Friday, August 20, 2010

Maintaining your Profits in 2010

by Enda Candon of Firstwestern

There are ways to continue to make profits in a recession. Here are four simple things any business can do to help their bottom line in 2010.

1. Take advantage of decreasing costs. Most businesses are both suppliers and customers at the same time. Your business needs to buy goods to sell or raw materials to manufacture and employ people. When demand weakens, remember your suppliers business is probably falling too. Therefore it is opportune to renegotiate every supply contract to get lower costs and look at getting your staff to take pay cuts as the cost of living is also falling.

2. Thinking the only way to increase demand is to cut price. Price cuts aren’t the only way to stimulate demand, and sometimes is not the best approach. Remember its easy to lower prices, but much harder to increase them again as customers become accustomed to lower prices. Many times buisiness can be more successful when competing on service, quality, or something other than price. So shifting to price cutting in a recession is often a losing strategy.

3. Failing to recognise increased competition. In a recession, competition accelerates because more businesses are chasing a smaller market size. In addition, when unemployment rises, people start new businesses thus further increasing competition. So the need to have a competitive advantage is even more important in a recession than in a booming economy.

4. Demand for all products does not increase in a recession. When customers cut back on their spending, they often substitute one product for another. For instance, discretionary spending on dining out in top restaurants has decreased, however fast food sales has increased. So look at areas and markets that your business serves and figure out the products and services demand is likely to increase for and lead the way in supplying them.

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