Plan your recession survival

With business failures on the rise, small firms are focusing on short-term survival rather than long-term strategic goals. But, as Vicki Arnstein finds out, this shouldn't be at the expense of sound business planning - and particularly an adaptable marketing plan

A recent survey from Lloyds TSB revealed that more than a quarter of small-business owners felt the recession had no impact on their business planning, while a third admitted they didn't have a plan at all.

Yet small-business owners can increase their chances of getting through the credit crunch by streamlining their firm and adapting to the needs of the market. 

"During hard economic times, regularly updating your business plan is vital," says Jane Khedair, managing director of Business Plan Services. "It should go hand-in-hand with cutting back expenditure and keeping a keen eye on opportunities to get a hold in new markets.

"This is probably the third downturn we've seen since we set up 17 years ago and each time we've seen the fittest businesses survive," she adds. "Those that make it recognise there are plenty of opportunities if they are geared up appropriately, have the right tools and minimise their overheads so they have a lower cash-burn than their competitors." 

Review your costs

Assess your main areas of expenditure to see where you can make savings. These are likely to include premises, staff costs, suppliers and equipment. Consider whether remortgaging, subletting, renegotiating leases, using more temporary workers or switching to cheaper suppliers are viable options.

According to Khedair, one expense that shouldn't be cut back is marketing. "You can't afford not to market your firm," she advises. "Just make sure you spend prudently and it generates a return.

"If you are considering redundancies, consider whether you'll have enough resource and goodwill to meet any new opportunities or demand once the economy picks up," warns Khedair.

Adapt to the market

Diversifying can also help you survive. You need to consider whether your customer base might dry up during the recession. Can you offer new products or services to different sectors to counteract this?

The inevitable casualties of the downturn may also allow you to take customers and contracts from failing competitors, so keep a close watch on your sector. You should also ask suppliers and customers for information and keep updated by reading industry news in sector-specific magazines or on trade association websites.

While you need to adapt to the needs of the market, Khedair warns that you must maintain your unique selling point. "The minute you start losing your point of differentiation you may as well shut up shop," she says. "For example, luxury brands risk devaluing their proposition by aiming cheaper offerings at the lower end of the market."

Despite the doom and gloom, the recession won't be a disaster for all. There may be opportunities for growth or even mergers. But not neglecting your day-to-day business is key. "Stay alert to what is going on and seize any opportunities, but don't take your eye off the ball because that could ultimately cost your business its lifeblood," concludes Khedair.