No one knows with 100% confidence whether U.S. businesses will face a major recession, or a more moderate economic slowdown, in the next two years. The Federal Reserve cannot confidently project our economic performance over this period. ITR Economics, a private blue-chip company that makes its livelihood off economic forecasts, has projected an economic slowdown for 2023 and recession in 2024 (go to ITR). In our current conditions, with inflation a continuing factor and with increased political uncertainty domestically, business executives face new business challenges.
At a minimum, it’s a fair assumption that after years of strong economic growth, a cyclical correction, or worse, is in our future. Is your business ready? I remember what I learned years ago as a young corporate executive; anyone can succeed with economic tailwinds; it’s what you do when you are facing headwinds that matter most. We know the economy will change, but in the memorable words of John C. Maxwell, “Change is inevitable, growth is optional.”
In most companies, surviving or thriving in an economic downturn is possible. Can you grow in a declining market? Of course you can; that’s why you get paid the big bucks. Here are some proven ideas to consider.
The Ten-Step Checklist
1. Protect every customer relationship you have. In a slowdown, there will be fewer new business start-ups, less capital to invest, and lots of hunkering down. You have invested time and resources in acquiring your customer portfolio. Protect every one of those relationships. Understand which customers are worth the most to you (revenue, contribution, customer lifetime value), and make sure you protect the highest value customers through your servicing touchpoints.
2. Keep competitors at bay–lock them out for a long time if you can. Everyone is going to be looking for revenue, and your competitors may be more aggressive with pricing in order to stay viable. If you offer subscriptions, one proactive tactic is to offer multi-year subscriptions with price protection built in. I have led businesses where we did this successfully, extending every one-year subscription to two or three years and locking in the price for our customers. We now had predictable revenues for several years, and our competitors were locked out. Many competitors never survived. If you sell products, you can protect your revenue streams, too.
3. Go deep into innovation. This might sound crazy, but when markets are in turmoil, it’s a wonderful opportunity to have a conversation with your customers about their pain points. Take this time to collaborate with them to reengineer business processes and understand where digital tools could improve process cycles, costs, and quality.
Many competitors will be cutting their R&D and product development budgets. You’ll be cautiously investing in new solutions. When the slowdown ends, they will be in worse shape, and you’ll likely have something new to offer the market. There’s a common phrase “Never kick someone when they are down.” There’s a version of that phrase in Italy that says “The best time to kick someone is when they are down because that’s when you have the greatest advantage, but not if they are a relative or they have lots of friends.” As an Italian, I kind of like that approach.
4. Take the opportunity to understand where your business makes money. A slowdown should force you to take a deeper look at your business. I’ve found that market, customer, and competitor insights are often not a strength of many businesses. Many of my clients have been in markets for a long time, but when you ask questions about share, profitability across multiple markets, profitability across customers and competitor knowledge, you get a lot of blank stares. You should improve your business intelligence now to reshape your focus and priorities and to prune unprofitable parts of your business.
5. Another great place to focus is on your product and service portfolio. If you haven’t evaluated the performance of your products across your entire portfolio recently, this is an excellent time to understand their role in your offering, their profitability, and expectations for future growth and contribution. Build a product/service P&L as best as you can. Slowdowns give you a fresh set of eyes to understand what drives your business. Understand, validate, then act with confidence. Can you further invest in your highest-growing markets? Can you further develop your highest profitability markets? And this is no time to keep unprofitable businesses around.
6. Diversify markets and customers. One opportunity you might evaluate involves completing an acquisition of a “counter-cyclical business,” which helps balance your revenue streams since they won’t all be dependent on the same economic factors. Acquisitions take time and the follow-on business integration can take even more time. You can get the process started by identifying competitors you might be interested in acquiring and researching their businesses. If they are privately held, resources like the IncFact database can be very helpful (https://incfact.com). This initiative can also help you reduce your business concentration risks from too few markets and too small a number of large customers.
7. Stop shot-gunning lead generation and get more targeted. If you are using passive lead generation programs as your primary source of new business, it’s time to get more focused and targeted. Websites alone will not drive enough qualified leads for your sales group to live on. You’ll need to using proactive lead generation tactics like paid search and account-based marketing to help you more efficiently put more qualified leads into your sales pipeline. If you want to learn more, check out this eBook: https://thepracticalcmo.com/improving-your-lead-gen-and-qualification-processes/.
8. Complete a Marketing Assessment and Audit. If you have not done a rigorous review of the performance of your marketing programs, it’s time. The goals of a marketing assessment and audit are threefold:
- Provide an immediate identification of “Horizon 0” opportunities that can be evaluated for immediate performance and financial improvement. You can learn more here: https://thepracticalcmo.com/introducing-horizon-zero/
- Set a formal baseline of current performance which will function as a foundation for future performance improvements.
- Ensure that marketing performance aligns with future needs by quantifying the gap between current and required future performance.
The value of this analysis is to capture key go-to-market and operational insights to allow clients to design and implement winning strategies.
The marketing assessment and audit evaluates 35 marketing capabilities across four dimensions of performance: cost, revenue creation, time-to-market, and competitiveness. Each capability is scored, and a highly graphical heat map highlights areas of greatest need. The assessment generates implications and recommendations which must be accounted for in a strategic marketing plan.
9. Evaluate the performance of your Marketing and Sales staff and suppliers. You’ll need high value from everyone on the team, internal as well as external. Time to check whether you have the right number of Marketing and Salespeople in the right seats and with the right skills. Have you waited too long to implement a more proactive digital marketing program because you don’t have the internal expertise? Maybe time for a swap out or an addition. Are your suppliers bringing maximum value to you? Time to ask them to buy in with extras (research, services, etc.).
10. Empower and develop your staff, and have some fun, too. Everyone will likely feel the effects of a slowdown in different ways. It’s your job to keep them aligned, focused, and acting as a team. Schedule some fun team-building activities. Make sure your staff has the ability to act on each one of the previous nine checklist ideas, too. They need to feel empowered and part of the solution.
There are many adjectives experts are using to describe the impending economic slowdown in the US: “modest,” “cyclical,” and “severe” are only a few being tossed around. The even more impactful word “recession” continues to get a voice, too. Do these adjectives matter?
What matters will be your ability to proactively manage through whatever economic conditions emerge. Use the challenge to improve your go-to-market programs and drive incremental revenue and profits when times are tough!
When the market slows, you’ll be much better off by having a plan for your success.
For More Information:
Mark Coronna, Founder & CMO, The Practical CMO