A country is confirmed to be in a recession when there is a decline in its Gross Domestic Product for two consecutive quarters. It’s a period of general slowdown in economic activities with resultant effect of rise in unemployment, bankruptcies, fall in profits, investment spending and inflation. Recessions normally happen when there is a pervasive fall in spending as a result of certain events such as an asset bubble, financial crisis or external trade shock.
Economists generally recommend for countries to spend their way out of a recession and this could be achieved through quantitative easing, reducing taxes and increasing government spending.
Nigeria is currently experiencing its first recession in decades caused by a severe fall in crude oil prices which usually accounts for about 85% of its foreign exchange earnings, leading to a reduction in revenue receipts and steep devaluation of its currency. This is not just a recession but a stagflation. Stagflation is when you have high inflation and weak economic growth at the same time. This makes it challenging as government cannot easily spend its way out of recession due to the inflationary challenge.
The implication is that this recession may not disappear quickly making it necessary to map out survival strategies. Outlined below are ways to stay afloat during a recession.
Discuss it with your family and staff: Its going to be a tough time so you need to have a talk and get everyone’s buy in. let your family members understand why certain expenses will be cut off from the family budget during this period. Your staff will also need to be on the same page with you when certain decisions that may affect their welfare but necessary for the company’s survival are taken.
Cut Spending where necessary: Every unreasonable and unnecessary expense should be taken off the family or business budget. Look out for deals which will offer more for less and also demand for discounts where necessary. Cash saved from expenses can be pushed into savings. For business, cutting costs may mean downsizing to reduce labor costs.
Repay or reduce loans: Debt comes at a cost and it will be a wise decision to repay all loans as you will save on the interest paid. Focus on repaying the most expensive debts first before the less expensive ones. Credit card debts should be avoided.
Put more money into savings: savings act as a buffer and in times of recession the more one saves the better prepared one becomes. Cash is king and opportunities will spring up in recession times which you can take advantage of if you are well prepared.
Look out for additional revenue streams: New streams of income will assist in these moments and will help boost savings. This can be done by starting an online business, a network marketing business or seeking out new passive business opportunities. A lot of jobs are lost during recession and creating new streams of incomes will assist in the event of job loss or down turn in business.
Work harder than before: As an employee you need to work harder than before to enable you keep your job in the event that your organization decides to downsize. You may have to come earlier to work and close later than usual, this is when you have to prove your worth at work.
Focus on quality rather than price reduction: As a business man you have to create more value for your customers to keep them and not necessarily reducing prices as there may be no justification to raise them back when the recession is gone.