1 Understand the true picture
Not all sectors will be hit in the same way, Michael Garstka, a partner at Bain & Company, believes. Banking, property and construction have been badly affected, but telecommunications is unlikely to be hit as hard. Charles Tilley, chief executive of the Chartered Institute of Management Accountants, recommends that you look at how your business is placed. This may mean adjusting sales and revenue targets.

2 You need to act
“There is a tendency to get paralysed by fear and gloom, but one has to recognise that it is an opportunity to outperform your competitors by handling things better than they do,” David Young, the chief executive of Shield Corporate Finance, said. “Life does not stop. People’s needs are still there. It is a time to focus on your unique selling points and changing or adapting your offering to outmanoeuvre your competitors.”

3 Cashflow is king
“You don’t go bust if you have cash, so with the difficulty in rearranging banking lines you have to be really on top of your cash position,” Mr Tilley said. Take pre-emptive action if possible, Dr Young said. “If companies get into financial difficulties, then management time starts getting consumed by managing the financial crisis, trying to line up funds and trying to hold off creditors. This means attention gets diverted from maintaining sales at the worst possible time.” Freeing up financial resources can also allow an organisation to out-invest its competitors, Mr Garstka said.

4 Keep an eye on the future
“Indiscriminate, across-the-board slashing of costs, staff and capital expenditures are more likely to damage your customer franchise and leave you weaker,” Mr Garstka said. “And by the time the impact of these decisions actually hit your bottom line, you are likely to need to spend heavily to recover from the gaps they have left as you enter the recovery.” Short-term survival may mean taking some hard decisions, but these must not conflict with medium-term goals or the company will face further threats.

5 Focus on customers
Understand how the downturn is affecting them. For example, if they are struggling to afford big-ticket products or services, consider pricing them in instalments, Dr Young said. Keith Ruddle, a fellow in leadership, organisation and change at the Oxford University’s Saïd Business School, said: “You might be short of money to throw at advertising, so focus your money on existing customer relationships, not long-term brand-building.”

6 It is time to innovate
Resist the temptation to hack away at the R&D budget. if at all possible. New products, ideas and businesses developed now could pave the way for success in the upturn. “There is a focus during recessions on battening down the hatches but actually it’s a great opportunity to look for things that will grow the business,” Dr Ruddle said.

7 Target cuts
Avoid cuts that will affect the most valuable customers or most productive areas of the business. “Focus on keeping things that are core and get rid of the waste,” Dr Ruddle said. Dr Young argues that you should Focus on cutting fixed costs rather than variable costs.

8 Look for opportunities
“Asset values are lower than they have been for a long time,” Mr Garstka said. “The downturn provides opportunities not just to acquire direct competitors, but also potentially key parts of your distribution networks or even choke points in your industry’s supplier chain.” Research by McKinsey & Company found that effective acquisitions during a downturn “created significant value for shareholders”. It is also worth looking at other markets, Mr Young said. “Not all parts of the world or the economy are in a downturn.”

9 Don't sack people you will need
Avoid dismissing – or failing to recruit – entire layers of staff. Freezing graduate recruitment now will lead to a shortage of good managers in three to give years’ time. And do not forget that your competitors’ staff may end up on the market as a result of the recession; now may be a good time to snaffle their top performers, Mr Garstka said.

10 Get your staff on side
“The staff who are staying have to be motivated, Dr Ruddle said. “The best way to cut costs is to get teams empowered and excited about doing their job.” Keeping employees happy during the hard times will also make it easier to hang on to them when the job market picks up. A study by Ceridian, an HR company, found that 56 per cent of people would stay in a job that they disliked but then leave when conditions improved.

Negative thoughts

— Recessions last an average of 11 months, according to the US National Bureau of Economic Research. However, upturns tend to last an average of six years

— A rule of thumb holds that a downturn becomes a recession when gross domestic product growth is negative for two or more consecutive quarters

— There have been five full-blown postwar recessions in the UK, in 1974, 1975, 1980, 1981 and 1991

Sources: NBER and ONS

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