A lot of talk about a possible recession has been going on for most of 2022, and now most people think it will happen in 2023.
The Conference Board, a business-focused think tank, surveyed in October and found that 98% of CEOs were getting ready for a recession in the United States in the next 12 to 18 months.
As the world enters a new era of economic uncertainty, businesses in Singapore need to be prepared for a recession, should one occur.
If an economic recession does transpire soon, it will present challenges for many Singaporean SMEs and businesses.
Considering the prevailing global and national economic cues, it is difficult to predict with certainty whether Singapore will go into an economic recession in 2023.
Economic conditions can change rapidly and are influenced by various factors such as global trade, global inflation, national inflation, and other aspects like trade conditions, monetary policies, and geopolitical events.
Businesses and individuals need to stay informed and adapt to changes in the economy as they occur.
Analysts say that Singapore might not have a full-year recession in 2023, but the export-based economy is in for a rough ride. Non-oil domestic exports (NODX), the economy’s most reliable engine, have ground to a halt.
As a result, the domestic services sector, which is driven by private consumption, is expected to play a predominant role in dealing with the recession and inflation scenarios.
Some analysts think there is a real chance of a technical recession in the first half of 2023. A technical recession is two quarters in a row of negative growth.
There are other sets of reports from industry experts observing the global cues that are of the viewpoint that if there is a economic downturn in Singapore, it is likely to be a short one because local and international travel restrictions are being lifted.
This is good for aviation and tourism-related industries like air travel, lodging, hospitality, food, and drink, as well as the arts, entertainment, and recreation.
Prevention is better than cure, and knowing the shadows of recession discussions all around, the SMEs in Singapore must focus on the issues of economic recession and inflation issues and prepare better to deal with any kind of challenges emerging.
As the economic landscape in Singapore becomes increasingly volatile, small, and medium-sized enterprises (SMEs) must be prepared for the possibility of a recession in 2023. Here are some steps that SMEs can take to prepare for a downturn.
Tips for Preparing for and Surviving a Recession and Inflation
Following are some simple tips that SMEs can help themselves to prepare for and survive a recession and inflation conditions if any are encountered soon.
These tips include reducing your costs, conserving cash, strengthening the customer base, diversifying the revenue sources, and seeking external funding if necessary.
1. Reducing business Costs
When times are tough, it’s tempting to cut costs wherever possible to save money and remain profitable in times of recession and inflation.
However, making significant cuts to the operating costs could lead to longer-term financial problems for the business.
For example, cutting customer service staff could lead to an increase in customer complaints and could damage the business’s reputation in the marketplace.
Instead, businesses should try looking for ways to cut costs without negatively impacting the business.
For example, businesses could consider sharing office space with other businesses to reduce costs or work on cross-selling deals, shared merchandise, etc., which could cut back on inflation expenses.
If necessary, businesses should also consider reducing the cost of products or services to stay competitive in the marketplace.
2. Build a strong financial foundation
This includes maintaining a healthy cash reserve, reducing debt, and diversifying sources of funding.
Every industry segment follows some practices of payment cycles, credit periods, discounting practices, etc.
It is essential that businesses keeping eye on the recession and inflation, must take timely decisions on the payment terms, and manage cashflows efficiently to sail thru the economic recession conditions.
Economic downturn and inflation conditions are seen from a negative perspective. Both in the case of the recession and inflation can teach businesses to stay lean, deal agile, and improve their operational efficiency.
It is paramount that the SMEs in Singapore should focus on the dynamics of operational efficiency.
3. Increase efficiency
Use technology and automation to streamline processes and reduce the need for labor. For instance, when businesses are digitally enabled strong, they can rely on chatbots and IVRS (interactive voice response systems) for dealing with customers’ order-taking process, thus reducing the costs of human resources during the economic recession.
On a positive impression, if the SMEs can consider developing their online presence, and improve the digital marketing setup for reaching out to more customers, it can help the businesses in overcoming some issues of inflation-related costs, and inflation in the business requirements consumption costs.
4. Diversify your customer base
Don’t rely on a single customer or market for your revenue. Instead, seek out new opportunities in different industries and geographic locations.
This is potentially possible for SMEs, by developing a strong online presence.
During the current challenges of inflation and economic recession conditions, it is paramount for businesses to focus on the diversification of their customer base.
5. Stay agile
Be prepared to pivot or adapt the business model as needed in response to changing market conditions.
6. Invest in marketing
While it may be tempting to cut marketing expenses during a recession, it’s important to maintain a presence in the market and communicate with customers.
Leveraging the industry’s digital and conventional trends to reach out to markets can help businesses deal better with economic recession conditions.
7. Foster a culture of innovation
Encourage employees to come up with new ideas and approaches to keep the business moving forward. Work on collective measures and strategic approaches to deal with the economic recession.
By taking these steps, SMEs in Singapore can weather the storm of a recession and come out stronger on the other side.
To get assistance in improving the digital enablement of your business to oversee the inflation and recession, please reach out to the Exabytes Singapore customer support team for more insights.