After the roaring economy that followed the initial shock of the early days of the COVID-19 pandemic, there have been plenty of economic jitters. And while the Fed has successfully tamped down inflation without triggering a recession, the anxiety and difficulty are far from behind us.
Some have dubbed this a “Waiting for Godot recession” that never seems to come, but whether official or not, the economic landscape has been challenging for years. Couple that macroeconomic uncertainty with the incredible rate of change, and business owners had better be on their toes.
One of the marks of a great business leader is an ability to thrive in both fair and foul weather. Elite performers can really separate themselves in tumultuous times. To capture that opportunity, here are some steps to take.
ν Focus hard on expense management while maintaining fundamentals. Too often leaders slash expenses in areas that help drive growth, like R&D, sales and marketing or quality control. Disciplined expense control is just that — disciplined. Find ways to cut back without losing what makes the company great and without mortgaging its future. Every company has some discretionary expenses, some non-essential projects to defer and other ways to protect the bottom line.
ν Keep a strong balance sheet. This makes things easier and provides critical leverage and flexibility. Work to reduce the debt load in a judicious manner, working closely with lenders for favorable terms. Adequate liquidity helps ensure that the company can withstand a downturn.
ν Protect your margins. It can sound counterintuitive, but giving too much away in discounts or foregoing necessary price increases can be like eating seed corn.
ν Innovate and stay nimble. We’ve never had more tools to improve efficiency and outcomes, whether that’s automation in manufacturing or leveraging the incredible power of AI. If you’re not capturing meaningful gains here, your long-term outlook is not healthy regardless of the economic outlook.
ν Reduce risks by being proactive with suppliers before you reach any kind of crisis point. This could mean renegotiations of terms, finding new vendors or other steps to help ensure the company’s success.
That’s a lot of battening of hatches, but a healthy company can do more in a tough environment than just survive. “Never waste a good crisis” applies to some of the best companies in the world. As competitors get weaker, it presents an opportunity to capture new customers or even consolidate through M&A activity as asking prices decline.
Building a growing and thriving business is a lot tougher when interest rates aren’t hovering around zero. And it was a lot easier to keep up with change when the pace of technical innovation was merely at the speed of sound rather than the speed of light it is today.
Times like these, however, have historically proven to be ripe with incredible opportunity for those who position themselves correctly and are able to be bold. I think we’ll look back on the last year or two as a time when numerous companies and innovations were undervalued. These are difficult times but also exciting ones, and embracing that challenge can make all the difference.
Stewart Kohl is Co-CEO of The Riverside Company
