Getting into shape for a challenging economic season

Written by Nick Gold, MD of Speakers’ Corner

In early 2023, the UK is expected to enter the longest recession for a century. Interest rates have already jumped eight times since December 2021, hitting peak rates since the 2008 economic crisis.

Many business leaders will be wondering how to cope under this impending financial pressure. With rising costs, a shrinking economy, and lower consumer spending, how can you survive a recession?

Some companies don’t just survive — they come through a recession in better shape than they entered it. In 2007, just before the financial crash, Netflix launched its online streaming service. By 2010, it had launched Netflix Originals and expanded its service internationally. Groupon launched as a side project in November 2008; in 2010, Google offered them a $6 billion buyout bid.

It’s not easy to grow during times of economic uncertainty — but it can be done. So what opportunities must businesses seize in order to grow, and how can you make sure your business is ready for recession?

Step one — don’t panic

Doom-and-gloom headlines about the economy are designed to scare us. For business leaders, it’s important not to panic at the initial signs of trouble. For one thing, if your business is more than, say, 5 years old, you’ve already been through some of the worst experiences a company can face. So you should take comfort in that; your business must be pretty robust.

It’s also easy to sweat the small stuff in the face of financial difficulty. But leaders must stay focused on the bigger picture. Don’t get swept up in keeping an eye on teabag usage, or how much milk your staff get through each week. These won’t have an impact on your bottom line in the long run, so try to stay focused on more meaningful costs.

If you can conquer your panic, you’ll start to see opportunities for growth. After the last 3 years, we’re conditioned to adapt to change — so don’t feel you have to continue on the same track you’ve always been on. Businesses can and will adapt to new circumstances — you just have to be ready.

Understanding your financial baseline

A critical part of any business is understanding your baseline; that is, how much money you have in reserve. If money stops coming in tomorrow, how long can your business continue to exist?

As a business owner, you must make decisions based on a worst case scenario. It may feel overly negative to view it this way, but it’s necessary for business survival. As spending opportunities arise, you can decide whether they’re beneficial, or if they’ll put you on the path to bankruptcy. Knowing your baseline allows you to make fast, informed decisions — and prevents you from entering panic mode.

Twitter is a prime example of this. Elon Musk’s $44 billion buyout of a company with poor revenues has led to chaotic staff cuts and a stream of unsuccessful feature trials. To avoid this, stay calm and focus on the important questions: what are we making now, and what do we need to survive?

Streamlining operations: should you or shouldn’t you?

Staff are the core of any business. They’re also the main cost. So when it comes to cutting costs, reducing your wage bill is the obvious action — but it’s also the most extreme thing you can do. Streamlining operations may extend the life of your business in the short term, but ultimately it stunts your ability to grow.

Don’t be hasty when it comes to making redundancies. You may decide it’s necessary, but it’s not as easy as keeping your revenue generating teams and removing others. Customer service staff create the business’s reputation, and make sure you come out of a recession in a strong position. So you must take a longer term view. You’ll know you’ve made the right choices when the people who are impacted can almost understand your decisions.

Reducing costs by cutting staff is the easy option, but it’s not a long term fix. When recession hits, redundancy is rarely the right path to take. It’s a time for opportunity and strengthening relationships, so don’t stymie your business in the face of economic turmoil.

Seeing opportunity in an economic downturn

A recession is the perfect time to work on your stakeholder relationships. Staff, clients, investors — you now have a massive opportunity to create a deeper relationship that’s driven by more than money. This allows you to go beyond a transactional relationship, and show them the true value of working with your company.

In a recession, the companies that succeed are those that are willing to take risks and bet on themselves. When the world is in flux, it’s the best time to be brave and try new things. Any company that has spent the last few years building relationships with their employees will find they can take these risks with the backing of their team.

Employees want to be part of something. They can be the driving force that makes you willing to take a risk and go the extra mile, especially in a time when the world seems to be burning.

If your business has survived the last 3 years, you’ll have the experience and tools to cope with any challenge that comes your way. It will be tricky and tiring, especially when everyone just wants life to feel almost boring for a while. But don’t panic, and don’t let it get you down. Seize each opportunity as it arises to create a stronger, more robust business that’s ready for a post-recession revival.