Posted: September 4, 2019
Say the word “recession” around a business leader, and watch their expression fall. The Global Financial Crisis of 2008 left its stain on many companies, and the ripples of a long-term recession environment continue to be felt in many industries.
Interestingly, some commentators believe we aren’t out of the woods yet. Economist Ben Cassalman writes about the potential for a 2016 recession in FiveThirtyEight magazine, and the US consultancy High-Frequency Economics released a report detailing their belief that the world was still living with the impact of the 2008 GFC.
Planning for a closing market should be part of your standard executive strategy. Why? Because all the techniques and processes that can recession-proof your business during lean financial times are also good business practice. If you employed the strategies we outline all year round, your business would be leaner and more profitable than ever.
WHAT DO WE MEAN WHEN WE TALK ABOUT A RECESSION OR CLOSING MARKET?
The NBER defines a recession as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
As we’ve all learned firsthand from the GFC in 2008, markets can swing from one extreme to another, and this can happen on a global, national, or local scale. A closing market is a market that’s contracting, slowing down. This could mean a global recession – like the one we saw in 2008 – or it could refer to a local market, such as a certain geographic area, or a segment such as mining or dairy. Whatever the situation, dealing with a closing market is a common factor of being in business, and there are several strategies you can employ to navigate it successfully.
SHOULD YOU BE WORRIED?
“WORRY IS A WASTED EMOTION,” STEVE HANSEN (ALL BLACK COACH).
Worry without action rarely accomplishes anything. Instead of worrying about the state of the world economy, focus on what you can do to prepare your business and your team for a potential downturn. Two key foundations that will recession-proof your business and drive your results in a closing market are the strength of your brand position in your market and your financial position.
Why? As markets and customer/client needs change, a business must pivot in order to remain competitive. By changing consciously before you need to, you stay ahead of the competition and retain your market edge – a sustainable point of difference.
The best leaders and companies are already pivoting at a time when they are performing well. They know through experience that the good times won’t last. To stay ahead of their competition and to navigate change they must understand what success continues to look like. How do they do this?
- Focus on core competencies: Define what differentiates you in your market, and focus on bringing that to the fore.
- Get strategic: A strategic plan for your company is only worthwhile if you’re regularly working on achieving it. Set short, medium and long-term goals and 90-day action steps to work toward these goals.
- Forecast your profit and cashflow: It’s important to strengthen your financial position. Prepare a 3-5 year forecast. Have benchmarks in place so you can quickly see if you’re hitting or missing. Update monthly so you have visibility on how you’re tracking against your plan.
- Don’t stop marketing: Too many businesses make the mistake of cutting back on marketing during a downturn. In fact, it’s the perfect time to step up your marketing game and strengthen your market position. Work on spending your marketing budget in smarter ways.
- Look for opportunities: Don’t let the doom and gloom in the media fool you, a recession can present unique opportunities for a lean company who can react quickly to market changes. Many companies experience significant growth during a recession as they leverage gaps in the market or slow-moving opposition.
- Be optimistic: If a global recession hits again, and even if it were worse than 2008 (or any of the other significant global downturns of history), there’s no saying that it will impact your business. By preparing how to handle a downturn, you’ll be set to bounce back in record time.
Whether we’re staring down the barrel of a major financial event, or simply conducting business as usual, any company can benefit from improved processes, cashflow management, executive strategy and superior leadership. Let’s examine these areas in more depth in our free guide, Success Strategies for Growing Smart Companies.