How to stand tall when the market falls
Kilimanjaro Consulting
The largest and most experienced implementer of MYOB Acumatica and MYOB Exo across Australia and New Zealand.
Business strategies and tips to make hay even when the sun does not shine
When every report, blog post, article, or commentary talks about a looming recession, it can be difficult to keep your mind on the future. You must remember that media hype is not an accurate reflection of reality. It is twisted and distorted to fit through a more dramatic lens, attracting viewers and clicks.
Understanding and Navigating Recessions
A recession is a decline in economic activity significant enough to last for a prolonged period and be visible in major metrics such as Gross Domestic Product (GDP), income, employment rates, industrial production, and wholesale/retail sales. Businesses and consumers tend to cut back on spending and investment when the economy slows.
Recessions are a natural part of economic cycles. Unabated long-term growth is unsustainable and impractical. Challenges like inflation or resource shortages often accompany periods of growth and activity. Businesses might face higher costs, and the economy can become overheated before running out of fuel and falling into recession.
Companies that adapt quickly, manage their resources wisely, and keep an eye out for future opportunities can weather the storm and come out stronger on the other side.
The turbulence before the storm
Economic indicators such as slowing GDP growth, rising unemployment rates, and volatile markets suggest we may be entering or have already entered a recession. However, it is essential to remember that each recession is different. While each period of downturn brings challenges, it is balanced with opportunities for those who are prepared and proactive.
Strategies to stand out in a recession
Historically, leading companies opt for a mix of staid and sensational strategies to continue growth and profitability during periods of economic downturn.
Stay positive and focused on your core mission
Focusing on the “recession” leads to an obsession with the unknown. As a business owner and leader, you should realise that the unknown will always be a part of your life. Overly focusing on recession limits your ability to grow or improve efficiency – everything becomes about cutting costs and saving money.
Your core mission should be your core focus. If your team wastes time on activities that will not impact an increase in sales or profits or a decrease in costs, then they should redirect their efforts to more worthwhile areas. The 80/20 rule is often championed in periods of downturn, as organisations simply must do more with less. Focus on the 20% and try to expand the 20 into 30, 40, and beyond.
Continue reinforcing strong relationships
Slow periods are often accompanied by productivity downtime. This time is still incredibly valuable and can be used to reinforce relationships inside and outside your organisation. Become a farmer for your internal and external stakeholders, supporting them in growing with mutually beneficial outcomes.
It costs significantly less to sell to existing customers than it does to source new business. Get more from each of your current clients by building stronger relationships with them. Get to know their companies, their needs, and their personal lives. Protect these clients, and they will reward you with referrals and introductions.
Inside the company, take the time to get to know your team better. Engage them in activities that expand their experience or offer a new perspective. Expand the team presence at strategic planning sessions or higher-level meetings.
Your entire team can also be a source of new ideas or opportunities that you can take advantage of. Brainstorming facilitates a trusted working environment, with everyone coming together to achieve common goals. Innovation Days encourage your team to break out of habits and find better ways to operate or offer new products. Such initiatives tend to grow in popularity in slower periods.
You can change your relationship with the market as well. Guerilla marketing is a cost-effective way of making your brand more salient in your customer’s eyes.
Make cash flow a priority
Increasing cash flow can be as good for your organisational health as cutting expenses. Cash flow should always be a priority, regardless of the economic situation. Especially in slower periods, it can be the difference between keeping your head above water and sinking into the depths.
Improving cash flow can be as simple as speeding up collection timeframes; however, you should be cautious not to ruffle too many feathers with established customers. Collect Cash on delivery (COD) as much as possible. Customers who prepay are the gold standard, although you must be willing to compromise, recognising that your customers and partners will also be prioritising their own cash flow.
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Best-of-breed accounts receivable solutions like ezyCollect are designed to help you recover cash faster and with less hassle. They streamline and simplify the entire invoice-to-payment process, improving productivity and customer relationships. With ezyCollect, you can integrate a Pay Now button in your invoice that allows debtors to settle invoices in one click through a secure online portal.
Pay your bills slower than you used to, but without eroding your positive relationships. Delay paying receivables as long as you can. Even waiting until the last few days allowed will make a big difference. However, keep an eye out for early payment discounts. Balance the compromise of discounts with the potential setbacks to your cash flow.
Increase your expenses, especially in payroll
Business leaders who are constantly talking about recession start to worry their employees. For many companies, recessions mean downsizing, and downsizing means layoffs. Even the best team members fear for their roles when layoffs start.
Hiring in the early stages of a recession may seem counter-intuitive, but you are hiring for both the long and short term. Imagine the impact of hiring one of your competitor’s best people – especially if it is from sales. It would impact both of your companies in precisely the way you want to in a competitive world. These team members represent a significant swing in your organisation’s performance and how your competitors respond. You are hiring to increase sales add money to your gross margin, and your competitors are cutting back to avoid costs and accept losses. Hiring also creates a buzz about your company and brand, helping you emerge as a bigger presence in a shrinking pool.
Choose to work with the right customers
Again, taking the perspective of the 80/20 rule, if 80% of your profits come from 20% of your clients, you are operating inefficiently for 80% of your time. Consider the impact of letting go of the bottom 20% of your customer list. These clients generate very little revenue and perhaps cost you money even before the downturn started. In forgoing these customers, you will eliminate overhead support costs and free up time in customer service, accounting, and sales. These teams can likely identify the customers you need to avoid; they usually do not pay bills on time, purchase at lower volumes and costs, waste the sales team’s time, or cause headaches for your customer service teams. If your competitors pick up these customers, they may also be impeded by the all-too-familiar roadblocks you are now avoiding.
A recession is not the complete absence of spending; it is a market evaluation. Individual organisations will still have the capacity to spend. Companies that predicted a downturn have likely already moved resources into cash. They are in the best possible position to control markets and dictate a post-recession future.
Determine which of your clients or prospects are doing well and ensure they are spending with you instead of the competition. Do your research and focus on those prospects, what they need, and how you can help. Ask your clients how much of their current business you are currently getting. Work with them to identify your strengths and build positive relationships – turning this individual market share in your favour.
Invest in improving your business operations
Investing in efficiency improvements now can pay dividends when the market recovers. With more available internal resources, you can focus on refining your internal systems and processes, eliminating inefficiencies, and removing obstacles that hinder growth. By doing so, your business will be better positioned to thrive when the economy picks up again, having laid a solid foundation for sustained success. Clever business management solutions are more accessible than ever – with proven returns on investment and efficiency improvements. You cannot afford your competition to implement these systems; your organisation will be left behind. Whether your business is facing disruption or in a quieter period, this might be the best time to implement a cloud ERP system and guide your business to success.
Take the next steps early
The good news is that bad economic times will only make strong companies stronger. If you never lose sight of your mission and focus on your company’s growth rather than the overall economy, your business will thrive.
Kilimanjaro Consulting’s mission is to help businesses to improve efficiency through the clever use of proven, innovative technology. We provide business process improvement consultation alongside software implementation and customisation to help your organisation do more with less. Talk to our team about the options to improve your efficiency and stand tall in a falling market:
call 1300 857 464 (AU) or 0800 436 774(NZ)
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