It hardly needs saying, but it’s tough out there for many businesses.
While it’s anticipated that the UK will narrowly avoid going into recession this year, the economy is still expected to shrink by 0.2% according to the Office of Budget Responsibility. You don’t need to be the Governor of the Bank of England to know that this isn’t good news.
A combination of supply chain issues, rising energy costs and mounting inflation continue to threaten the growth of businesses of all sizes. According to the Office of National Statistics, in February 2023 a quarter (25%) of businesses reported their turnover was lower compared with the previous month, while just 16% reported an increase. More than a third (37%) said that they had seen an increase in the prices of goods or services bought in February compared with January.
Reacting to a downturn
For many business leaders, their immediate reaction to a downturn is often to panic and consider cutbacks. And it’s easy to see why, as there’s no disputing that downturns are, generally, bad for business. Yet, despite the difficult backdrop, it is possible, as many businesses in the region are proving, not just to survive but to thrive if you approach the challenges in the right way.
Firstly, good leadership teams are key to the success of any business right now. It’s easy to get stressed out by all the challenges and rush about the office with a frown on your face but think about the message that sends to the rest of the team. Good leaders project calm and have a clear vision that serves to unite teams, creating a collective resilience and focus that is more essential now than ever.
Be courageous
Secondly, as Winston Churchill famously said, ‘don’t let a good crisis go to waste’. Opportunities abound when the going gets tough. It forces us to make the tough decisions that we’ve been putting off – but it also requires belief in the business and a certain level of courage to take risks that others aren’t prepared to take. As a case in point, we led an MBO in late 2020, just as the UK was about to enter into another lockdown. Not the best timing you might say, but we knew the fundamentals of the business were sound and the pandemic wouldn’t last forever – and the business is now stronger than ever.
Cash is king
My next point is key: cash is king. In my experience, most leaders are generally either focused on the product or the selling. It’s a rare animal that zones in on cash – but in challenging times this should always be your main focus. Businesses don’t go bust because of insufficient profit – they do so because they don’t have enough cash. Knowing how and when your business generates cash is critical. It might mean sacrificing some profit in the short term, but you need a healthy bank balance before you can start investing in growing profits.
Ask for help
Finally, remember, no great leader operates alone. All too often, leaders can feel that asking for help is a sign of failure, when in fact the opposite is true. Most of the successful managing directors I’ve met have led a failed or failing business at some point in their career. They have first-hand experience of what it takes to overcome the challenges you’re facing – and, more often than not, they’re only too happy to help. Seek them out and build a network of advisors (paid or unpaid) – you’ll find they will help to open doors that you thought were otherwise closed, creating opportunities for future growth at a time when they are most welcome.
