The current business climate is one of uncertainty – many predictions are that the Covid-19 crisis will cause a worldwide recession affecting both new and established businesses in Hong Kong and across the globe. No one can be sure what the coming months and years will bring, but now is the time to prepare your business to survive the storm:
Take Advantage of Government Support: The Hong Kong Government has announced measures totalling HK$287.5bn to help businesses in the Covid-19 crisis, including a financing guarantee scheme, wage support to furloughed employees, grants for training and upskilling, one-off grants to certain industries, and an online dispute resolution service for issues arising from the virus. A straightforward overview is available here and full details can be found here.
Take Control of Debts: now is the time to get as much debt as possible off credit cards or high-interest loans. Consider consolidating into a longer-term, lower-interest single payment. These deals will become harder to find during times of recession, so take steps now. Anticipate any upcoming costs – if a balloon payment is looming, don’t leave it to the last minute to negotiate refinancing or extend the terms.
Take Deposits Upfront: if a client’s business folds, you can find yourself one of a long line of creditors with little hope of seeing your money. Mitigate the risks by taking a deposit for services, charging for materials before beginning work and consider running a credit check on a client before agreeing to the work.
Spell out Penalties for Late Payment: many companies are taking longer to pay their invoices and this can severely affect your cashflow. You cannot afford to extend indefinite free credit – make sure that charges for late invoices are clearly stated in your contract before work begins.
Don’t Rely on a Narrow Client Base: if the bulk of your profit comes from a small number (or even a single) client then your fortunes are tied to theirs, which puts you at risk. Although cold-calling can seem daunting, creating a list of dream clients and then making a targeted approach to them can pay dividends. You can also go through previous clients who might have gone quiet – do you have a new product or service that might be of interest to them?
Raise Your Profile: If you have a new product, service or information, turn it into a story and let the press know. Media coverage is an excellent (and low-cost) way of gaining attention. Social media is similarly a great way to reach out to new markets, especially with greater numbers of people spending more time online during lockdown.
Don’t Reduce Marketing: during lean times, the temptation can be to cut back on marketing spend, however, during a recession it is even more important to find new markets. A report by AdAge found that companies which cut advertising spend during previous recessions lost stock value which was never recovered, whereas companies which retained or increased their ad budgets gained an average of 1.3 percentage points.
These are testing times, and the companies with the best chance of survival are those with a strategic plan in place, sturdy financial support and the flexibility to adapt to the market. Gains made during this time are unlikely to be lost after the crisis passes.