A solid team will be able to make business decisions and adjust in an economic slowdown.
Just when you thought the impact of the pandemic was over, here comes an economic slowdown preceded by high inflation and supply chain complexity. If you run a startup or work in part of a business that is responsible for revenue, you better prepare to make some quick adjustments to your overall strategy and possibly business model. Because if we do end up in a recession, and you have not taken the necessary steps to steer your company through this ‘storm’, you will have major problems just over the horizon.
For many younger business leaders and entrepreneurs, this may be your first economic challenge, despite the pandemic. As such, you may not really see the delay coming. But you have to look at the “points” of information that are already coming up. Inflation is high, supply chain problems, declining car sales, housing delays, large declines in new mortgages, employee freezes at large companies, layoffs in some industries and the overall effect on the stock market in terms of investor confidence. In addition, if you see big companies like Procter and Gamble pulling back on advertising media spending, according to a article by Adage, it’s like a “canary in the coal mine” warning that things could get worse before they get better. So what do you do first?
Talk to people who have been through three to four recessions and ask for their wisdom and advice. They’ll probably tell you to get to work now, in fact you should have been working on this in early February of this year, making the adjustments your business needs to survive and grow.
Here are some areas you should focus on and make important decisions to ensure the health of your business in the year ahead.
Manage your money. Cash flow is the lifeblood of almost every business. Managing your money, whether through a more aggressive accounts receivable effort, a negotiated payment schedule with suppliers in your accounts payable, keeping staff costs in line with payroll freezes and understaffing. It all matters now as your primary goal should be to generate strong cash flow in the business.
Control your costs. Whether you’re in a large company or a founder who raised $5 million in your latest round, you better really control your costs now. For founders who are pre-profit, you need to extend your “runway” and let the money you’ve raised continue, especially due to an economic slowdown. If you’re part of a large company, if you haven’t already received it, you’ll receive an email to help manage your region, division, and department costs for the rest of this year.
Small pivots are important. As you review your business strategy, business model, and revenue forecasts, don’t hesitate to make small decisions that can give you big benefits. If you wait and assume things will get better, you may not be prepared or able to withstand a recession. Look at your business model and shift people and resources into areas that generate or protect revenue. Perhaps in the near future, cut back on ad media spend and use services like re-targeting, email marketing, or better organic social media efforts.
Make your decisions right. While you’ll likely need to make some adjustments to your business in the near future, don’t make irrational or quick decisions just to make them. Consult your board, advisors, mentors and others who have experienced economic uncertainty. Combine your hard data with trend forecasts that are honestly realistic. Nor do you suffer from analysis paralysis or consensus groupthink. Get your data, your leadership team input, advice from advisors or mentors, then make a decision. Believe it or not, quite a few companies go bankrupt because they simply do nothing.
