Let’s look at how to survive and prosper, regardless of the economic perspective.
Why is it that some companies prosper, while others implode during an economic recession? This remains a mystery for many business owners. However, we should work hard to understand it, since recessions seem to arrive ever 5 to 10 years like clockwork. They don’t seem to be the ‘black swan’ events we once thought (or hoped) they were. Some business owners mistakenly assume that all companies must suffer through recession cycles. But the fact is that some companies are essentially recession proof, and it is not always because they are larger, more popular or highly capitalized. What actually separates successful companies from those who collapse during a downturn are that they have a unique and healthier view of their business.
They plan for the future and have contingencies to face any challenge. They sell products and services that do not go out of style. And they focus on profits and growth so they can prosper in good times and bad.
Here are some ideas to create a company that will be successful through a recession:
- Establish, measure and constantly monitor inventory levels, sales and income objectives. Make profit (net profit) the driving force.
- Stop working on unprofitable accounts and distracting ventures, services, campaigns or mediocre products.
- Reward your best employees, reassign them to make them more valuable, or remove them to benefit the team.
- Stay in close contact with customers and track their buying patterns and preferences. The better you know your customers, the better your business will be.
- Develop strategies to attract new customers, retain existing customers, and sell more products or services to each and every customer. Grow the customer base but also focus on net profits for a better bottom-line.
- Promote and market aggressively. Constantly refine and redefine campaigns measuring results. Work to strengthen your brand and improve brand loyalty, meaning and recognition.
Planning in Advance means Getting Ahead
Once a company begins to lose its way it can easily get carried away by the storms of business. When this happens, it is difficult, if not impossible, to return to the shore safely. During a recession, those who are barely floating will sink, those who are just treading water will drown, and those without a compass will lose their way. They lose their vision, identity and true connection with their best customers. To avoid these effects, it is important to prepare in advance for the likely (maybe even inevitable) downturn.
Way before the latest crisis, in January 2008, an article published in Businessweek, told us how important forward looking tools were to measure the market and our financial strength. Without them, business owners will be blind to difficult times and see cash reserves decimated without notice. While no business leader is clairvoyant, those who use easy to read and understand metrics, reference points and consistently test and evaluate performance are in a stronger and more informed position. Soon they can identify trends and adjust and adapt more quickly to changes, which gives them a tactical and strategic advantage over their less informed competitors.
Instead of simply shooting in the dark, those who have the right tools can determine proper objectives and hit them. When the profits begin to slide, they will realize it quicker and get back on track sooner. Those who do not respond proactively to the changes are at risk not only for wasting time and money, but also losing their valuable customer base, their integrity and brand value.
The Difference between Reaction and Response
Your coach may tell you about your need to keep calm under stress. We all know folks who over react to everything. So with proper guidance, instead of reacting or overreacting, we can respond with a more measured and effective way. If you have been trained and are practiced enough to face a set of challenges, responding to adverse conditions is often relatively easy and successful. But reacting to situations when you are not prepared or ready can often lead to instinctive actions that are ill conceived and poorly executed.
The difference between the response and the reaction is generally reduced to deliberate preparation, previous planning and intentional action, instead of simply doing something from a place of fear or panic. When our ‘croc brain’ (fight and flight) is engaged we tend to make poor decisions. This is why emergency response organizations practice and train for the inevitable. When there is a fire or a traffic accident occurs, firefighters and police officers generally see the situation as another day in the office because they have planned in advance to react intelligently, effectively and professionally. They have the available resources, they understand how to deliver them better and face the situation from a position of strength, not weakness.
One of the interesting things of the response versus the reaction is that once one reaches a certain level of training, instinctive behaviors are transformed from reaction to response, and from reactionary to responsible. The first time that a new quarterback enters a game, can be a heartbreaking and sad experience. But after a time and a lot repetitive practice, the perfect response becomes instinctive and subconscious. The blur of the defensive running in does not inspire panic, but reveals openings that can be exploited for a few more yards or to put points on the board. You can learn to respond even better under pressure, because that situation produces energy and insight.
Similarly, when your company has adequate contingency solutions in mind, you can avoid false steps and bad judgments while capturing a greater market share. To experience an economic recession only makes it stronger by allowing you to put into action the concepts you have been practicing. You not only survive, you thrive, as a downturn will eliminate your weaker and less capable competitors.