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Navigating Tough Economic Times

15th August 2023
In this instalment of Tools for the Times, ENC interviews Matt James of North Canterbury Business Services for his top tips on navigating a recession.
Navigating Tough Economic Times

When a recession is on the horizon, it’s crucial to assess how well your business can weather the storm. Some businesses are more vulnerable than others, for example, a business offering essential goods and services is likely to do better than one specialising in optional luxuries.

There are six key factors to consider when evaluating the recession risks for your business:

1. Market Impact

 Higher Risk Businesses:

  • Construction sector
  • Traditional retail
  • Hospitality
  • Tourism
  • Crown agency work
  • Manufacturing
  • Entertainment/hobbies

Lower Risk Businesses:

  • Online businesses
  • Food and grocery
  • Child-centric businesses
2. Products & Services:

Higher Risk Factors:

  • Limited offerings (“one-trick-pony”)
  • New businesses with little recognition

Lower Risk Factors:

  • Multiple offerings
  • Unique offerings
  • Established businesses
  • Recession-related offerings
3. International Trade:

Higher Risk Factors:

  • Reliance on export market
  • Reliance on imports

Lower Risk Factors:

  • Some exports/domestic trade
  • Utilizing local/NZ suppliers
4. Business Model:

Higher Risk Factors:

  • Few clients (“eggs in one basket”)
  • Slim profit margin
  • Limited technology use
  • Reliance on others
  • Limited staff access

Lower Risk Factors:

  • Many clients
  • Healthy profit margin
  • Good technology use
  • Self-reliance
  • Access to skilled employees
5. Monetary Impact (Interest rates):

Higher Risk Factors:

  • High borrowings
  • Limited/no cash reserves
  • Long cash-cycle
  • Stock holdings

Lower Risk Factors:

  • Low/no borrowings
  • Cash reserves
  • Short cash-cycle
  • Limited/no stock
6. Fiscal Impact (Taxation):

Higher Risk Factors:

  • Luxury or discretionary businesses
  • Reliant on Crown funding

Lower Risk Factors:

  • Everyday essentials
  • Independent of Crown funding
Business Survival Tips:
  • Postpone non-essential expenses.
  • Seek productivity improvements through automation.
  • Review your supply chain for cost-saving opportunities.
  • Consider online products/services.
  • Avoid taking on new debts.
  • Think about refinancing for better cash flow.
  • Maintain marketing efforts to engage potential customers.
  • Regularly assess your business performance using tools like Xero.

Not all businesses may survive, so monitor your performance closely. If things look dire, voluntary liquidation might be preferable to bankruptcy, but outcomes vary.

During a recession, seek expert advice for impartial guidance. Consult your accountant or business coach before the situation worsens.





North Canterbury Business Services is an ENC Business Service Partner. Based in Rangiora, they help start-ups and businesses across Canterbury and the wider South Island establish a solid foundation, overcome challenges, and perform at their best.

Their services include Business Navigation and Accounting, Bookkeeping and Tax support.

Find out more or get in touch with North Canterbury Business Services here.

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