In a downturn you are likely to be operating on lower margins. You have less room for error and the consequences of bad judgment will be more serious. Basically, you have to do everything better. That means you need to master all the details of your business and fit them into a larger strategic plan.

You need to be aware of where you are spending every last cent and determine where each adds to or detracts from your bottom line. This is difficult. In fact, it is so difficult that a lot of businesses fail to do it.

Take cost cutting for example. Cost cutting is generally done badly. Mercer Management Consulting surveyed 800 companies in a period covering the 1991 recession and identified 120 firms as 'cost cutters'. Only a third of them managed profitable revenue growth in the five years after the recession.

This is not surprising given the damage that indiscriminate cost cutting can inflict upon your business. If you cut your marketing budget you risk losing brand awareness, which is a prime business asset. Cut back on product development and you risk falling behind innovative competitors and losing market share. Lay off team members to meet simple number targets and you may lose team members with key skills, which leaves you facing a lengthy talent search when you need to expand again.

If you are lucky, many of your competitors will cut costs across the board. This will hurt them and give you an opportunity to improve your market share. In good times, everyone thinks about spending, expanding, and building capacity, so it's relatively difficult to make gains on your competitors. In a recession, you may also be able to get more value for the money you spend. You may be able to take advantage of falling office rental rates, for example, and upgrade your business premises.

Manage costs. Where other businesses just 'cut costs', you should engage in strategic cost management - a practice that will serve you well in both good and bad times. For example, you should try to move your fixed costs to variable costs. Your fixed costs are the ones that stay the same regardless of the amount you produce. For example, the rental costs for a plant are the same regardless of how much the plant produces. In a downturn fixed costs can become a problem, because they are likely to be relatively large compared with your variable costs.

Variable costs change according to your production levels. For example, raw materials are likely to be a variable cost for manufacturers. If manufacturers produce less, they use fewer raw materials and thus encounter fewer costs for them. It is easier to bear variable costs in a downturn, as they diminish as your production levels fall.

A downturn is a good time to carry out a thorough break-even analysis. A break-even analysis calculates the amount of goods or services you need to produce in order to cover your costs and start making a profit. If you have high fixed costs, you may find that you cannot sell enough of your product in a downturn to cover your expenses.

You then need to identify where you can reduce your fixed costs. If you find a way to operate on lower fixed costs, any downturn will be less threatening. Often, companies look on salaries as a fixed cost and therefore lay off team members, while expecting the remaining team members to carry out the same amount of work. However, as discussed, cutting the salary bill needs to be accompanied by a careful evaluation of where your team members are adding real value. There's no point laying off the team members who are keeping your company afloat.

Evaluate all your assets. If they are non-core or unproductive assets, consider selling them. If you have unused land, property, or equipment, it may be better to sell and convert their capital value into cash reserves.

Review all your discretionary expenses. For example, do you and/or your team members really need to travel business class when you go to meetings? Palmtop computers might add value in some job roles, but could be just an expensive supplement in others.

You can also review your contracts. A downturn is a good time to secure long-term contracts with valuable and dependable customers. This can give you a dependable source of income. Be willing to offer deals and concessions to entice customers to sign. You may have already segmented your customers according to the value they offer your business. Try to cement the loyalty of your most valuable customers by offering them high levels of service. Focus on them and retain them as a dependable source of income. At the same time, retain a diversified customer base, so that the loss of a small number of customers will not threaten your business. Be aware of customers who are less valuable and who may even cost money to do business with. Find polite ways to encourage these customers to do business elsewhere.