Many lose jobs, business sales go down, cash flow in the economy reduces. It is not wrong to say that small businesses like yours are often hit the hardest. Sadly, some undergo loss that’ll even force them to shut down, while others find creative ways to survive even in the bad economy.
Often, luxury products and services suffer the highest as most of the customers start saving more and spend less. Already it’s been observed that the purchasing power of consumers has dropped by 43%. Especially in the last 6 months passenger vehicle sales, tractor sales, two-wheeler sales, real estate sales, and domestic air traffic growth have gone really down.
Here’s how the upcoming economic recession in India impacts business overall:
1. Customer Payments get delayed!
Small businesses like yours operate on a tight cash flow. As the money comes in, it goes out; and if payment from a customer gets late, it makes running a business difficult.
Do you know what happens in a recession? In an economic recession, there will be huge delays in payments. Your customers start delaying purchases or payments for longer than usual often because they are waiting for payments to arrive themselves. This passes on from one vendor to another causing a chain effect.
Furthermore, vendors stop selling items on credits which slows down all aspects of the business. Thus, reduced availability of credit makes it difficult for the business to run smoothly.
2. You’ll lose customers: Demand reduces!
During an economic recession, the spending power of your customers reduces drastically. They’re short of money and for small businesses like you who depend on such few customers for the bulk of your revenue.
You will start losing a significant amount of income if one or more of those customers reduce their purchase amount or stops buying completely. You could lose money by being unable to sell the goods to customers. Also, you will not just lose your regular business, but you may also fail to get pending payments from the customer.
3. You may have to restrict your budget!
When your business face losses, you may have to cut the budget wherever possible. You may have to lay off workers and reduce staff. Then there will be fewer workers to do the remaining work. This further reduces the opportunities to generate income because the remaining staff is stressed.
Advertising is frequently one of the activities to be cut when any business experiences budgetary constraints because of which no new customers are being brought in.
Do you have thoughts on recession too? Please comment below.
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