The phrase “new normal” has been circulating for a while now to describe the current state of affairs featuring a tougher banking environment and retrenchment of debt laden businesses and households. The new normal envisages a future where the economy is powered by exports and business investment rather than by consumption, easy credit and rising asset prices.
Consumers are adapting to the new normal en masse by delaying gratification and repaying debt. We are collectively holding off on buying big ticket items – and we are adopting the collective attitude that if something isn’t on sale and seriously discounted, then we won’t buy it until the vendor is willing to just about give it away. We want to see some blood on the floor before we commit.
Tough for business owners who are hanging on in anticipation of a return to the “old normal”!
So how does your business thrive in the new normal environment? Here are our top seven tips:
Continue to be lean. Assume that boom times are not around the corner, so lock in those bootstrapping attitudes that have served you well through the past couple of years. Don’t relax vigilance with keeping overheads under strict control.
Monitor your margins closely – for the full range of your goods and services. There is still potential for costs to increase – and your ability to pass these on may be limited. The new normal is not an environment where you can thrive on the average of profitable and unprofitable activities.
Use cash surpluses to pay down debts. The new normal is no time for excessive leverage.
Take good care of your customers – and focus on adding value for them. Those businesses that are able to provide significant value with superior service will be the ones that gain market share and thrive in the new normal.
Look for growth opportunity – and if you do expand, continue to bootstrap and try to keep your use of debt to a minimum.
More than ever – remember, cash is king. Focus on your debtors and cash management every day – and try to keep enough cash on hand – or enough headroom on your banking facility – to cover at least 30 days of expenses. Preferably more.
Deal with employee issues with an approach that is seen to make sense. Despite relatively high unemployment, there is still a skills shortage – and you’re probably operating with a pared down team. Make sure your crew appreciates and buys into the direction your business must take to thrive in the new normal – and make sure that in return you are adding value for your team on the way through.
The old normal is unlikely to return any time soon – if at all. Those businesses that have survived the ressession in reasonable shape – and who focus on the seven points above will likely stay ahead of their industry averages, gain market share and thrive in the new normal environment.