Its a VUCA World
In the world of business, there is always a risk of economic downturn or recession. The world has been described as Volatile, Uncertain, Complex and Ambiguous (VUCA). This view can evoke stressful responses, and whilst the world can be like that, how we respond determins whether the outcomes are favourable or not.
In such situations, it is essential to recession-proof your business to ensure its longevity and sustainability. By taking steps to protect your business, you can minimize the negative impact of a recession and even come out stronger on the other side. Here are some ways you can recession-proof your business.
1. Build a Resilient Team
Your team is the backbone of your business, and during a recession, it is more critical than ever to have a resilient and adaptable team. Invest in your team’s training and development to ensure that they have the skills and expertise necessary to adapt to changing market conditions. Additionally, focus on building a strong company culture and creating a sense of shared purpose and mission, which will help your team weather the challenges of a recession.
Don’t make the mistake of the last GFC, where reactive companies pulled funding from developing their core asset – the people.
Be proactive and develop the confidence, competence and commitment of your people, so that they can deliver on the remaining four points below…
2. Build a Diversified Customer Base
One of the best ways to recession-proof your business is to have a diversified customer base. Relying on just a few customers or a single market puts you at risk of losing all of your business if that market or those customers are affected by a recession. By targeting different markets and customer segments, you can spread your risk and protect your business from the worst effects of a recession.
The creativity of your people is critical here. Keep the energy high and the language positive yet realistic. This will help fuel your team to look at new ways to engage with new clients. This is a time for innovation!
3. Maintain a Healthy Cash Flow
Cash flow is the lifeblood of any business, and during a recession, it becomes even more critical. Having a healthy cash flow can help you weather the storm during a recession. Focus on keeping your expenses low, collecting payments on time, and managing your inventory efficiently. You may also want to consider lines of credit, which can help you bridge the gap during a temporary cash flow shortfall.
Approach cash flow with a constructive mindset. Be careful not to just cut costs as this can lead to a nihilistic mindset, which will affect your product, team morale and ultimately your customer. Lose them and you are gone.
Being carefully optimistic, open and honest, will help all employees engage with a similar mindset of careful expenditure as well as being more disciplined around invoicing and clllecting payments on time.
4. Focus on Your Core Competencies
During a recession, it can be tempting to diversify your offerings to attract new customers. However, this approach can often backfire, leading to a loss of focus and dilution of your core competencies. Instead, focus on your strengths and emphasize your unique value proposition to stand out from the competition. This approach will help you maintain your competitive advantage and weather the storm during a recession.
Resist the urge to develop new products, unless you have done thorough market analysis and you have the necessary R & D funds to support this. Yes, think outside the box, in terms of diversifying your client portfolio, but stick to your core strengths.
5. Embrace Technology
Finally, in today’s digital age, it is essential to embrace technology and use it to your advantage. Technology can help you streamline your operations, reduce costs, and improve your customer experience. By embracing technology, you can stay ahead of the competition and position your business for success during a recession and beyond.
This is not an invitation to get the latest and greatest tech. Be careful not to become the slave of technology, where it rules you, rather than serves you. Technology is amazing and offers so much for business and the global community. Use it only if it supports your needs and does not make things overly complex. Keep it simple!
In conclusion, recession-proofing your business requires a combination of strategic planning, financial discipline, and a focus on your core competencies. All of this is executed by your people and is why I recommend focusing on them first.
People make the world go around. By supporting their energy and competency, you will be preparing them for the challenges ahead.
By taking these steps, you can minimize the negative impact of a recession and position your business for long-term success. Remember, during a recession, businesses that are adaptable, resilient, and forward-thinking are the ones that survive and thrive.
Adapt, improvise and overcome.