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The jury still is out on whether the US Federal Reserve will succeed in slaying its inflation foe without killing the economy. However, the threat of recession looms. Whether you’re 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 the company will survive economic uncertainty.
As the former Chicago mayor and one-time Chief of Staff to President Barack Obama, Rahm Emanuel, liked to say: “You never want a serious crisis to go to waste.”
When difficult times are on the horizon, it’s easy to think first of retrenchment — lay off workers, cut costs, marshall resources. But 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 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.
That’s why you need an interim CEO or interim COO who is good at business strategy, especially one who learned the ropes in the Great Recession.
2. Focus on Cash Flow
Cash is king during a recession. Companies should prioritize maintaining positive cash flow by closely monitoring cash reserves and expenses, reducing unnecessary costs, and making sure 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.
Maintaining positive cash flow 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.
This is a good time to consider hiring an interim CFO or fractional CFO who has helped other companies survive a cash crisis.
3. Streamline Operations
One lesson companies learned in the pandemic: Cut costs strategically. Cutting too deeply in certain areas could harm the company’s ability to generate revenue in the long run.
But 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.”
Finally, consider outsourcing. That can include contracting with interim or fractional COOs who can bring extensive expertise to C-suite challenges without the expense of hiring a full-time executive.
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.
These critical high-level technology threats are exactly the kind of challenges that call for a 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, 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.
Developing and implementing a diversification strategy in the face of a recession is not for the faint of heart. It calls for 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.
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.
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.
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.