There has been talk of a looming recession for years now, but there has been quite an uptick recently with the Federal Reserve continuing interest rate hikes and the meltdown of financial institutions like Silicon Valley Bank.
With all of this talk going on, it is important to remember that as business leaders, we cannot simply lie limp and allow the economy to get the best of us. It is possible for your business to persevere and grow even if the broader economy is suffering. However, to do this, you need to take risks that might make you feel uncomfortable – especially when you see your peers in the industry being cautious during this time.
In a recent talk given at PRI 2022, Tom Shay, the founder of Profits Plus and one of the leading small business management experts in the nation, gave an interesting presentation where he offered strategies to win in a tough economy.
The core focus of his talk was mainly urging business leaders in the automotive aftermarket industry to iterate, fail, and repeat. He truly believes that failure can lead to strong outcomes for an organization because that at least means you are trying instead of just waiting for a recession to come and go. To make this clear, he used the phrase, “Keeping the stone rolling is easier than getting it rolling again.”
This really stuck out to me because even if you fail, your business is still pushing itself and trying something new that you can iterate on rather than stopping initiatives altogether because you are too worried about where the economy is going. We must persevere regardless of market conditions because if we remain still, we open ourselves up to even more potential danger.
Shay also encourages business leaders to not be afraid to try new methods of generating customers or bringing back existing ones. Look at businesses that are afraid of trying something new and look at others that are innovating and see which one you want to replicate. I can tell you the reason we still talk about Henry Ford, the Wright brothers, Steve Jobs, and more is because they pushed boundaries and created success from new ideas, not being complacent with where their businesses were.
Owners and executives who are simply riding the ebbs and flows of the economy and not pushing their businesses forward despite the current climate are going to see their company fall by the wayside. It will be for one of two reasons: 1) the economy truly does sink to a recession and the business fails, or 2) the economy stays afloat but there are other innovators in the space that have created better products/services and your customers fled to the new, shiny, and better option.
You cannot fall behind the competition during a downturn. You need to remain ahead of the game by being innovative and exciting. These lessons are not only voiced by Shay. They are also echoed by a large group of thought leaders who encourage businesses to push through challenging times.
In the midst of the fallout from the 2008 global recession, the Harvard Business Review noted that during turbulent markets, it is critical for organizations to hyperfocus on agility and absorption.
Organizational agility is an idea that encourages business leaders to consistently find and seize opportunities to enhance operations, improve processes, and quickly capitalize on the rare golden deals that come into your funnel – all with intense speed and solid execution. If there is a cost that can be reduced, reduce it. If there is an obvious quality improvement that can be made, improve it. It really is as simple as that.
Do not sit on potential improvements just because they do not rise to the top of your priority list. Instead, take the leap and reap the rewards because when the market is in a rough spot, you need all the wins you can get.
On the other hand, organizations can also focus on absorption by insulating their businesses to handle any potential blows. The main ways you can do this are by shifting to low fixed costs, creating a more robust and diversified portfolio, and (if you are lucky enough to be able to) having a good amount of cash on hand in case an emergency arises.
This is a much more conservative approach to the organizational agility outlined above but is also effective in ensuring you can persevere through challenging times.
These two concepts, when used separately, are decent tactics for weathering economic conditions. When combined together, however, they make an even more potent antidote for a downturn. Agile absorption is something that I truly recommend implementing in your organization because it allows you to take advantages of the opportunities the market puts in front of you, but also trains your organization to be more willing to take necessary blows if you know there is light at the end of the tunnel.
To sum it up, there are many tactics a business leader can put in place that can help limit the damage an economic downturn can inflict on their organization, but it takes a willingness to be adaptable, seize opportunities, and absorb some of the bad that may come along the way.