How well are you prepared for an economic slowdown or a recession?
When we hear the word “recession”, our mind goes into an alert mode buzzing with all kinds of alarm bells.
A recent Reuters report indicates that there is a 40% chance that the United States will enter a recession period in the upcoming year. Financial experts are concerned that we are on the verge of a recession, as record-high inflation restricts consumer spending and big-box retailers such as Walmart and Target suffer losses. The experts are looking at GDP, which is an important indicator of economic growth and recessions. These numbers indicate that the US GDP fell by 1.4 % and that of the UK by 0.3% in the first three months of 2022.
According to the IMF, the global GDP is expected to reach 4.4 percent in 2022, a 1% increase from 3.4% a year before owing to conflicts and sanctions. However, in light of new information these estimates are forecasted to be revised downwards.
At the World Economic Forum 2022, Davos global leaders discussed how the current world troubles are adding to the woes of global supply chains. The ongoing pandemic lockdowns, climate change, war in Ukraine and the record-high inflation rates have forced us to shift the paradigm and focus on how to be more prepared for similar events in future and how to revive the global economy going forward.
As a leader, it is definitely difficult to choose between spending and cost cutting during an economic downturn. In an article by Fortune, economic experts and investment bankers at Goldman Sachs, Morgan Stanley, Moody’s, Deutsche Bank, Bank of America and others had their opinions divided – many believe that the US economy will experience a “soft landing” where inflation rates will start to cool off and growth will continue to happen.
During the financial crisis of 2008, many startups like Uber, Airbnb and Spotify started operations and flourished by taking the risk on the prevalent opportunities during the downturn. They spent more in these situations and created a higher brand awareness and market value. An added budget to their business’s marketing and sales campaigns helped the companies lock in some valuable clients while creating an additional prospective customer base.
So as a leader, what should be your future plan of action?
As a CEO, there are myriad challenges you may be facing during a financial downturn. But here is where it gets a little trickier –
- How to be well-prepared to face the business risks
- How to seek an opportunity in a financial crisis
- How to play it to your advantage on the business front
Here are some ways in which business leaders have sought opportunities at the right time and played them to their advantage to grow in an economic slowdown. And here’s how you can also join the many businesses that have experienced growth during a financial crisis.
Don’t Slash Marketing Budgets Instantly
Each downturn is peculiar and has different effects on the global economy. With such peculiarities, businesses across the globe have different strategies and views on budgeting. Although the norm would be to cut costs, it has not always proved to be beneficial in the long run.
During the Great Recession of 2008, companies like Procter & Gamble, Amazon, Nike, Accenture among others had significantly increased their marketing and sales budgets to turn the tables in their favour. With an enhanced advertising budget, Amazon was able to increase its sales by 28% despite collapsing economies around the world. It gained customers’ attention by introducing one of its notable products- Kindle, which placed the e-commerce giant as a leader in the innovative business space.
Invest in Customer Success
The famous proverb, “Customer is the king” is true in every sense whether the economy is experiencing a boom or slowdown. It’s the long-term customers that act as brand ambassadors for businesses through word-of-mouth marketing and help them gain more eyeballs in the marketplace.
One of the notable real world examples would be the collaborative partnership between HubSpot & Parlor Skis in which HubSpot, an in-bound marketing and sales software platform helped Parlor Skis, a personalised ski equipment provider, in categorising and tracking orders and delivering them on time to lessen sales disruptions caused due to excessive email threads and delighted customers who were more than happy to receive their orders on time despite the odds.
Outsource Key Business Functions
During a financial crisis, leaders find ways to cut costs. They try to find alternatives to reduce operational costs that could help them weather the downturn. One of the best time-tested methods to save cost is outsourcing.
Outsourcing helps leaders with strategies that help them reduce cost and grow. It helps businesses improve their strategic focus and enhances efficiency within the business processes across departments.
Companies like Amazon, Microsoft, Google and Visa among others have been taking advantage of outsourcing for many years now. Visa for instance, has witnessed a 15% surge in its value due to the increase in electronic payments. Visa solely relies on its outsourced sales processes for consumer revenue. It partners with other banks or institutions to handle the payment cycle.
At Blue Helion, we have helped one of the largest internet ventures from South East Asia to set up its business unit in India and assisted them in creating a 10+ partner network ecosystem with 50+ outsourced staff operating at different levels.
There is no one-strategy-fits-all approach that works for companies during an economic slowdown or recession. But it is often the right decisions at the management level that help in paving the growth path for businesses in future.
There are a few business leaders that come up with a master plan to survive a recession. They encourage their workforce to share ideas that can work for them and evaluate them with market trends to build a potential plan for surviving and thriving during a slowdown. This agility and analysis helps them sail uncharted waters smoothly with minor hiccups.
So don’t let a recession or an economic slowdown become a hurdle in improving your business. In the words of Walt Disney, “I’ve heard there’s going to be a recession. I’ve decided not to participate”.