For the past few years, economic data has been negative. It pays to remember that the economy goes in cycles and there will be a return to economic growth. Remember we recorded 3.3% economic growth in quarter two and the current account deficit shrank significantly.In the fast-moving world we now live in, those businesses prepared for the next growth cycle will get an edge on their competitors.
5 steps to take now
- Fight for margin. Many firms discount their products or services to maintain sales in the bad times. Every percentage point of margin you give away impacts directly on your profitability. Many customers will not agree to pay more when you stop giving discounts.
- Make sure you have the capacity to grow. Maintain capital spend to ensure this and when you embark on cost-cutting don’t cut to the extent it will impinge on your capacity to grow.
- Look at your product/service mix as some items do better in the lean times and be ready to put your efforts behind products and services that do well in times of growth. For example, consumers who have traded down on wine purchases will be ready to buy four and five star wine again.
- Keep in contact with important customers and maintain a presence in segments/areas which will respond to an upturn. Many of the African markets have reduced spend but this will tick up once growth returns.
- Keep an eye on your borrowings. Usually when a growth cycle has started, interest rates tend to increase to cut off any inflationary pressures. So, balance your money management.
It’s hard to believe that good economic times will come back but they will. The currency has firmed in recent months and Rating Agency Fitch has predicted there will be no further interest rate hikes. A recovery could happen faster than you think, so be prepared to respond quickly.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)