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Stock market volatility. Rising unemployment rates. Still-high interest rates. Will those tricky statistics lead to an economic downturn? The jury is still out. But it makes sense to do what you can right now to recession-proof your business.
Whether you’re an entrepreneur, a small business owner, or a business leader overseeing a Fortune 500 mega-corporation, there are steps you can — and should — take right now to increase the chances your company will survive economic uncertainty.
As Rahm Emanuel, the former Chicago mayor and Chief of Staff to President Barack Obama as the Great Recession of 2007-2009 was winding down, liked to say: “You never want a serious crisis to go to waste.”
When difficult economic conditions loom, it’s easy to think first of retrenchment — worker layoffs and widespread cost-cutting to marshal resources. However, that isn’t always the right approach. The companies that not only survive a recession but thrive after are the ones that see the slowdown as an opportunity.
They will take the following steps to protect their companies. And, yes, this is exactly the kind of challenge that calls for a rock star interim or fractional executive with a proven record of success, even in a recession.
1. Cement Customer Loyalty
During a recession, customer loyalty becomes more important than ever. Prioritize maintaining strong relationships with existing customers, offering exceptional customer service, and providing value-added services.
It’s a good time to have the D.O.S. conversation — what are the Dangers, Opportunities, and Strengths of your current customers? Ask them how you can be of even more value.
Consider customer-friendly programs such as:
- offering promotions or discounts,
- creating a customer loyalty program, and
- offering flexible payment options.
All of those tell customers you value their business and are willing to work with them during tough economic times.
“In a crisis, our brains do one of three things: fight, flight, or freeze. This built-in stress response happens in the amygdala within our brains and it can save us if we get attacked by a pack of wild dogs. But the amygdala is not good at business strategy,” describes Andy Crestodina, Founder and CEO of the web development company OrbitMedia.
How an Interim Executive Can Help: You can get the expertise you need by contracting with an interim CEO or interim COO who learned the ropes in the Great Recession, which began in December 2007 and ended in June 2009, making it the longest recession since World War II, according to the Federal Reserve.
2. Focus on Cash Flow
Cash is king during a recession. Much like personal finance experts recommend individuals have an emergency fund safely invested in a savings account to weather unexpected economic setbacks such as the loss of a job, companies need to have cash reserves.
That means making financial decisions that prioritize closely monitoring cash flow and reducing discretionary spending to ensure there is enough cash on hand to weather the recession.
This may involve taking steps such as:
- negotiating better payment terms with suppliers,
- collecting accounts receivable more quickly, and
- reducing inventory levels.
Liquidity can also help a company take advantage of opportunities that arise during a recession, such as acquiring distressed assets or investing in new products or new businesses.
Finally, talk with your bank about a line of credit at reasonable interest rates that could help you weather short-term cash flow challenges.
How an Interim Executive Can Help: Our team RED Team (Rapid Executive Deployment) includes experienced interim CFOs who can be onsite in as little as 48 hours to put in place a financial plan for recession-proofing your business. Even smaller organizations can afford a rock-star part-time or fractional CFO who will work a few hours or few days a week to work with your lenders and lead decision-making for your financial team.
3. Streamline Operations
One lesson companies learned in the pandemic: Cut costs strategically. Cutting too deeply in certain areas might help the bottom line in the short term, but it could harm the company’s ability to generate revenue in the long run.
Streamlining operations goes well beyond cost cutting, says Mike Bartikoski, a manufacturing and supply chain expert who has run operations for Hershey and Pepsico among others.
He suggests embracing a horizontal operations model to get everyone on the same page and make the entire business work more efficiently.
“A key differentiator between firms that are extremely successful, regardless of where they are on the maturity spectrum, is how well they’ve embraced a more collaborative model versus a more vertical command and control model. It adds a lot of speed to the organization as well as agility, because when questions come up, everybody hears the question at the same time, and the response is team-based as opposed to function-based.”
How an Interim Executive Can Help: Contracting with interim or fractional COOs with experience in maximizing operational efficiency can give you the edge your company needs to survive a recession.
4. Invest in Cybersecurity
There is no good time for a cyberattack, but an economic recession might be one of the worst times to risk the security of your data and your customers’ sensitive information. Implement strong cybersecurity measures, such as firewalls, antivirus software, and multi-factor authentication.
How an Interim Executive Can Help: These critical high-level technology threats are exactly the kind of challenges that call for an Interim CISO or fractional CTO. You can hire an experienced cybersecurity expert on a project basis to assess your threat level and create a plan to protect your company, secure remote work, and respond to threats.
5. Diversify Revenue Streams
Relying on a single product or customer can be risky during a recession. Companies should consider diversifying their revenue streams by expanding into new markets or offering new products or services.
There are many ways to do this, even in a recession. A recession-proof business might be one that operates as a joint venture partnership, sharing product development costs and increasing revenues. Or it might mean finding new ways to make money from your existing business, such as launching an e-commerce website or implementing a social media strategy to reach new customers.
How an Interim Executive Can Help: Developing and implementing a diversification strategy in the face of a recession is not for the faint of heart. It can benefit from the skill of an experienced business leader with a proven track record of success, such as an interim CEO who learned the ropes from working with past customers.
6. Invest in Marketing
In a recession, it can be tempting to cut back on marketing, which can create opportunities for competitors to gain market share. But marketing costs could actually decrease during a recession as competition for advertising space decreases.
Regardless of the costs, investing in marketing can help your company maintain or even increase its market share, build brand awareness, and generate new leads and new customers.
An asset allocation that focuses on a marketing program of targeted promotions or loyalty programs that reward customers for their business can help build customer loyalty and retain your existing customer base.
How an Interim Executive Can Help: An interim CMO skilled in the hottest trends in marketing can help you reap the benefits of your marketing investments.
7. Stay Agile
If we learned anything in the pandemic, it was the importance of being able to pivot quickly if necessary. Those lessons will serve you well as you navigate the churning waters of an economic downtown.
You may need to adapt to:
- changes in customer demand,
- increased competition,
- pricing pressure, or
- shifts in consumer behavior.
Experimenting with new products, services, or business models will allow you to take advantage of new opportunities. Just as companies jumped into the remote work and e-commerce approaches brought on by the pandemic, the ability to adapt to market and economic challenges now will allow you to position your company to survive and even thrive during tough times.
How an Interim Executive Can Help: A visionary interim CEO with experience leading companies in the throes of industry, competitive, and market challenges can be the business leader your organization needs.
More Resources:
* How to Save a Failing Business: 4 Key Steps to a Turnaround
* 5 Times Companies Should Choose Interim Management Over a Full-Time Executive
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InterimExecs RED Team is an elite group of CEOs, CFOs, CIOs, and CISOs who help organizations through turnaround, growth (merger, acquisitions, ERP/CRM implementation, process improvement), or absence of leadership. Learn more about InterimExecs RED Team at www.interimexecs.com/red-team or call +1 (847) 849-2800 for a confidential conversation about how an interim or fractional executive can help your organization.