A small bakery in Nigeria.

Shina Adebambo

Every big business started small! There are differences between those who grew their businesses and those whose organisations later go belly up. So, what is the difference, especially when an individual wants to grow his Small and Medium Scale Enterprise from scratch in a depressed economy? Discipline, determination, information, mentorship and others.

First, it is important to examine how businesses best tackle the realities of an economic crisis head-on.

Poor sustainability programmes for businesses as well as a lack of values and ethics have been identified as major contributory factors to the failures of small, and medium-scale enterprises (SMEs) in Nigeria.

These challenges are, however, in addition to other factors such as harsh economic environment, inadequate capital, and poor management, according to some professionals.

The professionals said sustainability involves programmes, actions and initiatives aimed at preserving and adding value to businesses. They spoke recently in Lagos at the maiden annual conference of the Young Directors Forum, Institute of Directors (IoD), Nigeria, with the theme “Building a sustainable business: the place of sustainability reporting.”

The event provided an opportunity to discuss sustainability reporting and corporate governance strategies and how these concepts can be deployed to drive the continued existence of businesses.

Akin Ogunbiyi, group chairman, Mutual Benefits Assurance Plc, who was chairman of the occasion acknowledged that entrepreneurs should create long-term growth and prosperity for their businesses. But in doing this they should consider that sustainability is “our society’s ability to exist and develop without depleting natural resources needed to ensure, on a continuous basis, a healthy planet”.

Also speaking, Omobolanle Victor-Laniyan, head, group sustainability in Access Bank, who looked at what sustainability means to business, said it was about responsibility, acting and thinking as responsible government, individuals and businesses.

Omobolanle, a sustainability expert with experience across different sectors, added that sustainability was about meeting the needs of today without compromising the environment for tomorrow’s needs.

According to her, making profits should not be at all costs but in an ethical manner and ensuring that the acts taken today do not have a negative impact tomorrow.

“A business must be long-term focus. To do this, the business must sacrifice some profit today to exist for the long term. Sustainability may look difficult in the short-term, but organisations are planning for tomorrow”, she told the audience of young entrepreneurs at the forum.

Folashade Akinmusire, chairperson of the young directors’ forum of the Chartered Institute of Directors, said the programme was organised to cater to the needs of SMEs which contribute about 54 percent of Nigeria’s GDP.

“Lagos alone has over 100 million start-ups and businesses, but if we look at our economic landscape, we find that a lot of them are dying. It is not just to start a business, you have to start a business that stays sustainably, not just for now, but also for the future,” she said.

What, therefore are the strategies to grow SMEs, especially in a depressed economy like Nigeria? Can businesses be successful during a recession?

In a word, yes. There are many businesses that have been started during a recession or have grown during an economic downturn.

Disney was founded at the beginning of the Great Depression in the late 1920s, while Hewlett and Packard began work in the recession that followed in the late 1930s. Netflix, Citigroup, Groupon and Lego are all examples of businesses that thrived during the 2008 Great Recession.

Making your business “recession-proof”

Is there such a thing as a recession-proof business? Well, it depends what industry you’re in. There are certainly industries that are more likely to make it out of a recession relatively unscathed. These include groceries/food and beverage, telecommunications, tax and accounting (after all, there are only two certainties in life: death and taxes!)

7 strategies for business survival during a recession

With all that said, it’s wise to assume that no business is safe when it comes to a recession. So here are some strategies for business survival during a recession you can employ to give your business the best chance.

1. Cut or reduce unnecessary costs
This is an obvious one but it’s by no means a silver bullet solution, nor is it sustainable. However, when times turn tough you might want to consider the following:

Negotiating down your monthly rent and any other supplier costs
Find cheaper vendors for utilities and cut any non-essential technology costs
Delay payables and collect receivables sooner
Consider whether poorly performing employees are worth retaining

Look at flexible staffing options

2. Protect cash flow
Above all else, ensure you have steady and reliable cash flow. If this means applying for government grants or other assistance, do so. (See point 6.)

3. Nurture your existing customer base
Reach out to your existing clients or customers and ask them what they want or need from you. Listen to them and then deliver outstanding customer service. If your existing customer base is nurtured throughout a difficult time, they are more likely to be loyal and recommend you to their networks. You might even consider cutting the bottom 20% of your worst-performing customer base to ensure you’re devoting precious resources to those that are worth it.

4. Support the employees you’re retaining

A recession naturally provokes anxiety and fear, especially if costs are being cut and employees are being furloughed or even laid off. Letting your poorest-performing employees go may be a step you need to take. If so, build morale and motivation in the employees you’re retaining by clearly communicating with your staff what is happening within the business. Try to involve them in the decision-making process, so they can feel included and part of the solution. Motivate them to work hard because you’re all in it together.

5. Look for operational efficiencies
What can you automate? What can you streamline? Where’s the bloat within your processes and day to day operations? If you can wheedle it out during a recession, your business has a better chance of survival.

6. Seek available assistance
As at the start of the Covid-19 pandemic, there may be government assistance packages available to businesses like yours. This could mean the difference between having enough cash flow to ride out the storm, or breaking under the weight of a crumbling economy, so whatever’s on offer make sure you take it.

7. Bring it back to what you’re really good at
Every business has a product, service or area in which they really excel. They also have supporting services, markets they’re trying to crack, and new products they want to push. During a recession is usually the time to refocus and bring it back to those core competencies that are tried, tested and true.

How do you succeed as an entrepreneur in tough economic times?

Times of economic recession (and economic growth) bring about opportunities. Entrepreneurs who can quickly adapt to the changing environment will be more successful than others.

Be ready for an opportunity
It’s not all doom and gloom; market disruption can lead to opportunity. If you’re able to see it, you might be able to take advantage of a bad situation. After all, spotting gaps in the market and outside-the-box thinking is an entrepreneur’s jam.

Build relationships
Always keep the lines of communication open. Get out there, network and build relationships. Keep your ears open, your eyes peeled and your thinking outside the box because you’re going to need your wits about you to spot those much-needed opportunities.

Use technology to your advantage

When that golden opportunity comes along, you’ll need to be quick off the mark to capitalize on it, especially in a depressed market. Capital raising can take several months and the best way to accelerate it is to use the latest technology to guide and automate what can be a complex and labor intensive process.