There are many people who don’t want to mention the “r” word on the basis that it is self-fulfilling. As an optimist I understand this argument well, but there comes a point when it is foolish to ignore the possibility of recession – that point has now been reached.
However, there is much that can be done to not only survive, but thrive in a recession. Here are nine things you can do – some are about attitude, some are about actions.
First, is your management in denial? They should be working under the assumption that there is a recession already and that it will last some time. Otherwise executives will continually avoid taking tough decisions, arguing that “it’s a temporary blip”. This is a common error.
Second is to keep staff morale up. You are worried there is a recession on its way – and so you should be. However, there is no point in depressing your staff as it will affect their performance. This does not mean you should mislead them, but be selective with the bad news. You are paid to bear the stress, they’re not.
Third is the margins/share dilemma. Are you going to fight to keep your profit margins up or your market share? In a recession you can’t expect to do both. You have to make up your mind because this affects pricing policy, staffing and overheads. It also affects your communications – internally and externally – so you need to think about how you’re going to handle it.
The fourth key element is to drive through tough decisions. This is when you have to be cruel to be kind. Hanging on to too many costs, including people, can put the whole company in jeopardy in a recession. This is when you hear that rather brutal expression: “Cut early, cut deep”.
You need to ask who you have outgrown and who has not kept up with the changes at the company. Conversely, who did you bring in to manage “a more sophisticated service”? In a recession, you don’t want sophistication, you want a fast, responsive service based on results.
Fifth is never forget that cash is king. But do you have any? Depending on the answer, you are faced with totally different decisions. I remember a credit card ad some years ago with the headline “Cash stinks” – well, not in a recession, matey.
Those with debt create opportunities for those with cash. Indebted competitors become available very cheaply; indebted suppliers will give amazing terms for cash up front.
Following on from this is the sixth key way to surviving recession, that cash management is king. A lot of executives in this country are wimps when it comes to collecting money. Somehow asking for payment is embarrassing. One heavyweight exec who worked for me told me it was rather tacky. Tacky to expect payment for a good job done and which was agreed to in advance?
This kind of sloppy thinking has to be swept aside because overdue debtors are bad debtors in a recession and you do not want to be at the end of the queue when an administrator has been called in. Payment needs to be pursued in a planned, rigorous but persuasive manner.
Seven: keep close to your clients. The temptation in a recession is to become very internally-focused. This can be fatal: now is the time to really listen and respond to your clients. Is the service you provide one that, over time, has come to reflect your systems rather than their needs? It’s an easy trap to fall into because most people are comfortable working that way. But work against it and think about what new services you can introduce.
Eight: remember that big projects stand out. The big-ticket items get scrutinised early on, so you should look for small recurring income. The monthly service fees will only be cut if a recession is both long and deep.
I have invested recently in a five-a-side football operator. For a fiver a week blokes can really let off steam with their mates – a lot of bigger expenses are going to be cut before they will stop that slice of freedom and passion each week.
And the final point is, increase your new business drive. This isn’t just a matter of flogging your sales people harder – it means senior management need to be more involved and put their shoulder to the wheel too. It’s very easy to immerse yourself in “strategy” and “running the business”, but often it’s an excuse for avoiding the sharp end. Rejection is an essential part of selling, it is how you deal with it that matters. Bosses need to change how they work in a recession: it’s not a question of just putting pressure on the salespeople. You’re not meant to be a First World War general operating 15 miles behind the front: you need to be at the front, having planned in advance how you’re going to make a difference.
It won’t be an enjoyable experience, but approached the right way, a recession can bring as many opportunities as a boom.