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10 lessons from the last recession

David de Robillard March 24, 2009

2 min read

According to Greg Will, a partner in PwC’s private companies practice, “smart companies can grow market share, refine their product range in a downturn, and even take out some weakened competitors when the economy turns south.” The ten tips are:

1. Scenario planning
Test what will happen to your business if the downturn is mild, bad or severe. Look at four specific areas; revenue, cost structure, the quality of your business plan and your capital structure. Be prepared.

2. Flexible balance sheet
As well as making sure you are paying careful attention to cashflow – and that means chasing down those debtors – think about ways to turn your assets in cash. Will suggests businesses could look at selling plant or equipment and then leasing it back. Reducing debt will also give you more balance sheet flexibility.

3. Flexible operations
Most businesses will have more than one source of revenue – that might mean the business has a number of different business divisions or perhaps offices in different locations. Be prepared to switch your focus and effort from one division into another, depending on where the best opportunities are.

4. Market share
It’s tempting to cut marketing spending in a downturn. Don’t. If anything, you should be increasing your spend. “When we look at the last recession, the better business actually held that expenditure to win market share,” Will says. “When things turned around they were much better placed.”
If your competitors are struggling during the downturn, you can quickly take advantage of the fact and grab customers from them – but it will only happen if your brand is in good shape.

5. Staffing
Hiring costs is one area you can save money in a downturn by concentrating on retaining your staff. “We’re finding that in terms of a downturn, it’s making it increasingly difficult to motivate employees,” Will says. He recommends improving communication with staff where possible and really selling them the benefits of working at your company. Keeping staff is always cheaper than finding new ones.

6. Cost cutting
Cost cutting is always a good idea in a downturn, but Will says companies must be careful to only cut costs at the periphery of the business. “We say you’ve got to cut fat, not muscle.”

7. Product range
Another area for cost cutting could be your product range. Review your entire range and think about which products actually, work, with particular attention to the margins products attract and the marketing spend each product needs. Focus particularly on successful products or services and discard less successful ones you may have preserved with during better times.

8. Customer/supplier analysis
It is also worth thinking about how the slowdown will effect key customers and suppliers. Will says businesses also need to look at the size, loyalty, reliability and profitability of their customers and come up with a shortlist of the best. These are the customers who should be given the most attention and care. “We need to be focusing our strategies on the right type of customers.”

9. Mergers and acquisitions
Some of your competitors will not survive the downturn. If you feel your own business is in good shape, it might be the perfect time to acquire a struggling rival, grab their customers and build your market share on the cheap.

10. Steering committee
Finally, you must start looking ahead right now. Will recommends forming a steering committee within your business to plan for future growth when the economy turns again. “Start now to plan for an upturn so you can hit the ground running,” Will says.

David de Robillard

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10 lessons from the last recession

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