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An economic downturn is no time to stand still and wait for things to improve. Our top tips for business survival in these challenging times...

will help you to steer your business in the right direction. As the global recession bites harder, businesses across the UK are bracing themselves to weather the economic storm, hoping to emerge leaner and stronger at the end of it.

But how exactly do you guide your business through the most volatile and uncertain economic conditions in living memory? Clearly every business faces different challenges and some sectors are hit harder than others by falling demand and increasing competition. However, there are a few key principles that any business should follow to ensure they are in the best possible shape to see out the recession and position themselves to take advantage of the recovery when it eventually begins.

We’ve scoured the many recession survival guides available online and in print to bring you the ultimate eight-step guide to surviving the downturn.

1. Get the facts.
Accurate financial information about your company and its position is essential. Find out exactly what you have to pay out, how many orders you have and what money you are owed. It’s more important than ever in a recession to have a clear picture of your company’s financial position. The decisions you make now need to be based on reliable facts, not assumptions.

2. Reduce your costs.
There are many ways you can make savings in your business. Look at whether you are spending unnecessarily, perhaps travelling to meetings when a telephone conversation or videoconference would do. Are you renting premises when you could work from home? Look at ways to be more efficient. Cutting energy usage can be quite simple and could lead to significant savings.

Regrettably you may have to look at your staffing levels. Businesses have a tendency to over-recruit during the good times. Perhaps you could hire people on short-term contracts as you need them, agree a temporary pay cut across the board to avoid redundancies or move to a four-day week.

Try to avoid making sweeping cuts for short-term survival, as this may damage your business in the longer term. Instead, focus on areas that are critical for your business and think about any activities you could stop temporarily. Think carefully before reducing your marketing spend, even though it may seem like an easy area to cut back on. Experience has shown that firms that succeed in a recession are those that continue to invest in their reputation and brand.

You could also make savings by making sure you’re paying the right amount of tax. Make sure you’re claiming all of your capital allowances and expenses, as well as taking the maximum benefit for any losses.

3. Maximise your productivity.
Focus more than ever on bringing in a constant supply of work. If you’re busy now, don’t become complacent – always look ahead and think about where the next jobs will be coming from. In a competitive market you need to keep your customers happy – so you can’t afford to let service and quality standards slip. Remember that word of mouth and recommendations are a powerful source of new business, and doing more work for existing customers is cheaper than going out to find new ones.

4. Know your competitors.
Keeping an eye on the competition and knowing what they’re up to can help you stay one step ahead. During a recession, skilled people who have been made redundant often start up their own businesses, meaning that the market can become flooded with small enterprises all competing for diminishing demand. You need to maintain your competitive advantage at these times, and that doesn’t necessarily mean cutting prices – quality and service are key differentiators too. Customers are always willing to pay a little more for a good job done by a firm with a proven track record, rather than risking a lower price and poor workmanship from an unknown entity.

5. Keep cash flowing.
Cash is the lifeblood of any business. Focus on invoicing customers promptly, adopt strict financial control systems and follow up invoices rigorously to make sure they are paid on time. If you spot a potential cash flow problem, act quickly to resolve the issue. It’s worth speaking to your bank as soon as you spot any potential cash flow difficulties, as they may be able to help. Look at ways of improving your cash situation, perhaps by reducing stock levels to boost your available funds.

6. Invest if you can.
If you’re fortunate enough to be in a position to invest, now’s the time to do it. Many capital items, stock and premises will be cheaper than ever at the moment. You can also invest in recruiting the talented people that other firms have had to let go. Investing now will put you in a strong position to take advantage of the economic recovery when it comes.

7. Take advantage of free advice.
There are plenty of professional organisations out there dedicated to helping businesses survive and thrive in difficult times. It’s well worth seeking their advice and guidance. Getting someone else’s perspective on your business can be invaluable – they can often spot opportunities that you may have missed. Try consulting the likes of the Federation of Small Businesses, your local Business Link or the Health and Safety Executive.

8. Plan ahead.
Resist the temptation to focus on short-term quick fixes at the expense of long-term planning. As well as dealing with the immediate challenges facing your business, it’s well worth taking time to look at your growth plans, investigating potential new opportunities or incentive schemes and how you could take advantage of them. Think about potential new markets, as well as expanding in your existing ones. Where are your key markets likely to be in future? Are you over-reliant on one large customer or market? Can you diversify?

Facing the future
Although it may seem optimistic, thinking about the future now and putting some plans into action will help to better position your business for the eventual economic recovery. After all, it’s strong, ambitious and forward-looking businesses like yours that will be key to driving and accelerating the economic revival.

Sources: ICAEW, Surviving the Downturn, 2009; PricewaterhouseCoopers, Managing in a downturn, 2009; British Bankers’ Association, Surviving the downturn, 2008; bbc.co.uk/business