• Thursday, July 18, 2024
businessday logo

BusinessDay

How can businesses best tackle the realities of an economic crisis head-on?

How can businesses best tackle the realities of an economic crisis head-on?

Even in a country as accustomed to economic ups and downs as Nigeria, 2024 has proven especially challenging. Amidst ongoing global inflation and rising interest rates, businesses in the country have had to grapple with fuel shortages, grid collapses, the end of the fuel subsidy, and a plunging Naira, among other things.

As a result, things have become significantly more challenging for individuals and businesses alike. Inflation, while high all around the world, hit 30 percent earlier this year (the highest it has been in three decades), with food prices rising 35 percent. Simultaneously, rising interest rates have made borrowing more expensive and funding more difficult to come by, forcing businesses to pass on their rising costs to already overburdened consumers.

Read also: Only 1.3% of informal businesses make ₦2.5m profit/month Report

While there should, at some point, be a turnaround in the country’s economic conditions, businesses will have to exercise near-unprecedented levels of resilience to make it through these trying times. Being able to ride through economic ups and downs is, after all, the ultimate test of a business’s potential longevity. Building up that resilience isn’t always easy, but with the right combination of strategies, it is possible.

Lay out a game plan

The initial priority for any business aiming to enhance its resilience is to establish plans that enable it to navigate the current economic challenges effectively. The ideal scenario would have been for that plan to have been in place prior to the crisis and to have cash reserves and a strong customer base to support it. Those two things make it easier to take a conservative approach for the duration of the crisis and to come out at full pace once it passes.

Even without extensive cash reserves in place, however, there are still things organisations can do to make it through tough economic conditions.

Rethink marketing expenses

Freezing marketing spending when an economic crisis hits could result in your brand no longer being the first choice for customers, especially when competitors continue to invest heavily in marketing efforts. In order to optimise your marketing budget, your business should focus on well-timed campaigns that deliver impactful messaging. You can also reduce spending by focusing on the channels that deliver the best returns on investment, particularly those that allow your business to speak directly to your customers. It is important to measure and evaluate.

Re-allocate resources where necessary

While there may always be instances where new hires are necessary, businesses can also get around them by doing a careful audit of their teams. If you discover that one team is overstaffed while another is understaffed, for instance, could members of the former be redeployed to the latter?

This reshuffling-based approach offers several benefits. Not only does it save on hiring costs and reduce the risk of having to lay anyone off, but it also provides crucial opportunities for employees to gain exposure to different areas of the business. The understanding that comes with that experience can only serve those employees and the business well in the long run.

Exercise empathetic CX

While it may be tempting to chase down as many new customers as possible during periods of economic turbulence, such activities mustn’t come at the expense of existing customers. In fact, organisations should pay extra attention to loyal customers during periods of economic turbulence.

That means that businesses should do everything in their power to build an empathetic customer experience. Doing so entails listening to the hardships customers face and seeing if there’s anything the business can do to help them. If you’re a B2B company, for instance, can you waive an invoice or offer discounts for the duration of the economic crisis (with the proviso that your offerings go back up to full price once it passes)? Doing so will engender long-term loyalty and benefit the business’s bottom line in the long term.

Read also: Purpose-driven businesses and the power of the SDGs

Cut down on overheads

It’s surprising how many businesses will start layoffs before trying to cut down on overhead costs. That’s surprising because even a few small changes can make a big difference.

Consider data centres as an example. Companies outsourcing their data centres and their management should assess whether they could save costs by running them themselves. Another area where businesses can reduce overhead costs is in real estate. If your business’s office lease is coming up for renewal, consider moving to a suburban or rural office instead.

Alternatively, if you have more space due to moving to a hybrid model, you could look at renting out part of your office, or even individual desks, to other companies.

Resilience breeds success

While taking these measures isn’t always easy, they can be vital for seeing a business through an economic crisis and building long-term resilience. That resilience, in turn, not only ensures that the business is better able to get through the current economic crisis but will also be better set up for growth once the economy picks up again.

 

Ogundare is country manager, Zoho Nigeria.