Strategies to Strengthen Your Business During an Economic Downturn

It’s hard to avoid the headlines predicting hard economic times ahead. A recent survey from The Conference Board, touting the C-suite’s focus on a potential downturn, was widely covered, with one ominous headline telling us It’s almost impossible to find a CEO who isn’t bracing for a recession (NPR). Voice of America highlighted the recent decision by the International Monetary Fund to lower the global growth rate with its article Tough Year Ahead as IMF Cuts Growth, Projects Recession, and CNN made it clear it’s keeping an eye out on those businesses that are struggling with its headline, These retail chains may not survive a recession. Articles like these are enough to make even the most “recession-proof” organizations sit up and take notice.

Economic cycles are nothing new, and corporate leaders have been navigating swings in the prices of goods, supply chain constraints and a volatile job market for some time. A formal downturn, or a possible recession, however, comes with its own set of concerns. The biggest of which are focused on how long will it last and how much damage will it do?

While no one can peer into a crystal ball, there are troubling signs that cannot be ignored. Inflation hovers at a 40-year high and central banks around the world are hiking interest rates to try and fight it. Stock markets are ensconced in bear territory and Europe, in particular, is suffering the effects of the Russia-Ukraine war. When you couple this with continued supply chain disruptions and the lingering impacts of the pandemic, it would be shortsighted for CEOs to not prepare for an economic downturn.

Gloom and doom aside, there are tangible steps that companies can take to mitigate the impact of economic slowdowns. Rather than fret about what may lie ahead, now is the perfect time to ensure the right systems are in place within your organization to not only weather future storms, but to come out ahead. 

Invest in relationships

Customer relationships are important no matter the economic outlook, but they can be especially critical when financial times are tough. Not only is it important to understand the impact of the economy on your customers’ business, but it also is an ideal opportunity to find ways to support them and provide even greater value. 

Relationships with partners can also prove pivotal. Partners help share the load of acquiring new business and, while it may make the overall slices of the revenue pie a little smaller, strong partnerships can help to stabilize or even increase revenue streams.

Customer diversification is also key. When facing a down economy it’s an important time to assess your customer base and find out if your company is overly reliant on a few large customers. If that’s the case, consider how you can invest in building new relationships and diversify to include a greater pool of customers. Be thoughtful about new customer growth, as you’ll want to ensure that you can continue to serve customers at a high level. This differentiation becomes especially important when every company is fighting for limited customer dollars.

Empower employees 

We say it often here at StrategyBlocks, but taking care of your team should always be a priority, especially so when the economy turns downward. Employees are worried about their own finances and layoffs loom large when there’s talk of a recession. As we’ve seen over the last few years, attracting strong, skilled employees is no easy task.

Rather than immediately jumping to reducing your team’s size, consider if there are creative ways to cut costs without losing people. For example, can you give employees a day off each week in exchange for reduced pay, or can the team collectively agree to a pay cut that ensures everyone keeps their jobs? Where else can you trim costs, such as overtime or scaling back some nice-to-have, but unnecessary perks? 

These ideas aren’t always feasible for every organization, and we know sometimes hard decisions have to be made. In those instances, transparency is always welcome by your team. Be clear about the company’s needs and goals and do your best to make decisions for your staff with dignity and gratitude. Consider the importance of each role within your organization and the impact to those left behind when positions are eliminated. Demonstrate that you have a strategy in place to ensure an equitable and enjoyable work environment, even if the team size has to change.

Practice agility 

Agility has been spoken of so often in a business sense it’s almost lost all meaning. At its core, it’s about having the flexibility to pivot or diversify when necessary, but true agility also means working with a strategic plan in mind. Shifting too quickly or without a strong plan in place is not being agile, it is reactionary, and that never serves a business well.

Sometimes learning to be agile requires making investments in your company and increasing spending in certain areas. This can seem counterintuitive in a strained economy, however, you may find that improving technology or business systems offers greater utilization of resources in the long run. It also may open the door to offering new products or services, and diversifying revenue streams. 

Agility can be useful in any number of departments within your organization. Agile marketing allows you to pivot the way you connect with customers and help them to find new value in the products and services you offer. Agile development may mean freeing up wasted resources to give your team the time and creativity to better utilize their skills. Agility in your human resources department may look like cross training employees to take on new functions or creating job share opportunities to better utilize strengths and leverage your pool of talent.

A recent PwC survey of C-suite executives showed that “increasing agility to better operate in a turbulent business environment” was one of the top three factors they found important in 2022. With continued volatility, agility has become even more important as a way of navigating through an uncertain economic future. Check out this post from StrategyBlocks managing director, Craig Catley, on the functional aspects of managing agility using StrategyBlocks’ solution. 

Like everyone, we remain hopeful that the economy will rebound quickly. We’ve learned to be patient, and to be proactive in weathering potential storms no matter what form they take. Having a mindful strategy, and the insights necessary to see how that strategy is being executed, is mission critical when economic times are tough. Reach out and let us walk you through a free consultation to see how your organization can best create a strategy to stay recession-proof now and in the future.