How to “recession proof” your franchised business

While the South African economy is now facing its 2nd recession on the back of the economy contracting 1.4% in 2019 Q4, it’s helpful to remind oneself as a small business owner that some of the most successful businesses in history were built during economic recessions, including Apple, Microsoft and Burger King.

Small businesses have an advantage over big business in the sense that the small business owner has the flexibility to make decisions in real time, while big business structures with time-consuming approval mechanisms, do not. Given this flexibility, it is important that SMME’s recognize that it is important to temper a cost-cutting mindset which tends to prevail during phases of constrained economic growth, with the flexibility of capturing opportunities faster than big business.

While cost containment is absolutely vital, opportunities will present themselves, and you as the small business owner need to be poised to leap at those opportunities. Giving yourself that edge relies on following a handful of critical tips:

1. Protect your cash flow

Capturing opportunities relies on having cash available, and therefore focus on limiting your cash flow shortages.  Establish a line of credit to access when opportunities present and be disciplined about maintaining a steady cash flow.

2. Convert working capital to cash

Hold your customers to payment terms and reward those that settle early.  Negotiate extended payment terms with suppliers to retain cash in your business and promote a steady cash flow.

3. Limit inefficiencies

Address inefficiencies in your workflow, replace manual process with technology and automation as much as possible to reduce overhead costs as much as possible. 

4. Cut down waste

Inventory management to reduce waste is key, but never compromise on quality.  Evaluate your inventory holdings to limit your stock holdings to only that which is necessary for the long-term survival of the business.

5. Nurture customer relationships

Experts differ in the statistics, but it is a widely held opinion in business that it costs 9x more to sell to a new than to an existing customer.  By nurturing your customer relationships, you are better positioned to understand their requirements, and position products to answer to that need.  This increases their spend with you, and is at lower business risk than launching new product lines. 

At Signarama, we offer our customers a range of signage solutions to support their business in all seasons of economic change.  We are South Africa’s biggest signage franchise brand, and part of the global Signarama Group.  If you are interested in joining our franchise family, reach out to us and let’s start a conversation about a new chapter for you and your business.