Staff Retrenchment Isn't The Answer
Retrenchments occur because they save money. In almost every business, wages and other staff costs are the biggest or second biggest expense. Retrenching 20% of 50,000 or 10,000 staff saves huge amounts of money. And you still have 40,000 or 4,000 employees remaining to reorganize to share the workload.
Retrenching 5 of 20 or 2 of 10 employees produces modest savings. And in a busy small business it's more difficult for 20 staff to do the work of 25 or 8 to do the work of 10 than for 40,000 to be reorganized to do the work of 50,000.
Retain Your Staff: Reduce Your Profits
Are you prepared to work on reduced profit margins so that you can retain staff? Almost all your competitors will retrench staff, reduce prices and cut costs. But their service standards will drop. Their revenues will fall. They might maintain a 25% gross profit. But 25% of severely reduced recession revenues may be less than 20% of pre recession revenues. Your objective is to maintain a viable business for the next 2-3 years so that you can regain good gross profit as quickly as possible.
Be Ready For Intense Competition
Recessions create competition. Expect your competitors to use all sorts of tactics to frankly, put you out of business. They'll reduce prices, extend credit lines, offer bulk discounts, target your best clients and staff and even spread misinformation about your financial viability. Don't be surprised when this happens. Be ready for it.
It's Bargain Time
Recession time is bargain time. I don't advocate wanton spending merely to "snap up" bargains. But during a recession, you should also be able to negotiate lower prices from suppliers. You may even be able to renegotiate and extend current leases at favourable terms. Of course, you must have the cash flow to support such expenses. Don't overextend just for a "good price".
Recessions Create Winners As Well As Losers
During the Great Depression, employees who kept their jobs, even with reduced wages, improved their living standards. Wages may have reduces by 50%. But prices for commodities such as eggs, milk, meat, bread, sugar and similar staples fell by up to 80%. Many companies too, stayed in business with reduced revenues. But their expenses also fell. And they gained new clients from businesses which closed. It may be doom and gloom for many. But if you can survive you should also thrive. Make recession a positive self fulfilling prophecy for your business.
Conclusion
When your business survives the recession, it will be leaner and better focussed. You'll have better systems, better expense control, higher performance standards, more dedicated customers and more committed staff. Put simply, you'll have a far more effective business than you had prior to the recession. And that's the biggest benefit of all.
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