With the rise of the Coronavirus, many businesses are preparing for the worst. From remote-work policies to reevaluating financial planning, smart companies are focusing on adapting to current challenges while anticipating future setbacks. In uncertain times, the companies that survive are the companies with grit and a plan.
What Happens in a Recession?
You’re probably familiar with the negative implications that come from a recession. Business activity slows, unemployment increases, and credit tightens.
While the negative effects of a recession completely alter the economic landscape, there are benefits that come in this time as well. For instance, competition weakens, there’s an increase in quality candidates, prices go down, and money goes further.
How to Thrive (Before, During, and After a Recession)
An economic downturn does not need to be a death sentence for your company. In fact, the best companies thrive before, during, and even after a recession. The key is preparedness.
At Sapper, we anticipate possible threats through a premortem. In the case of a recession, we ‘teleport’ ourselves into the future and imagine a worst-case scenario. We then follow with the critical question, “What went wrong?”. Below are 5 risks you might face in a recession – and how to avoid them.
1. You ran out of money.
With a slow in business activity, you’ll likely need to reevaluate spending, cut costs, and pull from financial reserves. In the midst of a recession, it will be more difficult to secure cash. Rather than waiting until your finances are running low, go to the bank every six months and continuously increase your line of credit.
2. Your loan was called.
Know that in recession you’re actually less likely to get your loan called. Because most people are experiencing the same financial struggles, there is more leniency.
That said, it’s important to remember that your loan being called is a decision made by humans. Yes, there are formulas involved, but at the end of the day decision makers at the bank are guiding your future. This is why it’s important to communicate regularly with your bankers and cultivate a great relationship.
3. Too many clients churned.
While you’ll be cutting costs in the face of a recession, so will your clients. You need to ensure that your products or services aren’t on the chopping block.
In order to prevent client churn, you’ll need to do more than deliver on your promises. Larger, more established companies are less likely to go out of business, therefore they will be more secure as clients in an unstable economy. Review your client roster and analyze the risks associated with it.
Secondly, focus on long term contracts. With clients locked in, you can have more dependability despite a recession.
4. You Stopped Marketing.
They say that when times are good, you should sell and market; and when times are bad, you must sell and market. CEO of Salesforce, Marc Benioff said that one of his top mistakes in the financial crisis of 2008 was not hiring more sales reps. This shows just how important it is not only to save existing clients, but to continuously be signing new business. If you’re going to cut costs, it shouldn’t come from sales & marketing, the lifeblood of your company.
Check out our eBook on How to choose the right marketing solution for your budget.
5. You scrambled to make decisions.
In uncertain times, you’re likely making quick decisions on little sleep, in a state of high stress. To avoid reactivity, create a playbook of triggers and corresponding actions: “If revenue reaches X, if sales decline to Y, if client satisfaction drops to Z, etc. – we will make corresponding cuts.”
Making decisions well in advance will help you to navigate change with a clear head while also reducing stress. Instead of making a quick call, simply pull your playbook off the shelf.
Leading your organization through a crisis requires resilience. From revenue shifts to cultural impact, the foundation of your company may be challenged. How you handle these challenges is what separates good companies from great companies – and it all starts with a plan.
For more foolproof tactics on how to recession-proof your business to overcome any obstacle or economic climate, download the full ebook below.