To start on a positive note, recessions don’t last forever, which is a good thing. However, it doesn’t mean you should sit back and take it easy. You must create actionable strategic plans and not just make moves based on recessionary fears that can put you in a worse position financially.
An HBR article highlighted that during the recessions of 1980, 1990 and 2000, only 9% of the 4,700 companies they studied bounced back in 3 years after the recession and outcompeted their rivals in sales and revenue. Similar studies by Bain & Company and Mckinsey confirmed this on different occasions. The key differentiator for these outliers was what they did differently from the rest of the crowd during the recession.
Slowdowns in business are not new. How you deal with it really creates the contrast – that decides how strong your business is when it ends. Let’s look at some lesser-known ways of identifying opportunities and playing to your strengths to emerge stronger than before..
Let’s get started.
1. Sharpen your saw
“Slowing down is sometimes the best way to speed up” – Mike Vance
Unlike how it’s labelled in popular media, a slowdown is an interesting phase for a business to have some breathing space, take stock of the situation, do the necessary sharpening and prepare for the next growth phase.
Much like the 8-hour sleep that our body deserves to function optimally the next day, businesses also need the time to take a step back from the status quo to examine, review and plan the next growth phase.
How we utilise this period is what differentiates the recovery curve of businesses after every downturn – does an organisation actively jump out of the slowdown to get into action, or does the inertia of recession slow its pace way beyond the actual slowdown?
a. Strengthen your finances
An MIT study by Xavier Giroud (of MIT’s Sloan School of Management) and Holger Mueller (of NYU’s Stern School of Management) showed a direct correlation between debt levels and businesses shutting shop due to falling consumer demand during the Great Recession. The majority of these firms that closed down were highly leveraged.
Cost saving is often the first step to fighting a recession, but it usually backfires by hindering improvement and slowing down efficiency attempts. Thus, many companies that have thrived in the recession have done it by bolstering their cash position through a thorough review and restructuring of their debt levels.
A classic example of this strategy was Amazon’s famous sellout of convertible bonds worth $672 million in the early 2000s to strengthen its finances. A month later, the dot com bubble burst and several digital startups went down but not Amazon. Amazon saw what others ignored and acted upon it while there still was some time.
b. Revamp your capital investment
An economic downturn is a period to look as much inward as outward. Look outward for opportunities that will help you excel when your growth is back on track. And, to monetise these opportunities, look inward for structural improvement in your business. Invest in machinery, tools and technology to empower your business for the future while your competitors worry about the present.
Revamping your capital during a slowdown makes more sense since:
- Prices of real estate and machinery are low during to decreased demand
- Sales contracts could be negotiated better
Shopping during the discount season often results in better deals!
c. Hire that talent you have been eyeing
A recession is generally not a time when employees switch their jobs, and ones who do out of some compulsion do it at a discount. Hence, it is a good time to keep an eye on the job market to hire more affordable quality talents. It has become more convenient now than ever through social media and virtual hiring platforms.
d. Align partners for mutual benefit
As important as planning for the future, it’s equally practical to devise ways to survive the present. With revenue taking a significant hit during a slowdown, it’s critical to look for avenues to keep the cash registers ringing in the short term.
Look for opportunities with partners and suppliers where a mutually beneficial association would result in immediate-to-short-term economic gain for both parties. This will have an added benefit apart from a new revenue stream – your partners and suppliers would have more faith in this association since now they have an added stake in your survival.
In an environment where your competitors might be renegotiating or ending contracts, your urge to explore newer partnerships will strengthen their commitment to this association. Your success improves their survival chances by multiple, and they will be more dedicated to it.
2. Attend to your customers more
“Focussing on the customer makes a company more resilient” – Jeff Bezos, CEO, Amazon
While customer centricity is always critical for business success, focusing on them during a downturn is an elusive opportunity many companies overlook. Focusing on them during tough times drives the point home that you care for them. It’s a major image booster, especially during gloomy times.
You might wonder if this pivoting involves going extravagant by offering discounts and lowering prices, but that works only sometimes. Look out for opportunities in service, after-sales connections and every contact point in a customer lifecycle wherein a minimal tweak in a process or a more human approach to your communication can make contact more personalised, customised and contextual for the customer.
The feeling of “Especially for you” has enormous power in generating positive word of mouth from your customers. When things look bleak, such positive affirmations create the necessary contrast in building greater loyalty among your customers and set the tone for future upselling/cross-selling.
Ask your front-end employees, check out the customer care logs, and scan your social media to find recurring patterns in concerns voiced by your users. Utilise this downturn to turn your critical customers into your biggest advocates – all of this through simple, mindful interventions.
3. Talk to your employees frequently
“Treat employees like they make a difference, and they will” – Jim Goodnight, CEO SAS
The downturn can be taxing for businesses and individuals. While many companies focus their energy on surviving the business, savvy leaders spend an equal amount of energy ensuring that their employees are also taken care of and motivated enough.
Employee welfare during a slowdown requires a series of well-thought and sensibly executed action items that:
- Inform them about the ground reality
- Provide clarity on the situation
- Help them gauge an organisation’s strengths that can be used to bounce back
- Seek feedback from them on additional inputs on thriving in a recession
This elevates an employee’s role from an executor of KRAs to a committed partner in sailing through difficult times. The higher the stakes they have in turning the boat around, the more dedicated and determined they would be in an actual turnaround.
Benefits would be
- A lower turnover rate
- Higher employee commitment
- More innovative and, at times, surprising ideas on how to tide over a downturn
Your staff are closer to your company’s operations and customers than you are, so it’s critical to help them understand this and take advantage of it while looking for greater chances.
- Cross-skill for different business functions
- Mentor them to assuage their doubts and fears
- Acknowledge and appreciate their efforts more
Let empathy become your second nature.
4. Foresee the future like no one else
“Never miss out on an opportunity like a good recession” – Jack Welch
Every recession is different. Therefore, looking back at the past may only be moderately helpful in conquering a future recession. Every recession has its roots in the complicated past industrial practices.
Hence, while planning on ways to survive the recession, it’s important to adopt conservative methods. It is equally critical to review them in light of newer evidence of what the present is and how the future is likely to unfold.
Enterprises that failed to upgrade their online sales channels or embrace remote work culture during the pandemic were the first ones to go out of business when the world returned to post-covid normal. Dot com bust in the early 2000s led many to believe that the end of e-commerce was near, but it continued to grow steadily, thriving in the 2008 recession and prospering into an established industry.
Thus, being agile helps a lot. The following are some of the points to bear in mind.
- Embrace technology
- Look for opportunities to automate
- Invest in the future of work
- Watch out for more sustainable and greener ways of doing business
- Have a deep understanding of the evolving consumer preferences
The early bird catches the worm
As the corridor noise grows louder, it becomes more chaotic to navigate this recession, making a comeback even more painful. Your business has the potential to be the next outlier with the right strategy and sound execution. While others are busy betting on the odds of a recession, employ this time to re-evaluate your business and unearth the hidden pockets of opportunities that the upcoming downturn will present. With Blue Helion, let your preparation carve your story of thriving in a recession. Talk to us today.