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7 deadly business sins to avoid in a recession

7 deadly business sins to avoid in a recessionAs government and industry focus on rebuilding business confidence, let’s consider the ‘seven deadly sinssmall business commit during the recession and how to avoid them!

If big businesses are hurting financially, smaller suppliers that are more reliant on cash-flow will be hurting even more. Rather than envying their cashed-up clientele, suppliers may need to sit down with customers and restructure project schedules and payment terms to facilitate regular progress payments and deal with cash flow issues. Most customers will appreciate the need to keep key suppliers afloat, especially where they have developed good business relationships.
Lesson:  On the conduct of each depends the fate of all (Alexander the Great)


Market forces shift, industries evolve, customer expectations change – especially during recessions. How resilient is your organisation to change? If your business is based on widget making, can the market be widened to increase your customer base? Alternatively, if customer demand for your services is waning, have you considered ways to re-brand, re-fresh or re-conceptualise your service offering?
Lesson:  If you don’t change, you will become extinct.

The credit crunch has forced many businesses to delay forecast spending and put non-essential projects on hold.  As a result, SMEs that were dragging out commercial negotiations or pushing for higher fees back in 2008 may now be left high, dry and without service fees.
Lesson:  A bird in the hand…

SMEs with robust 2009 survival strategies will have built a level of redundancy into their business model – identifying an alternative customer base, focusing on more resilient markets like the public sector, reviewing back-up plans and promoting alternative product offerings. Perhaps they have found different ways to provide value to existing clients, for example by offering business ‘health checks’ or suggesting products that create cost-savings.
Lesson:  Don’t put all your eggs in one basket.

Sustainable business models are back!  While credit is the lifeblood for many SMEs growing their business, some level of risk aversion is essential. Sound corporate governance and ethical business management are fundamental to ensuring sustainable business prosperity.
Lesson:  The bow too tightly strung is easily broken.

SMEs lusting for a return to early 2008 profit margins may be tempted to shed staff. But retaining good people who understand your business and know your clients will be essential when the good times return. This is especially true for SMEs that rely on their ‘bedside manner’ to distinguish themselves from larger competitors.
Lesson:  Good fortune is the result of good planning.

The post-GFC corporate landscape will probably be defined by increased government oversight and regulation. These measures will likely extend beyond executive remuneration and disclosure requirements for listed companies to include consumer protection, marketing and advertising practices as government attempts to curb sharp business practices in tough economic times.
Lesson: Everybody, sooner or later, sits down to a banquet of consequences (Robert Louis Stevenson)

– Oliver Barrett is a partner at Minter Ellison, and Julia Murray is a lawyer at Minter Ellison (www.minterellison.com)

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Oliver Barrett and Julia Murray

Oliver Barrett and Julia Murray

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