While major economies have continued to grow fairly steadily in recent years, forecasts have become increasingly uncertain for businesses. With the UK’s exit from the EU, the United States’ ongoing political issues, and politicians all over the world turning toward anti-globalisation rhetoric, many of the international trade relationships our economies are built on don’t appear as reliable as they once were.
This kind of uncertainty gets in the way of growth, and ultimately precedes recessions, which economists have begun forecasting even in seemingly recession-proof Australia. To weather a storm like this, businesses need to understand how consumers and other businesses will generally react to economic trouble, and what they can do to prepare. However, it’s not all about survival. Even if the economy, or even your industry as a whole, is stagnating, it doesn’t necessarily mean that your business has to stop growing.
Adversity makes consumers more careful
When facing uncertainty, consumers are naturally inclined toward more conservative spending behaviours. This is a part of the feedback mechanism that creates recessions, in which lower demand drives down production, leading to job losses and even lower consumer confidence. In respect to consumer behaviour that means looking for low pricing, taking advantage of other savings opportunities, and cutting some non-essential purchases. However, while people do spend less freely than during good times, businesses who understand this behaviour can also work to capitalise on it.
Businesses crave stability
When growth opportunities are plentiful, businesses can benefit from operating in more flexible business relationships that allow them to evolve and change quickly. Shorter term contracts with suppliers, landlords, and equipment rental partners allow for fast, minimum-hassle upgrades and renegotiation.
In a more uncertain economic environment, things are very different. Being highly flexible in the short term is important when you need to be able to seize growth opportunities quickly, but that kind of readiness is expensive. Also, it just isn’t as ideal for competition driven by falling demand than for that driven by industry growth. Long-term contracts drive down costs, provide better financial security, and allow businesses to plan for the future more reliably so they can survive during tough times. Because of this, both you and your business partners can benefit more by building mutually beneficial longer-term relationships.
Building your community network
Both the businesses and the end consumers your business interacts with will be seeking predictability and reliability. To provide that security, your efforts should be turned toward building strong relationships that emphasize your commitment to meeting their needs.
Customer relationship programs
When overall demand isn’t growing, retaining existing customers is a top priority. That means soliciting feedback, optimising customer experiences, and engaging with clients on a personal level on social media and in person. Also, at a time when consumers are more likely to react to price incentives, and less likely to be turned off by minor inconveniences, loyalty programs that offer reduced prices or freebies are going to be more effective than usual.
More committed business relationships
When times are good, potential business partners are plentiful, and relationships are often short-lived arrangements designed for short-term mutual benefit. There’s nothing wrong with that, of course, but that kind of behaviour is far less likely to work well during an economic slowdown. Working together closely and building symbiotic relationships with a community of partners is more advisable in this kind of situation. It allows those businesses to stabilise their environment so they can not only survive, but strategically pursue growth even as less well networked competitors fold around them.
But how does all this allow businesses to actually grow? While these strategies certainly appear defensive and about ensuring your business’ survival, they also set your business up to take advantage of growth opportunities.
Organise for growth by consolidation
Economic uncertainty is no reason to stop growing. Economic pressure works to prune out less competitive businesses, and ultimately provide more of the market share to each of the surviving businesses.
As competitors that fail to adapt to the situation go under, supply of your products and services drops, and customers of those former competitors need to look elsewhere. This consolidating effect is ultimately where growth can come from, even as your industry overall might be shrinking. To seize that opportunity, your biggest challenge is just to ensure that your business is around when it comes.
Your long-term partnerships don’t just make your own life easier, they also help to stabilise your suppliers. This, in turn, gives you more reliable access to resources so that you can better accommodate growth. The community you build around your business is what stabilises your operations when times get tough, and also the foundation that allows you to accommodate growth and to place yourself into a more dominant position in your industry.