- March 9, 2020
- Posted by: avantconsulting
- Category: Singapore Economy
5 ways to prepare your business for the upcoming recession – The global economy together with the Singapore economy is slowly going towards a recession. We all have saw the signs, things have been slowing for the past few years after an explosive growth from the great depression just 12 years ago. With a great bull run comes the time when the party has to stop.
Singapore’s economy is an open economy. With the trade war between the United States and China still ongoing and with the recent Covid-19 outbreak spreading across the globe, world economies have slowed drastically.
On the 9th of March, there was also a sharp drop in oil prices leading to a 30% fall in oil prices which may trigger a further decline in the conditions of the market: https://www.ft.com/content/804d6c82-61aa-11ea-a6cd-df28cc3c6a68
With the fall in oil prices, banks across the globe are experience sharp falls in their share prices, Singapore banks are not spared.
Singapore banks have slightly higher exposure to oil related businesses due to Singapore being an oil refinery hub.
Singapore share prices also saw a steep fall: https://sbr.com.sg/stocks/news/sti-opens-3-drop-over-oil-mayhem-fallout
Even without an impeding recession, a major slowdown in economy is definitely going to hit Singapore and the rest of the world.
We will like to write an article to help our readers to find out “5 ways to prepare your business for the upcoming recession”.
Cut cost and reduce head count to preserve capital
Cutting cost such as unnecessary travel and welfare is definitely one of the few things that most businesses will look into doing. When there are good times, you are able to afford having fun times and free stuff going around the company. But when things are bad, it will be better for your business to prepare for the worst and cut things that are wasteful.
Preserving capital is one of the key things to ensure the survival of your business.
Cutting cost is one of the best ways to do this, so things that create wastage have to go.
Retrenchment is actually the hardest part in a downturn but a necessary evil. If you are expecting revenue to fall and business to start failing, you should consider letting go of staff members that are not too productive or those that are unnecessary due to the lost of business.
With capital at hand, you can deploy it to where there is lacking funds or requiring more attention and being prudent is key during this tough phase.
Increase investment into marketing
Contrary to popular believe that you should save up money and be careful when there is a downturn or recession, you should actually be throwing more into marketing your business. Downturns are when the Darwin’s theory of survival for businesses come in. Strong and prepared businesses will survive while the weak and poorly managed ones will not. This is also the time when businesses will start dying off due to poor management.
When your competitors die off, the market has extra openings and spaces for you to fill. When there is such an opportunity, it is time for you to spend more into your marketing efforts to take up this market share that is recently left open by your competitor who has failed.
Spending more into marketing and branding will help you to emerge from this downturn even stronger than before when the recovery of the economy comes and you are right ahead in terms of your business branding position.
Ask for upfront payments and deposits before commencement of work
Some businesses only charge customers after work is done. With the upcoming recession and increased default risk, there could be a possibility that you might want to apply for upfront payments and collecting deposits from your customers.
Some businesses have high fixed cost such as rental and staff cost without even work done, so this cost will keep running as time goes by and if you are not able to collect your fees due to default, the business might end up having big cash flow issues.
Deposits and upfront payments are therefore the best ways to safe guard your business survival.
Outsourcing of non essential business units
Non-essential business units might be things like call centre, accounting, administration.
This has been a trend for most businesses for the past few years and might have been on your mind for the past many years too. But with a strong economy going around, you might have postponed the need to get this thing going on.
With free time from the slowdown, you can spend more time in your overseas base that you wish to outsource and start to train the personnel to take over your local staff members.
Non-essential business units will end up being a major asset for you when times are good and when you are ready to go at full force.
Take a business bank loan in Singapore to tide through things
Business bank loans are one of the best ways for you to tide things through. With loan terms of up to 5 years for Working Capital Loans, you can consider working on this as a way to ensure your business survival with enough cash to pay salary and rental.
Singapore government has committed funds to ensure liquidity in the Singapore economy with the recent raise in Working Capital Loan quantum to $600,000 and the government taking on 80% of the default risk.
Having some cash in your bank account could mean survival and death if you are able to tide through things and ledge onto opportunities such as buying a cheap property or product to resell when times are better.
Working capital loan can also mean that you are able to last the winter storm before spring comes.
Avant Consulting is able to assist you and your business in tiding through this upcoming recession with business bank loan applications and consultancy.
Remember, in such situations, survival is key to your business and doing whatever it takes to ensure survival is what your business will need to do.
Speak to us to find out more.