Strategies Tech Companies Can Use To Recession-Proof Their Business
By Lou Martel, Vice President, Sales - U.S., Ciklum
Currently, America is experiencing its longest economic expansion in the nation’s history and while tech companies may seem impermeable in our current state of economic growth, financial experts are increasingly bracing themselves for the next recession.
During this time, companies have borrowed and raised funds at an astounding rate, investing in new technologies and hiring teams to handle the demand. While a myriad of reports hint at an impending economic downturn, many companies are preparing with over 50 percent of companies having a strategy and plan in place to address the recession.
The sheer talks of a recession for companies typically mean it’s time to “trim the fat” on the way business is handled. While there is a plethora of ways to do this, there are in fact strategies companies can employ now to stay afloat and prosper, be it economic downturn or windfall.
Prepare Early
The key to surviving a recession is to act as early as possible. A company’s willingness to make strategic and necessary moves prematurely becomes the difference in them weathering the storm of an economic shock or sinking their corporate ship. When it comes to the enterprise, ideating on the exact time and length of a recession pales in comparison to those who are ready to seize the moment ahead of time, when more options are available. Companies who are agile and not afraid to pivot are most successful. However, what’s most important is that businesses adopt this mindset now.
Examine Costs, Don’t Cut Corners
One of the main concerns for any organization is the depletion of capital, whether there’s a recession or not, which is why it’s helpful to have flexibility when it comes to financing operations and unexpected expenses.
A report by Harvard Business Review found that “resilient companies during the last recession reduced their debt by more than a dollar for every $1 of total capital on their balance sheet. By contrast, non-resilient companies added more than $3 of debt. Reducing this debt gave these companies far more cash on hand by the time the recession was in full swing.”
For companies on the defensive end of things, their natural response is to aggressively cut costs and reduce staff, however, this doesn’t necessarily guarantee survival. Organizations must exercise financial discipline by routinely examining and curtailing costs where possible. This, in turn, allows them to pivot faster than their competitors when times are hard, allowing them to seize opportunities that are there and even learn what projects you should pause or eliminate for the time being.
Yes, Continue to Invest
Investing in the right technological resources ahead of a recession helps companies and organizations build resilience, not regret. The right technology enables companies to automate their processes while lowering operational costs, allowing companies to thrive amid an economic decline. This, in turn, provides companies with a competitive edge.
During a recession, companies should resist the urge to discount their service or product offering or accept deals and sales that eat into profit. Instead, they should look to acquire other companies at an affordable rate or expand geographically; believe it or not, even in times of economic hardship, opportunities abroad are available.
Maintain Strong Customer Relationships
In today’s era of hyperconnectivity, it has become more important to continually build better relationships with your customers. Checking in with your customers now to assess their current and future needs and gain quality feedback on their experience with your company will give you greater insight into what they are looking for. Frequently, the financial squeeze that occurs during a bad economic period can cause companies to retreat. This is where the communication aspect comes into play. When you regularly engage with your client-base, you will be able to share how you’re staying afloat and streamlining your business to last. Also, remember, while spending may slow down in a recession, it won’t completely stop, so continue to empathize, engage genuinely and communicate your value.
While it’s nearly impossible to predict the exact timing of an economic downturn, it's important to prepare your business to weather any storm. Regardless of the state of the economy, the foundation for a successful business depends on a company’s willingness to adopt preventative processes and policies that allow for continued growth despite an uptick or downturn in the economy.
About The Author
Lou Martel is Vice President, Sales — U.S. at Ciklum.