Depending on whom you ask, which news report you’re reading or analyst that you’re listening to, some of the world’s biggest economies are already in a recession or heading toward one. Whether this downward cycle ends in a “soft landing”—or if the overall negative impacts are wider and deeper—now is the time to take steps to position your business to maximize output during the slow times.
While the knee-jerk reaction may be to start cutting internal expenses, pull back on hiring and take other cost-cutting measures, these aren’t considered sustainable solutions to a short-term challenge. In fact, taking these extreme measures now could even curtail company growth down the road, when the economic outlook is brighter.
“After three years of adapting to disrupted business conditions due to the pandemic, the aftermath of inflation and fears of recession have leaders scrambling to get budgets in line with slower revenue growth,” Harvard Business Review reports. “Riddled with the anxiety of making the wrong choices and having to deliver tough news, leaders are often prone to making short-sighted decisions when cutting costs.”
6 Steps to Take Now
According to Gartner, just 43% of companies actually achieve the cost reductions they reach for in the first year, and only 11% can sustain the prudent behaviors into year three. “The ultimate failure comes from taking their eyes off the future,” HBR points out. “For example, only 9% of companies create enough capacity to take on growth and innovation to support their long-term aspirations.”
The balancing act between managing the current economic uncertainty and preparing your company for future success isn’t always easy, but here are six time-tested strategies you can use to get on the right track in any business conditions:
1. Develop a cash flow plan
Running out of cash is always a top concern for business owners, but it becomes especially important during a recession. “Start by getting a handle on your current cash balances and monthly sources and uses of cash,” NetSuite “Create a rolling cash flow forecast for the next quarter to guide the management team and serve as an early warning tool that alerts them to variances.”
2. Stick to your budget
When you operate within your budget, you put your business in the best possible position, should a recession emerge. “In fact, following a budget or operating plan is a best practice at all times,” NetSuite points out. “Some recessions, like the one associated with the onset of the COVID-19 pandemic, come without any economic early-warning signals.”
3. Pay down your debt
If you enter a recessionary period as debt-free as possible, it positions your company to have the highest amount of capital available to draw on in the future—should you need it. “Prepayment of debt may also save some interest expenses, which can be tucked away in cash reserves,” NetSuite adds.
4. Use more automation
When you use an enterprise resource planning (ERP) platform like NetSuite to incorporate more automation into your business processes, you can save time, money and valuable resources. “The futuristic businesses focus on incorporating automation of essential business operations,” consulting firm Capital Numbers points out in Key Ways to Recession-Proof Your Business. “It saves countless hours of labor and aggravation while allowing companies to do more with fewer resources.”
5. Focus on your customers
Capital Numbers says 86% of customers are ready to spend more for a better experience, while 93% of consumers are more likely to make a repeat purchase following a pleasing experience. “From these numbers, you can understand why a positive customer experience is essential to scaling revenue development,” the company adds. “Satisfied customers are more loyal, spend more money and may also promote your brand effectively.”
6. Get a better handle on your inventory
“While you’re reviewing your receivables, spend time examining your inventory practices,” Mike Berner advises in How to recession-proof your business. For example, are you ordering excessive quantities of certain items? Could you perhaps buy certain products at better prices from different vendors? “There are many ways to cut costs, so don’t get caught up doing things one way because it’s what you’re used to,” Berner adds. NetSuite Inventory Management provides a single, real-time view of inventory across all locations and sales channels, allowing businesses to reduce inventory on hand to free up cash while avoiding stockouts. By optimizing inventory levels and ensuring product availability across multiple channels, the solution helps businesses keep inventory costs low while exceeding customer expectations.
Power-Up with NetSuite & Reach Your Goals
Regardless of the current state of the economy, it’s important to prepare your business to both tackle the “now” and prepare for what’s to come. By working with an experienced provider like ERP Success Partners to either implement or optimize NetSuite, you can position your company to tackle the rigors of the current economic environment and prepare it for even more success in the future.