What Business Should do to Thrive in all Economic Cycles
Last weekend, Western Australian residents turned out to make a clear statement – they were no longer happy with the Colin Barnett government and were not prepared to let him steer the states flagging economy for another term.
Now it depends with whom you speak – some say the election result was due to messy preference deals, others say it was due to the dilution of One Nation as a protest vote – perhaps it was simply this. More time should have been taken to capitalise on the boom and prepare WA for the inevitable decline.
With the nations worst unemployment rate and a dramatic decline in business trade and confidence, Western Australia has fallen a long way from the heady days of the mining boom.
Do you get the feeling you’re exposed to volatility in the market place? In one season you may be riding a wave of success and then the next you’re on the ropes.
There must be a way to smooth out the peaks and troughs – to make a business more resilient in any season and protect it from feast and famine.
Here are some tactics that you can apply at either end of the fiscal cycle so that your business can capitalise on a mountain of work or stare down a declining market.
Boom Times – Don’t Squander the Advantage
While it’s important for every business to extract the most from buoyant markets, let’s ensure that value-adding work is not thrown away in the interest of fast profits. Here are four approaches designed to generate sustained value.
- Top Line Growth: Work with your key suppliers to know what new technology, services and products are around the corner. Armed with advance knowledge of external capabilities, you can develop new market solutions and out compete your competition.
- The Entrepreneur Inside: Encourage an entrepreneur mindset amongst your team. Calculated risk should be encouraged with appropriate transparency and safety nets. These measures prevent the team being burned by less-successful attempts at innovation and change.
- Product Extensions: Explore the creation of products and services that are an extension to what currently sells well. These ‘products’ are specifically marketed to the customers who already love what you do.
- Indicators: Develop an awareness of the trends or patterns that signal the tide is turning to a declining market. If you know your indicators you will be able to prepare a response before a market dip.
The Season of Bust
When times get tough it can feel suffocating. Falling sales, margin squeeze, delisted products and services are all common place, along with greater instances of competitors who are prepared to ‘buy’ your customers.
What can a company do to combat this environment?
Early deployment of defensive strategies is the straight forward answer. Below are four simple but effective defensive tips:
- Develop a program of staggered cost-saving initiatives. Project out further declines and the initiatives needed to reduce expense whilst maintaining profitability. Initiatives will increase in severity as the economic environment worsens. This approach prevents drastic and hard to reverse action being taken too early.
- Review vital back-end process. Ensure consistency throughout the business, remove duplication, increase project adoption levels and resolve recalcitrant behaviour.
- Draw upon the skills of your top suppliers. Explore their alternate services for improvements in cost and yield. Be open about your performance and they will be more likely to work and collaborate with you.
- For your products and services that generate the greatest profit, consider how they could be improved for even greater returns.
Western Australia had an opportunity. More should have been done. Instead, it all unraveled with an economy going into free fall and a government being sacked. Don’t let this be the case for your business.
Whilst you may not be able to control the market, you can take preparatory steps in readiness for a change in economic season. To not act is to choose to bob about in the current and hope that you stay afloat.
Now is the time to prepare your business. What will you work on first?
Like to read more? William Pegg’s book ‘Changing the Game’ is written for the leadership of mid-sized companies to help them improve profit and growth prospects.