There are times that business owners absolutely dread. I’m not talking about corporate year-end, tax time, or other minor pain-in-the-butt things like that. I’m talking about the bigger and sometimes catastrophic ones (ie. economic downturn, and yes, the R-word).
We are in the second one of these economic slowdowns in a handful of years. The COVID-19 pandemic was disastrous for businesses. Many just got back up on their feet, and now the economy is pulling the rug out from under them again with a borderline recession.
When the economy slows down, there’s no need to panic (though a little panic is understandable). The COVID-19 period should have been a wake-up call for all business owners. There should have been a ton of lessons learned on how to run your business smoothly during a slowdown.
How to Protect Your Business During an Economic Downturn
Now that we’re back in a slowdown, it’s time to get laser-focused to steer your business through tough times. Here’s how.
Keep Your Cash Flow Top of Mind
We’ve talked before about why cash flow is the key to business growth. One of the things our clients started doing during the pandemic was ensuring they were checking their cash flow forecasts monthly (at a minimum). If cash flow was looking tight, they would check it weekly or even biweekly and then plan their accounting and activities based on that.
Many businesses changed their billing practices to maximize cash flow. For example, some professional services companies would bill more frequently during the project rather than at the end. They also looked at ways of optimizing accounts receivable and accounts payable to ensure they had more cash flow at any given time.
One of our clients just started reviewing their expenses and found tons of opportunities to improve cash flow by doing things like:
- Reviewing and reducing optional expenses (subscriptions to products or services you never use)
- Renegotiating deals (this is a great time to renegotiate because those businesses are hurting too and may have better leverage to get a deal in your favour)
I got a note from this client every week on how much money they are saving by doing a careful review of their expenses as they go line by line. Consider this rightsizing – reducing costs to help you get through the slowdown.
Communication is Key
I read an article a while back that said CEOs communicate their vision only about a tenth of the time they should. When you’re dealing with an economic slowdown, which brings risk and uncertainty within the business, you should communicate more!
Your people are no doubt already feeling worried. It’s your job to reassure them that you’re going to get through this, that you have a plan, and that they’re safe. Make it clear that you value them and engage them to be a part of the solution.
I had a client who lost most of their customer base during the COVID-19 pandemic. Instead of despairing, the CEO was very clever. He held an all-hands meeting to explain that their customer base had tanked, the company was in trouble, and what they planned to do to get through it. In a moment of brilliance, he told his team that he needed their ideas to come up with ideas to recover some customers or get new ones. Brainstorming on the spot led to the business emerging stronger within a couple of months.
Hold on Tight to Your A-Players
Things can get scary during a slowdown and sometimes you may even have to think about losing staff. But you can’t afford to lose your A-players, the top 10% of your performers who are an amazing cultural fit. You want to spend more time with them to make sure they’re happy and confident (shedding C-players during this time, on the other hand, is a great thing to consider).
For some companies, economic downturns are fantastic opportunities to lure talent from elsewhere. There’s a little bit of a defensive game to be played to ensure your great talent isn’t poached. The last thing you want as a business leader is to have any of your A-players be uncertain and not confident about their outlook at your company during an economic slowdown. After all, you don’t want them to take an offer and go somewhere else where they will feel safer.
So, how do you retain your best talent? The most valuable thing you can do is elevate them. Spend time with them and make an effort to connect with them. Find other areas in your business where they can level up and grow inside your business.
If activity is slowing down, you have an opportunity to tighten up skills and strengthen your team so actually learn and grow during this time. What big effing problems are there in your business that your team can solve that will level up both them and your business? Identify them and let your team tackle them.
Build Consistent Processes
As a business strategy consultant, I’m a process guy so this is always top of mind. When things slow down, it’s the perfect opportunity to evaluate how you do things and optimize them. If you systematize your business when things speed up again, you’ll be in a better position: you’ll have great processes in place, you can delegate more, and spend less time managing. Plus, systematized businesses create better customer experiences at a lower cost.
Double Down on Creating Fantastic Customer Experiences
During an economic downturn, it is even more important to ensure your customers are delighted. Delighted customers pay less attention to the dollar figure because they are focused on the amazing value and results they get by working with you.
Take this opportunity to find awesome ways to delight those customers. Improve their overall experience of working with you by finding ways to solve their problems better! You’d be surprised how much more depth you can often get with your customers and make even more money. For example, you can offer a solution to another problem they have. You can reach out to have a conversation with a previous customer to discover more issues that you can potentially solve.
Stay Disciplined and Focused
Let’s be honest- things slow down, money gets tighter, and we tend to get a little more reactive. We may be tempted to spend more time firefighting and less time on strategic stuff. We may panic about whether the next deal is coming through. All of this is counterproductive. I’m not saying there isn’t space to worry about the business. But if you’re monitoring your cash flow, holding on tight to your A-players, and improving your processes, you need to take a breath and trust that you’re doing the right things.
Stay focused on the plan, keeping in mind the plan may change. After all, you need to stay agile to adjust to what’s happening in the market. You will get through an economic downturn by ensuring your team is aligned, focused on the right things, and most importantly, disciplined. Enter the ever-helpful business coach.
How a Business Coach Can Help You Through an Economic Downturn
The role of a good business coach is to…
- hold a mirror to your business to show you where you aren’t staying disciplined and focused
- point out areas where we see other clients thriving during a challenging time to help inspire you
- act as a thinking partner to tease out opportunities you may not be taking advantage of
And, most importantly, to help ensure you have the right tools to be able to confidently get through this kind of economic slowdown. At Incrementa, we help our clients with every single thing discussed above. Contact us to learn how we can help your business get through this economic downturn and emerge stronger on the other side.