Health Crisis and Economic Slowdown - What to Expect?
We were thinking about the current economic situation and its consequences from the last several days.
Our Summarised Thoughts are:
We may enter into an economic slowdown globally and the exception is likely to be India and China with ~2 percent GDP growth in 2020 which, of course, is way below ~5 - 8 percent in the past several years.
Way of Life going forward will be:
What will change during the slow down:
1. Spend on luxury will come down drastically
2. Long-term / Capital expenditure such will be almost cut to nil
3. Lifestyle expenditure such as salary, rent, entertainment, travel will be minimized
4. Working capital will be under tremendous pressure.
5. People will shy away from taking credit/mortgages unless absolutely necessary
6. Personalized services like hotel, restaurants will take a longer time to recover
7. Socialized and event-based business models like malls, cinemas, event halls will be a hard hit
8. New innovative business models around tech and AI will evolve
9. Businesses around cleanliness, waste management, medicines, and affordable healthcare will grow
What will NOT change during the slow down:
1. People consumption on essentials will continue
2. Rise in Investment on ideas/technology solutions that will improve efficiency
3. Businesses with healthy cash flow and minimum or no leverage will thrive
4. A rise in investment on spiritual / self-learning practices
5. Value for money products/services will shine
What you Should do as an Individual:
1. Hold back any luxury / high-risk investments where visibility of returns is difficult to predict
2. Minimize expenditure on the routine stuff - keep a watch on your lifestyle spends - ask the question, is it really necessary!
3. Develop yourself on improving competency and skills to become sharper and more efficient
4. Share the financial situation with your family members and educate them on the family financial position and the plans to improve
5. Invest - yes invest in the right business models. Take risks based on thorough research. This is not the time to follow tips.
6. Spend more time with yourself. Yes, spend more time on things you missed during the race. Be it family, study, music, spirituality.
What you Should do as an Entrepreneur:
1. Take care of your employees. Be reasonable and transparent with them
2. Be in touch with your customers and suppliers, even more than before. Hear them well
3. Use the slow down to improve your processes
4. Invest in technology/systems that will accelerate your reach in adding value to your customers
5. Be frugal in working capital decisions and operating expenditure
6. Capital expenditure to be kept on hold unless there is clear visibility on the associated returns
7. This may be a time to strategize. All your competitors are down. Good time to catch up with large players if you strategize right.
Nothing is Constant
We are in an ever-changing world and even this situation will change. The economy will shine again. Let us get smarter by helping ourselves and be ready when the economy bounces back.