Handling Past Recessions, By Tony Alexander

April 22, 2020

Former BNZ Chief Economist Tony Alexander is one of NZ’s leading economic minds.  He summarised responses from readers of his weekly “Tony’s View” publication as to how people handled past recessions and what they did in their businesses to get by, here are the top 10 themes he came across:

  • Forget profit and balance sheets and devote all attention to cash flow. Forecast it out at least six months, and assess and update that forecast weekly.
  • Go as early as possible to your bank with your forecasts, your plans, how you will assess them over time, and what you want from your bank. The bankers will be busy so the easier you can make their job of selling your request up the line the better for you.
  • Trim every expense not core to your central product offering, ranging from sponsorships to magazines, company cars, etc. Explain your situation to your landlord and suppliers and ask for discounts. 15 per cent supplier discounts were common.
  • Make cost cuts including staff reductions as early as possible, trying to avoid having to make further rounds of cuts as the months advance. Act early, act big, act once.
  • Communicate fully and honestly with your staff, suppliers, bank, and clients. Get as many people as possible on-board with your plans.
  • Look after your mental and physical health, and seek advice from a wide range of sources – definitely not just your banker and accountant, and almost certainly not from your mates around the barbecue.

  • Trim back advertising and concentrate on marketing to targeted audiences.

  • Look for opportunities in the form of cheapened competitors, but stay focused on your core areas of strength.

  • Stop following negative media, speculation on how bad things might get, and measurements of the depth of downturn. Pessimism leads to inaction.

  • Remember that this too will pass as all previous recessions have, and note that many people regret that once they had cash flows under control, they stayed too cautious for too long and missed some good opportunities.

His entire article can be found here and is definitely worth a read.