Preparing for a Recession
Many senior executives in Malaysia have not begun to prepare for a downturn. No significant plans are being put in place. Preparing for a recession gives a company the advantage of thriving above unprepared competitors who may fall to positions that they cannot recover from.
Below are some ways a company can prepare for a crisis:
Diversify your company’s revenue stream
Look for new ways to diversify your revenue. For example, a business in Malaysia can expand into Singapore and target a new market altogether. This diversifies your income stream and allows you to have a more stable source of income.
Manage your debt. Debt increases quickly when there are tight budgets, thus you shouldn’t accumulate debt as a company. Pay it off as quickly as you can. Do not neglect your higher-interest loans. They should be top on your debt list to be cleared. Also, work on efficient ways of collecting debts owed to your company.
Balance sheet discipline
Track your finances well daily, not just in preparation for recession but as a daily routine. This helps to ensure you are aware of your actual cashflow, and how you can plan around it.
Business planning can be difficult, especially if you have no experience in handling a recession. Fortunately, Paul Hype Page is a trusted advisor in the region, with years of experience, and we can advise your business, specific to your needs.
Find a way of renegotiating with suppliers or landlords for a longer repayment plan. A company can do this by asking for a long-time rental agreement that is lower. Landlords would rather have you stay at a lower rent for longer than have the premises vacant for months. Cut down on subscriptions like magazines and newspapers. Try to have discounts on all your utilities like water electricity and the internet.
Reduce your inventory to a bare minimum and keep only that which you need to meet demand. Do away with inventory that is tying up cash on your shelf. That cash has a possibility of not being liquidated during a recession.
Invest in your customer relationship
Create the best results and experience for your current customers or clients instead of investing so much to attract new clients. The happy clients in turn will bring more clients by sharing their experiences with other potential customers.
Proactive mergers and acquisition (M&A)
A company should take the opportunity to use M&A to reshape its business portfolio. It may choose to form mergers with strong companies, and at the same time acquire new lines at lower prices.
It should at the same time do away with companies that are economically viable to be part of in the present and more especially in the future.