A Far-Sighted Business Growth Strategy Will Help Your Future In A Recession

During periods of market slow down, the executive leadership of a business  is able to make choices about how they will react to the future, and the position where they would like to be once the economic down turn ease and the market begins to bounce back to what it was before.

By changing their perspective and strategy planning to have a long term perspective instead of realizing only the production of a short term positive uptick to the profit statement, it is possible to grow a business even during tough economic times. A foundation to success in this area, however is that the management in charge are true leaders and are prepared to look beyond the short term  prospects and work toward positive change for the future. It goes without saying that if the company is in a strong position before the downturn begins, combined with good leadership during the period of recession, that venture has a better chance of surviving the challenges with not only streamlined processes, but with a greater market customer base, due mainly to it stepping into the space left by companies who go out of business in the meantime.

The attitude toward a long-term business growth strategy needs to be a part of managerial mindset  in times of plenty as well as times of hardship and needs to result in the implementation of changes which will be advantageous over a period of economic cycles and not only from the short-term stance. The ability to handle recession in this way is the mark of true leadership abilities and the trademark of success.

The use of redundancy is an obvious example of knee-jerk reaction to company failures in a declining market. While it’s immediate effect is to release cash flow into the company which may be sorely needed, the long term result is that once the recession passes, the company then needs to re-establish the knowledge and experience base that it has just discarded. Across-the-board axing of staff positions may seem like the obvious thing to do, however it will be undesirable in the long term vision.

Realise that the wider social implications of major redundancies such as those that we are seeing in the international economy currently, actually makes a recession last longer, as it affects the entire status of a country’s economic infrastructure.

It is far more beneficial to reduce your cash flow by optimising processes than getting rid of people, particularly if you want to grow during or immediately after a recession. This way you retain the human resource necessary to quickly and effectively respond to opportunities in the market.

The techniques  brought in by consultants can usually help you identify quick wins in this area, and the money thus made available can be used to fund growth related activities such as buying your competitors stock or developing new market offerings.

The old proverb of buying when the market is depressed is most applicable in this situation, and businesses should be preparing for this situation when the going is good.

Business Growth Strategy: How To Use Pareto Analysis To Focus Efforts On Growth?

This week I am working with a client who is drowning in success because of a well-implemented business growth strategy. He has been working on his business for two years (following four years work in his business). His sales are taking off and his team is rushed off their feet, stressed and heading for burnout.

So my task is to coach the team to perform better, to survive and ultimately to thrive on their success.

What is the 80/20 rule?

I explained to the team that commonly 80% of results are produced by 20% of causes. Applied to sales revenue, this idea gives you plenty of levers with which to control and manage your situation:

Observation 1: 80% sales come from 20% customers.

Printing out the cumulative sales ledger by value enabled us to identify the important customers. We will focus our sales effort on these few, important businesses.
Interestingly they tend to buy single product types at present, so cross-selling several products to them will immediately boost sales revenues while reducing the team’s invoicing task.

Observation 2: 80% profits come from 20% products.

Tracking the actual profitability of products enables us to raise the prices on strong products and only offer discounts on the weak products.

We will bundle two or three ‘low profit’ products that complement a high profit product.

We are prioritising the production schedule, inventory investments and delivery dates to favour high-profit products and we might discontinue some low-profit products.

Observation 3: 80% costs come from 20% activities.

We plan to manage only the high-cost activities. For instance, some high cost materials will only be processed ‘just in time’ for their assembly and finishing activities.

Cross-training the staff will build flexibility into these sensitive activities.

How do you focus your best efforts?

Understanding the 80/20 rule helps to unravel the averages and aggregations in your business to expose the insights that will help you grow. How can you reduce 80% of your wastage and invest into extra sales growth?

Following this idea, my client plans to review his business annually, then his team will avoid burn-out as they grow the business.

Best of luck with your business growth strategy and strategies!

Adrian Pepper coaches people through business and personal difficulties.