There's no doubt 2022 became a turbulent year. As we're closing in on an economic downturn, the question is - have you prepared to get the most out of it?
Resilient companies take the early-mover advantage
Research from McKinsey shows that companies that made necessary changes early during the 2008 financial crisis were significantly better off in the long run than those who waited to adapt.
From McKinsey Quarterly, "A defining moment: How Europe’s CEOs can build resilience to grow in today’s economic maelstrom", October 12, 2022.
There is great potential here, as we're still early in the current crisis. Setting your priorities straight and being proactive in 2023 can help you get ahead of everybody else.
Proactive companies plan how to tackle the crisis
Over the last few months, I've called CEOs weekly to take the temperature off the economic climate. I'm surprised how few of the companies had put together a proper plan for the time to come. Less than 10% have an action plan with clear scenarios, even though it only takes a couple of hours to make.
At Upsales, we think about this a lot, and I'd like to share three actionable strategies we implement when tougher times lurk around the corner.
Strategy 1: Assess what industries will be affected and adjust
All crises hit differently, so it's essential to consider how different industries will be affected. Are your customers or prospects in a sector likely to take a significant hit? Or will the crisis not affect them at all?
Let's compare the war in Ukraine to COVID-19, for instance.
As you can see, the impact on capital markets was completely different.
It's important, however, to remember that people often panic in turbulent times. That's why jumping to conclusions based on stock market data can be a dangerous path to go down on.
In every crisis, we'll see companies that perform better, companies that aren't affected and companies that are affected a lot. Even if capital markets are down 30%, we can always find companies doing well. Use the publicly available data to find these companies, and focus your outreach on them. You can also dive deeper into your customers' data to predict which customers may not be able to keep you as a supplier. Make sure to call and meet them in person, convince them your product is more than “nice to have” in the year to come.
Strategy 2: Target companies based on their financial health
It's important to be more thorough than usual to find reliable prospects in turbulent times. Data from Creditsafe shows that overall bankruptcies have increased drastically during the last weeks of 2022.
To prevent risk, move beyond the typical parameters, such as geography, industry and size, when making your target list.
Start understanding your prospects' financial health instead. We look at financial KPIs as debt and cash flow when choosing companies to focus on. A friendly piece of advice here is to always look at cash flow in favour of profits. Then you compare apples with apples, since profit can be easily manipulated. Ranking potential customers after cash flow ensure you spend time targeting the most promising leads.
Strategy 3: Plan for every scenario
It's essential to have a clear plan in place to guide decision-making.
When the pandemic hit, we developed a plan that included three scenarios: green, yellow, and red. In the green scenario, we focused on finding ways to cut costs temporarily, like reducing our advertising budget or pausing a project that wasn't crucial. In the yellow scenario, we planned to identify which roles or individuals might be at risk if we needed to make layoffs. And in the worst case scenario, the red scenario, we planned for more drastic measures such as significantly contracting the organisation.
Fortunately, we never had to implement the red scenario, but these plans allowed us to stay focused and avoid panic during a challenging time. We're taking a similar approach in preparing for this current crisis, which makes it easier to sleep well at night. Besides the scenario planning, we also chose one KPI to follow up weekly on how we were progressing.
Never let a good crisis go to waste
During the pandemic, we became a much more united team and a more effective company. Many of the great things we've done since then weren't despite the crisis but because of it. As Winston Churchill once said:
"Never let a good crisis go to waste"
This is a time for leaders to sit down and think about the most critical areas of focus for their business and to have open and honest conversations with their team about those priorities. People are more likely to listen and engage in these discussions during a crisis, so it's an excellent opportunity to get everyone on the same page and ensure everyone is working towards the same goals.