of tougher times ahead. Be it
the recent collapse of the automobile sector or the rising number of non-
performing assets (NPAs), sluggish consumer demand or failing manufacturing
sector; all have a hand in this deceleration of growth rate.

The spurt in instances of job losses from automobile manufacturers to biscuit

makers has led to the general acceptance of the downturn. This is the third
instance of an economic slowdown for India in the past decade after the ones that
began in June 2008 and March 2011. The technical term for the same is growth
recession. A recession is defined in economics as three consecutive quarters of
contraction in GDP. But since India is a large developing economy, contraction
is a rarity. The last instance of negative growth for India was in 1979. A growth
recession is more commonplace where the economy continues to grow but at a
slower pace than usual for a sustained period, what India has been facing
nowadays.

The growth of the Indian economy had been predominated by consumption

inclusive of both -- Private Final Consumption Expenditure (PFCE) as well as the
Government Final Consumption Expenditure (GFCE). Over the last five years,
the total consumption expenditure by Indian households had accelerated with an
average growth rate of 7.8 per cent compared to an average of 6.1 per cent in
2011-14. But the recent sharp fall in PFCE in the June quarter to 3.1 per cent
compared to 7.2 per cent in the March quarter has significantly contributed to the
recent slowdown.
That being said, any fall in consumption expenditure, as and when it would
happen, would escalate the crisis even more. If consumption spending falls, then
output and employment levels also fall since consumption expenditure directly
impacts the other two. As a consequence, the economy would stagnate, and prices
deflate. Lower prices, if unable to recover the costs, would halt the operations of
any firm and would initiate the layoff process. This, in turn, reduces earnings
further. Hence this vicious cycle keeps on repeating itself until the economy slips
into a deeper state of shock.

In addition, another major component of India's GDP is investment, induced by

both -- private and government sectors. It has been a key driver of growth since
the liberalisation of 1991. Though gross fixed capital formation (GFCF), the main
constituent of investment in the economy, increased, yet its contribution to
growth fell by 6.2 percentage points in 2014-19 than in 2011-14. The slackening
of investment lowers the level of infrastructure development, causes hesitation in
creating small business stop entrepreneurs from investing in research and
development, and thus stagnates technological development. Capital Investments
are long-term gains that generate profitability for many years by improving
operational efficiency and boosting innovation. It goes without saying that for
holistic growth of the economy and to gain competitive edge over others, the
economy must innovate.

In addition to these factors, the slump in the economy is also affected by the
various exogenous factors. A leading dampener is the US-China trade war, which
has intensified over time and has contracted world trade and, in turn, Indian
exports. Also, high rates of GST, liquidity crisis in NBFCs, and shift in the
behavioural pattern of the workforce due to the entry of young people has
discouraged savings. When people save less in the economy, it leaves less money
for investments.

Recession can be short-lived if corrective actions are taken immediately, failure

of which can have a prolonged effect on the health of an economy. Amidst the
news of slowdown, rise in FDI inflows from $12.7bn (FY19) to $16.3 bn (Q1
FY20) brought respite for the government. In a welcoming move, government
revised GST for the automobile sector, opened up FDI in contract manufacturing
sector and even announced the recapitalization of the banking sector. Together
with these, it should also focus on optimum utilization of funds granted by RBI
and direct them to boost investment in the economy both infrastructural and
research investment. Further, structural shifts over the long run can be achieved
through tapping into the health and education sectors that long for quality
improvements. Only such long-lasting structural changes can improve the growth
potential of the Indian economy and deter the possibility of three slowdowns
within the short span of a decade.

THE GDP NUMBERS

India’s economy grew at its slowest pace in over six years following a sharp
deceleration in consumer demand and cooling down of investment.

So, to recount, here’s what happened: Towards the end of August, the Central
Statistics Office, or the CSO, released economic growth data for the first quarter
of the current financial year 2019-20. It was speculated for weeks prior to the
announcement that what was around the corner might not amount to good news.
Even the Reserve Bank of India had marginally lowered the GDP growth
projection for 2019-20 to 6.9% from 7% projected earlier in the June policy. The
central bank had underlined the need for addressing growth concerns by boosting
aggregate demand.

GDP growth in the fourth quarter of the previous fiscal topped off at 5.8%, in
addition to the waves of not so great news from various sectors - like the falling
sales of automobiles and everyday consumables. Even so, the official GDP data
of just 5% growth in Q1 came as a shock to many. In comparison, GDP growth
was 8% in the same quarter of 2018-19. (Let’s also not forget that economists
agree that to realise the dream of a 5 trillion dollar economy by 2024, we need an
annual growth of at least 9%!)

Let’s look at the different sectors that were affected. According to a report in
Business Standard, sharp deceleration in manufacturing output and subdued farm
activity also helped drop GDP growth to 5% in the April-June quarter.

The last time GDP growth went this low was the 4.9% during the April-June
quarter of 2012-13.
The National Statistical Office released a statement that read, “GDP at Constant
(2011-12) Prices in Q1 of 2019-20 is estimated at Rs 35.85 lakh crore, as against
Rs 34.14 lakh crore in Q1 of 2018-19, showing a growth rate of 5 percent.”

There’s more: Gross Fixed Capital Formation (or GFCF), a barometer of

investment, was estimated to be Rs 11.66 lakh crore in the first quarter as against
Rs 11.21 trillion a year ago. In terms of GDP, GFCF at current and constant prices
during the first quarter was estimated at 29.7% and 32.5% respectively, as against
30% and 32.8% last fiscal.

According to a Money control report, muted household spending as reflected in

metrics like falling car sales have resulted in unsold inventories. Rising unused
capacities in factory plants reflect slackening demand and feeble investment.
Automobile showrooms have not been reporting brisk activity, implying lower
spending ability and flat income growth. Hundreds of showrooms have shut shop.
Tractor and motorcycle sales – indicators of rural demand – continued to contract.
Commercial vehicle sales slowed even after adjusting for base effects, mirroring
how stocks aren't moving rapidly across the country to fill shop shelves beaten
by low demand. Construction activity indicators have also slackened, with
contraction in cement production and slower growth in finished steel
consumption in June. Construction sector GVA grew 5.7% during April-June,
2019, compared to 7.1% in the same quarter last year and 9.6% in January-March
2019. Import of capital goods – a key indicator of investment activity– contracted
in June. Trade, hotel, transport, communication growth stood at 7.1% in Q1
compared to 6 percent in the previous quarter. Electricity and other public utilities
grew by 8.6% in Q1 as against 4.3% last quarter. Agriculture grew at 2%in Q1
compared to a contraction of 0.1%in the preceding quarter.

CAUSE FOR CONCERN?

Aside from youngsters using too much Ola Uber to bother buying cars for
themselves, what else is at play?

Chief Economic Adviser K.V. Subramanian said the slowdown is due to

endogenous and exogenous factors. Gourav Kumar, principal research analyst at
fundsindia.com, told Reuters, “...the indications we have seen in the past few
months, growth was expected to be slow. However, 5% is far below street
estimates of 5.6%-5.7% and does come as a surprise. This was primarily driven
by lower growth in private consumption. Manufacturing growth staying almost
flat is also worrying and immediate steps are needed to revitalise this sector. An
overall recovery may take another couple of quarters as the NBFC sector is still
recovering from the liquidity crisis.” Rupa Rege Nitsure, group chief economist,
L&T Financial Holdings, said, “National accounts data is consistent with the
picture suggested by leading indicators for Q1... GDP growth has decelerated to
5% - the lowest since Q4, FY13...Except for mining activity and power
generation, all other productive sectors have slowed on a y-o-y basis. In our
opinion, the weight of structural factors has gone up in the slowdown and mere
monetary stimulus may not work beyond a limit.”

The RBI was a bit more evasive in its evaluation. It said, “The diagnosis is
difficult, these conditions are hard to disentangle cleanly, at least in the formative
state.”

Other economists were more direct. Madhavi Arora, the lead economist at
Edelweiss Securities, Mumbai, said, "The...5 percent is clearly a shocker, and
confirms that the growth slowdown is more entrenched, thus giving further scope
for coordinated fiscal and monetary response. The growth slump clearly reflects
that the slowdown is beyond just the cyclical aspects and policymakers need to
address the structural constraints to ensure secular growth picks up ahead. We do
not see much immediate momentum in the growth picture. Near-term growth
dynamics are unlikely to change dramatically."
Sakshi Gupta, Senior Economist with HDFC bank in Gurgaon, told India Today,
“GDP growth has come in line with our forecast of 5 percent-5.2 percent. The
slowdown is being felt across sectors, including agriculture, manufacturing and
services. A strong base effect from last year only added to the pain. Going ahead,
we are looking at activity improving from these lows. This could be the bottom
for the current slowdown. Policy stimulus by the RBI and the government along
with normal monsoons will provide some relief in the second half. For the year,
we expect GDP growth at 6.5 percent. The RBI is likely to deliver another 40 bps
in rate cuts this year. While this will address the cyclical part of the current
slowdown, the structural issues could continue to plague the system this year."

The fall in consumption is being seen as an equally grave issue, given that it has
accounted for 55-58% of GDP. As Business line explained, “Consumption is at
the core of domestic demand in India, and hence the sharp fall in private final
consumption expenditure from 7.2% in the March quarter to 3.1% in the June
quarter needs immediate attention.” While rural consumption has been weak for
some time due to low wage growth, it appears that urban consumption is also
slackening.

According to BloombergQuint, “Economists conjecture that this could be

because of weaker employment opportunities and lower availability of finance
from non-bank lenders could be the reason behind the slowing urban
consumption.”

Devendra Kumar Pant, chief economist at India Ratings and Research, is

concerned about the collapse of private consumption demand. He told
Bloomberg, “Declining savings, especially household saving, is a major
challenge for the economy and is leading to structural growth slowdown. While
the fiscal space to undertake counter cyclical measures are very limited, we
believe, the government would undertake some measures to provide short-term
boost to the economy.”
The released data also indicates that credit to consumer durables shrunk by as
much as 71% as of June. Vehicle loan growth has slowed considerably to 5%.
The capex cycle also continues to be subdued - credit growth to industry is still
single-digits.

Further more, as real GDP growth fell from 8% last year to 5% in the previous
quarter, the sharp fall in nominal GDP growth from 12.6% to 8% during this
period, is worrisome. An analysis in Business line explained that the GDP
deflator (meaning, growth in the ratio of nominal to real GDP - a measure of
inflation) has fallen from 4.3% last year to 2.8% currently. The report said, “If
high inflation hurts consumers, low inflation also has an impact on India Inc. and
consumers. While falling food prices hurt agriculture income and spending,
overall inflation also has a bearing on the wage growth and income levels across
industries. Nominal GDP, also decides the credit requirement of a corporate, and
hence impacts the growth in bank credit. CPI inflation has fallen from 7.4% levels
five years ago to 3.15% recently.”

The Business line report also sounded a warning on the big merger of public
sector banks. It said, “The recently announced big bank mergers within the PSU
Bank space will hurt credit growth...At a time when growth in the economy needs
the banking system to ramp up lending activity, the bank mergers can only cause
more disruption. Given that the immediate attention will be to focus on the
integration process, bankers will mostly look at consolidation of loan book and
containing asset quality rather than scale up lending.”

Things are so bad that Subramanian Swamy - yes, that Subramanian Swamy -
declared, with no small amount of disdain, “Get ready to say goodbye to Rs 5
trillion if no new economic policy is forthcoming. Neither boldness alone or
knowledge alone can save the economy from a crash. It needs both. Today we
have neither. [sic]”

THE ROAD AHEAD

Finance Minister Nirmala Sitharaman did announce steps to revive economic
growth and shore up market confidence, including rolling back recent tax hikes
on foreign and domestic equity investors and several measures for industries. The
government also further liberalised foreign direct investment rules in many
sectors, in an effort to get economic growth back on track.

Chief Economic Adviser KV Subramanian sought to clarify, “The government is

alive to the situation and has taken several measures...We should be back to the
high growth path soon.”

According to an Indian Express analysis, the present growth trajectory indicates

we’re not out of the woods yet. A State Bank of India report said when GDP grew
by 8% in Q1 of FY19, 70% of leading indicators, such as car sales, showed
acceleration. In this quarter, only 35% of such indicators showed acceleration,
and GDP grew by 5%. For Q2 (July to September), only 24% indicators show
acceleration. Meaning there could be more pain ahead.

GDP growth rate forecasts for the current year have been revised downwards.
Observers expected a real GDP growth rate of between 5.4% and 6.4% for the
previous quarter. SBI now estimates the full-year growth at 6.1%, ICICI
Securities expects 6.3%, and Pronab Sen, former Chief Statistician, thinks it will
be 5.5 percent. Six months ago, a majority of the estimates for FY20 were around
7.5 percent. Weak growth implies the government’s fiscal deficit figures are
likely to be breached. Since weak growth will lead to lower tax revenues, the
government is likely to struggle if it wants to push up growth by spending on its
own. Independent experts expect the slowdown to persist for a while and see
another rate cut by the RBI in October after the 110 basis points slashed in this
round of monetary easing.

NO DEMAND - NO INVESTMENT: VICIOUS CIRCLE OPERATES

Since it is capital formation, or investment, that drives growth in the economy,
investment is an immediate source of demand as firms that invest buy goods and
services to do so. It also expands the economy’s capacity to produce.

The two sources of investment are private and public. The Private investment
source is depressed as of now due to the factors cited above and is difficult to
revive unless some external force is applied for example – tax sops, incentives
for investment, creating demand for certain products through public funded
projects among others.

When there is no demand, supply has to be stopped due to piling up of stocks and
production units go idle, leading to cut in labor force. It further reduces the
income leading to less demand and further reduction in supply and stopping of
production.

Since, investment involves committing funds for a long period under uncertainty,
the stepping-up of public investment when private firms are unwilling to invest
more is required. Increased public investment increases demand and quicken
growth and also encourages private investors, as the market for their goods
expands.

CORPORATE SECTOR & INDUSTRY CRITICIZE THE

GOVERNMENT

Although, a concrete plan to address the problem is being developed in

consultation with Prime Minister Narendra Modi. However, a section of the
industry and many economists have criticized the government for not being
prudent enough to read the distress signs and for treating the slowdown as
temporary and transient.

The economy grew by a mere 5.7% in the quarter ended June 2017. In the first
quarter of this financial year, growth fell to 5.7% as against 7.9% in the same
period last fiscal year.

Ways to Make Your Business Thrive in Tough Economic Times

Declines in consumer confidence and decreased sales threaten all businesses,
but small businesses are particularly vulnerable as they often don't have the
reserves to help them weather difficult times.

How, then, can your recession-proof your business? Implementing these

practices will help ensure your small business's survival and even allow it to
thrive during tough economic times.

I) Protect Cash Flow

Cash flow is the lifeblood of your business; to keep your small business healthy,
cash needs to continue flowing through. Now no matter how tough times get,
having cash flow out of your business will never be a problem.

As long as your business exists, you will have expenses. But the harder times
get, the harder it can be to keep the cash flowing in. Recession-proof your
business by implementing strategies to keep the cash flow moving. See also 5
Quick Ways to Improve Your Cash Flow.

Cash Flow Management Tips

1) Keep Your Weather Eye Open

One of the key factors in weathering any storm is knowing that it's coming and
what direction it's moving. Keep an eye on the leading indicators for your
business and be aware of changing economic conditions.

Prepare cash flow projections for the next year. This will help you to see what
changes need to be made and when. If such-and-such happened and your
predicted cash flow dropped x%, what could you do?

2) Review Your Credit Policies and the Credit Histories of Customers And/or
Clients

Managing your customers' credit is an important part of cash flow management.

Weed out unprofitable customers, those that cost more to maintain than they
add to the bottom line. Flag those who have a history of slow payment.

It is equally important to perform credit checks on new customers applying for

credit.

Remember that you do not have to extend credit to anyone. If a customer has a
history of slow payment, changing the credit terms or even eliminating credit
entirely may be required. If it does become necessary to refuse credit to a
customer, make sure this is done as tactfully as possible. After all, you do want
to have them as a customer in the future. Send a polite, regretful note informing
them that you cannot extend credit at this time and state the reason(s). Make it
clear that they are welcome to transact in cash.

3) Take Action to Speed up Payment

First, invoice promptly. Putting off invoicing gives the customer the impression
that you don't care how long it takes to get your money.

Second, take measures to encourage prompt payment, such as clearly stating

payment due dates and sending overdue notices. Use collection services when
necessary. Getting the money if you can is always better for your cash flow than
a bad debt.

4) See if Payments to Suppliers Can Be Extended

On the other side of the coin, check on the credit terms that your small
business's suppliers allow. Most suppliers allow thirty days to pay but you may
be able to get them to extend that term to sixty or even ninety days, allowing
you to keep the money in your cash flow pipeline longer.

5) Renegotiate Contracts

Landlords, lenders, and contractors are not impervious to changing economic

conditions so trying to renegotiate is worth a shot. For instance, if the lease on
the premises of your bricks-and-mortar business is up, you may be able to
negotiate a more favourable rate with your landlord - especially when another
retail property is standing empty. A less expensive lease will let you free up
more of your cash each month and get more of a cash flow going.

6) Use Cash Flow Management Tools

There are a number of software tools available to manage, track and forecast
your cash flow. If you happen to be using small business accounting software to
manage your accounts you may already have the cash flow tools you
need. Cloud-based accounting applications such as QuickBooks have built-in
cash flow forecasting reports. Others such as Sage One offer add-ons for cash
flow management. See 6 Advantages of Using Small Business Accounting
Software and Before You Buy Accounting Software for Your Small
Business for more information on accounting software.
There are also many software products dedicated to cash flow
management, forecasting, and budgeting, such as Pulse and Float that can
interface directly with popular accounting software products.

Remember, the outflow part of cash flow is never a problem; money will always
run out of your business easily. Keeping the money coming in on a regular,
sustained basis is the tricky part of cash flow management. Following the
suggestions above will make it easier to keep your cash flow flowing.

--------

II) Review Inventory Management Practices

See what can be done to reduce inventory costs without sacrificing the quality
of goods or inconveniencing customers. Are you ordering too many of
particular items? Can an item be sourced somewhere else at a better price? Is
there a drop-shipping alternative that will work for you, eliminating shipping
and warehousing costs?

Just because you've always ordered something from a particular supplier or

done things in a particular way doesn't mean you have to keep doing them that
way - especially when those other ways may save you money.

III) Focus on Core Competencies

the word "core" doesn't denote singularity; a business may have more than one
core competency. Successful businesses tend to have more than one of the
following core competencies:

 Quality
 Customer Service
 Value
 Innovation
 Marketing

The Origin of Core Competence

The concept of core competency originated as a resource-based approach to

corporate strategy; the concept was first introduced by C.K. Prahalad and Gary
Hamel. In the Core Competence of the Corporation (1990), they describe core
competence as something that a firm can do well that meets three conditions:
1. It provides consumer benefits
2. It is not easy for competitors to imitate
3. It can be leveraged widely to many products and markets

Obviously, such a strict definition of core competency excludes small

businesses, as most would not be able to meet the third condition.

I have seen many articles on diversification as a strategy for small business

success. (I've even written some!) But too often small business owners simplify
the concept of "diversification" to "different".

Just adding other products or services to your offerings is not diversification. At

best, it's a waste of time and money. Worse, it can damage your core business
by taking your time and money away from what you do best and/or damaging
your brand and reputation.

Drop the extras and focus on what you do best that is most profitable to
recession-proof your business.

------------

IV) Develop and Implement Strategies to Win the Competition's

Customers

If your small business is going to prosper in tough times, you need to continue
to expand your customer/client base - and that means drawing in customers
from the competition.

How can you do this? By offering something more or something different than
the competition does. Research your competition and see what you can offer to
entice their customers into becoming your customers.

How to Gather Intelligence on Your Business Competition

1) Check Out Competitor Advertisements

A competitor's advertisements can tell you a lot about the particular audience
they're targeting and the products or services they're promoting. This
information is useful for planning your own promotions and advertising
campaigns. In addition, scouting competitors' ads is an ideal way to compare
prices and view their sales and promotions.
 2) Visit Competitor Locations

The best competitive intelligence is current intelligence. Therefore, if your

competitors have brick-and-mortar stores, be sure to visit them regularly. Look
at what products or services are being promoted, and how they are priced and
displayed. This information is useful in forming an effective sales strategy.

If your competition has a website, be sure you visit and read their blogs
regularly. Websites can be particularly rich mines of information, telling you
more about your competition’s plans, marketing strategy, and even their
personnel than you could learn in a single visit to their facilities.

If your competition uses social media, you should also routinely check their
postings. The app Social-searcher is an efficient way to view this information,
as it gathers company postings from social sites such as Facebook and Twitter.
The number of "likes," as well as customer comments, can give you an idea of a
company's popularity in the marketplace.

3) Inquire About Your Competition

Look for opportunities to question colleagues and customers about the

competition. For example, ask if they've heard of the company, or if there is any
company news, to obtain useful feedback. Learning in advance about a
competitor's plans such as a future sale, a personnel change, or a wish to sell the
business, can help you formulate a better strategy.

In addition, don't hesitate to delve further with follow-up questions, such as

asking why the customer was pleased with a particular product or service. These
details can help you make improvements to existing products or services, or
provide ideas for new offerings.

9 Tips for Providing Excellent Customer Service

1) Know Your Product or Service

To provide good customer service, you need to know what you're selling, inside
and out. Make sure you and your customer-facing staff know how your products
or services work. Be aware of the most common questions customers ask and
know how to articulate the answers that will leave them satisfied.

2) Be Friendly

Customer service starts with a smile. When you are in a face-to-face situation, a
warm greeting should be the first thing your customers see and hear when they
ask for help. Even when handling customer service requests via telephone, a
smile can come through in your voice, so make sure you're ready to be friendly.

3) Say Thank You

Gratitude is memorable, and it can remind your customers why they shopped at
your store or hired your company. Regardless of the type of business you
have, saying thank you after every transaction is one of the easiest ways to start
a habit of good customer service.

4) Train Your Staff

It's important to make sure all of your employees, not just your customer service
representatives, understand the way they should talk to, interact with, and
otherwise assist customers. Provide employee training that gives your staff the
tools they need to carry good service through the entire customer experience.

5) Show Respect

Customer service often can involve emotions, so it's important to make sure you
and others you have handling your customer service tasks are always courteous
and respectful. Never let your own emotions overtake your desire to see your
customer walk away happy.

6) Listen

Listening is one of the simplest secrets of customer service. It means hearing

what your customers are saying out loud, as well as what they are
communicating non-verbally. Watch for signs that they are displeased, while
listening to what they say to you directly.

7) Be Responsive

There may be nothing worse than non-responsiveness to a customer who is

trying to get help, resolve an issue, or find out more about what you're selling.
It's important to respond quickly to all inquiries, even if it is only to say you are
looking into the issue and will be back in touch. Some response is always better
than none so the customer doesn't feel ignored.

8) Ask for Feedback

You may be surprised what you learn about your customers and their needs
when you ask them what they think of your business, products, and services.
You can use customer surveys, feedback forms, and questionnaires, but you also
can make it a common practice to ask customers first-hand for feedback when
they are completing their orders.

9) Use Feedback You Receive

You need to do something with the feedback you receive from customers in
order to make it useful in your customer service process. Take time to regularly
review feedback, identify areas for improvement, and make specific changes in
your business.

Excellent customer service often comes down to consistently checking in with

your customers and making sure they are happy with the products and services
you're selling and the process of purchasing, ordering, working with you. If you
do that successfully, you are on your way to becoming known for providing
excellent customer service.

---------------------

V) Make the Most of Current Customers and Clients

We've all heard the old adage that a bird in the hand is worth two in the bush.
The bird in the hand is your customer or client and he or she is an opportunity to
make more sales without incurring the costs of finding a new customer.

Even better, he or she might be a loyal customer, giving you many more sales
opportunities. If you want to recession-proof your business, you can't afford to
ignore the potential profits of shifting your sales focus to include established
customers. See 6 Sure Ways to Increase Sales.

6 Sure Ways to Increase Sales

1) Set Up a Sales Incentive Program

Give your sales staff a reason to get out there and sell, sell, sell. Why do so
many businesses that rely on their sales staff to drive sales have incentive
programs in place? Because offering their sales staff the trips, TVs, or whatever
perks for a set amount of sales works. Your sales incentive program should be
“sweet and simple and attainable”.
2) Encourage Your Sales Staff to Upsell

Essentially, upselling involves adding related products and/or services to your

line and making it convenient and necessary for customers to buy them. Just
placing more products near your usual products isn’t going to do much. How to
increase sales? Persuade the customer of the benefit.

3) Give Your Customers the Inside Scoop

If you have a promotion or sale coming up, tell your customers about it. They’ll
come back and probably bring some friends with them too, increasing your
sales even more. (And don't forget – you can give your customers the inside
scoop by emailing, calling them, or posting on social media too.)

4) Tier Your Customers

There should be a clear and obvious difference between regular customers and
other customers, a difference that your regular customers perceive as showing
that you value them. How can you expect customer loyalty if all customers are
treated as “someone off the street”? There are all kinds of ways that you
can show your regular customers that you value them, from small things such as
greeting them by name through larger benefits such as giving regulars extended
credit or discounts.

5) Set Up a Customer Rewards Program

We're all familiar with the customer rewards programs that so many large
businesses have in place. But there’s no reason that a small business can’t have
a customer rewards program, too. It can be as simple as a discount on a
customer’s birthday or as complex as a points system that earns various rewards
such as discounts on merchandise. Done right, rewards programs can really help
build customer loyalty and increase sales.

6) Distribute Free Samples to Customers

Why do so many businesses include free samples of other products when you
buy something from them? Because it can increase sales in so many ways. The
customer who bought the original product might try and like the sample of the
new product and buy some of it, too. Or they might pass on the sample to
someone else, who might try the product, like it, and buy that and other
products from the company. At the very least, the original customer will be
thinking warm thoughts about your company and hopefully telling other people
about your products.
------------------------------

VI) Don't Cut Back on Marketing

In lean times, many small businesses make the mistake of cutting their
marketing budget to the bone or even eliminating it entirely. But lean times are
exactly the times your small business most needs marketing.

Consumers are restless and looking to make changes in their buying decisions.
You need to help them find your products and services and choose them rather
than others by getting your name out there. So don't quit marketing. In fact, if
possible, step up your marketing efforts.

VII) Keep Personal Credit in Good Shape

Hard times make it harder to borrow and small business loans are often among
the first to disappear. With good personal credit, you’ll stand a much better
chance of being able to borrow the money needed to keep your business afloat if
you need to.

To recession-proof your business, keep tabs on your personal credit rating as

well as your business one and do what's necessary to keep your credit ratings in
good shape.

There's absolutely nothing that will make your small business one hundred
percent recession-proof. But implementing the practices above to recession-
proof your business will help ensure your small business survives tough times
and might even be able to profit from them.

How to Maintain a Good Credit Score

1) Know What Goes into a Good Credit Score

The more you know about what goes into your credit score, the easier it will be
to maintain a good one. Five key pieces of information are used to calculate
your credit score—your payment history, level of debt, credit age, mix of credit,
and recent credit.

Some things do not affect your credit score. For example, checking account
overdrafts and utility payments won’t automatically help (or hurt) your credit
score.
2) Pay Your Bills on Time
That goes for all your bills, not just your credit cards and loans. While certain
bills don’t get reported to the credit bureaus when you pay on time, they could
end up on your credit report if you fall behind.

Even a small library fine could wind up on your credit report if it's left unpaid
and sent to a collections agency. Continue to pay all your bills on time to
maintain a good credit score.

3) Keep Your Credit Card Balances Low

The higher your credit card balance in relation to your credit limit, the worse
your credit score will be. Your combined credit card balances should be within
30 percent of your combined credit limits to maintain a good credit score.
That’s $300 on credit cards with combined limits of $1,000.

Charging more than 30 percent of your credit limit is risky even if you plan to
pay off the balance when your billing statement arrives. Card
issuers typically report the balance when your statement closes, so that's the
number that will be reflected on your credit report. It's a good idea to keep tabs
on your accounts online and pay enough to reduce your balances to less than 30
percent just before the billing month closes.

4) Don't Close Old Credit Cards

When you close a credit card, your credit card issuer no longer sends updates to
the credit bureaus, and the credit scoring formula places less weight on inactive
accounts. After 10 years or so, the credit bureau will remove that closed
account's history from your credit report, and losing that credit history will
shorten your average credit age and cause your credit score to drop.

Closing a credit card also reduces your available credit. For example, if you
have three cards with a combined credit limit of $10,000 and you close one with
a $3,000 limit, your combined credit limit will be reduced to $7,000. Since your
goal is to keep your credit card balances at less than 30 percent of your
available credit, closing that card reduces your threshold by $900.

5) Manage Your Debt

Credit card balances aren’t the only accounts that influence your credit score.
Loan balances and lines of credit also impact your level of debt. Having too
much debt can cost you points on your credit score. The lower your debt, the
easier it will be to maintain a good credit score.

6) Limit Your Applications for New Credit

Woman looking worried Too many credit inquiries—whether they be for a
credit card or a loan—also can have a negative impact on your score, so
make sure you're only applying for credit when it really is necessary.
Opening a new credit account also lowers your average credit age.

7) Watch Your Credit Report

Just because you do everything right with your credit doesn’t mean everyone
else will. Errors could end up on your credit report leading to a drop in your
credit score. Identity theft and credit card fraud also can lead to inaccurate
information on your credit report. Checking your credit report throughout the
year helps you detect these mistakes sooner so you can correct them and
maintain a good credit score.

8) Hedge Your Bets

Companies can turn to commodity derivatives to hedge raw material prices and
assure adequate supplies. Commodity derivatives are contracts that draw their
value from the price movements of an underlying asset. You can hedge the
prices of oil, gas, coal, metals, agricultural products, and even electricity
through commodity derivatives.

If you are a producer or supplier of these materials, recessions will likely push
down prices and forward contracts can lock in your sales price — smart oil
companies locked in high prices when the price of oil recently dropped.

9) Swim the Channel

One of your most important assets is your sales channel and existing
customers. To better position yourself in the coming downturn, consider using
that channel to expand sales of new products and services. There are several
strategies and methods to increase sales:

 Adjacency Strategy. Are there “adjacent” areas around the company’s

core products or services that are natural extensions of the core?
 Examples might include a warranty or expedited delivery service offering
to your existing product line.
 Extension Strategy. Extensions involve the concept of the
“extended enterprise.” Consider reaching beyond natural adjacencies to
product or service extensions that might position the company for growth
beyond the core business.
 New Channel Strategy. Consider entering new markets through
alliances, partnerships, mergers or acquisitions, or even franchising your
product. Alliances and partnerships might be a less capital-intensive way
of growing the company without having to make an investment in new
production facilities or inventory.
 3. OPM (Other People’s Money)
 Most small businesses have some form of a line of credit: an agreement
between a financial institution—generally a bank—and a borrower to
provide a certain amount of loans on demand. Many banks today have
more money than borrowers and report that only about 40% of the
existing lines are drawn. Many businesses do go out of business during a
recession and it is for one fact: they run out of capital. Consider
increasing your line of credit and establish new credit facilities even if
you don’t need them now. You may later.

Another strategy for increasing your company’s cash flow, critical in a

downturn, is through a change in credit terms from your vendors and to your
customers. For example, if your competitor pays their suppliers in 45 days and
you pay in 30 days, you are leaving money on the table. Conversely, if your
sales terms are overly generous, you will need to finance cash needs that could
be met by better billing and collection practices. Lastly, determine if your
suppliers are giving you their best deals.

10) Outsource Everything (that’s not strategic)

 You are already a big user of outsourced services. You probably don’t
deliver you product directly to your customer yourself, do your own
audits or taxes, or self-insure your business. You may also outsource
some or all of your manufacturing overseas. In an economic downturn, a
key strategy is to convert fixed costs to variable costs — outsourcing is
one way to do this.
 Consider outsourcing everything that is not strategic to your business.
This includes your HR support functions, accounting, manufacturing,
transportation, and even your executive staff. Do you need a full-time
 CFO or controller, or would a “fractional” CFO or controller that is a
shared resource with other companies work for you?
 Most HR functions can and should be outsourced for small and mid-sized
companies. A Professional Employee Organization (PEO) can help
process your payroll and offer your employees a better offering of
benefits. In addition, by pooling with other companies through a PEO,
you can get significant discounts on the cost of benefits.

11) Understand Your Value

During the last recession, virtually every U.S. car company except one had to
be bailed out by the government. The exception, Ford, saw the recession
coming and sold and leased back their facilities, creating a war chest of capital
to weather the recession. It might be reassuring to own your real estate, but if
you are not a real estate company, consider reinvesting the capital tied up in
your real estate into the production and growth side of your business.

A sale-leaseback is a transaction between a bank or investor and a company

that sells and leases back its real estate or other fixed assets over a long term. It
is more complex than a loan and involves many accounting issues, but you still
use and control the facilities and you are effectively turning a non-liquid asset
into a liquid asset, an important decision when times are tough.

CONCLUSION

Regardless of your local or national economic situation, many people wonder

what they can do help bolster regional economic growth. Most major economic
change is based on the actions of major corporations and government actors,
but there are some things you can do to champion a better economy. Start by
investing in your local economy, where you can support businesses and jobs by
switching to local shops and services. You can also help foster greater change
by advocating for economic policy reform in your area, and keeping yourself
and your community educated about the latest economic trends.