If there’s one thing experts agree on right now, it’s that COVID-19 is going to create a recession. There’s more disagreement about what that recession looks like. Some are predicting a strong turnaround once lockdowns begin to lift, while others suggest the road forward will be quite rocky.
It’s been over a decade since the Great Recession, and many economists have been calling for a downturn for the last few years. Despite that, growth seemed poised to remain strong until the pandemic broke out.
The future may be impossible to fully predict, but it can help to turn to the past for advice. The Great Recession means many business leaders have recent experience navigating a historic downturn. Here’s what leaders said saved their businesses—and what they’d do differently the next time around.
The most common strategy for surviving a downturn is cost-cutting mechanisms. The majority of businesses leaders identified a need to bring costs in line with revenue during the last downturn.
Many businesses expect to have nearly zero revenue during lockdown, so making costs and revenue align may seem difficult. The goal is to reduce the discrepancy. Scale back revenue projections where possible, and make changes to keep some revenue coming in where possible. Take advantage of any business financing and incentives that could help your business stay afloat.
Cutting costs will allow the business to keep operating instead of folding. It also seeks to keep operations going without overburdening the business with debt obligations so that there’s no room to maneuver.
Travel, adjusting cost structures, cutting unprofitable or marginal parts of the business are all good targets for cuts.
You should also act swiftly. Many business leaders lamented not acting sooner during the Great Recession, which cost them. Since the length and depth of this recession is uncertain, the best plan is to slash costs quickly. That way, when the market bounces back, your business will be ready.
Many businesses have had to furlough employees. Some have had to let employees go permanently, because they know they’ll be operating in a reduced capacity or are in danger of shuttering their doors forever.
The strategy here is obvious. Reducing headcount and reducing salary obligations frees up capital. If the business isn’t operating at full capacity, then it makes sense to scale back the workforce to match.
Consolidating some jobs and marginal offices could minimize impact on operations. During the Great Recession, several companies reduced executive compensation as well, which frees up funds.
Business leaders reiterated the need to act fast here as well. Keeping people on when they’re no longer needed is a high cost for the business.
At the same time, some leaders also suggested they shifted their focus to their employees during the Great Recession. These people were already trained and the businesses wanted them on board when the market bounced back. Some even felt cutting staff contributed to the depth of the Great Recession.
Given that, it makes sense to pare back where possible, but keep top performers, well-trained and talented staff, and those who are necessary to operations so you’ll be prepared to leap back into action.
If you do have to let people go, try to maintain relationships with employees you’d like to see return to the team. Furloughs may be a better option than simply letting a top performer go. If possible, try to help people you must let go access assistance programs or point them to a sector that is hiring.
COVID-19 has upended the business world, and it’s unlikely things are going to truly go back to “normal” for some time. Change is the new norm.
That’s not necessarily bad news. Businesses that embraced change during the Great Recession were more likely to successfully weather it.
To embrace change, flexibility and diversity are key. Diversity can refer to your team, but also to your operations. Flexibility means the ability to shift the business focus from one area of the business to another rapidly.
COVID-19 has shone a spotlight on how effective this strategy is. Take a look at sports equipment companies switching to making PPE, distilleries making hand sanitizer, or even small shops shifting online.
The business world is likely to remain unsettled for some time after this, especially until an effective vaccine hits the market, so flexibility and change are likely to remain keywords.
It’s worth noting that a narrow focus also has benefits here. Businesses that are too large may be pulled in all directions, unable to focus on one thing. By contrast, narrowly focused businesses can better weather a recession because they concentrate their efforts on doing one or two things, and doing them well.
Perhaps contrary to the usual wisdom, some business leaders suggested putting more effort into sales and marketing helped them during the Great Recession. Businesses often scale back on sales and marketing during a recession in an effort to conserve costs.
Instead, some leaders focused on reaching out more and discovering new audiences and potential customers. Reach out to existing customers to let them know of changes to the business and how you can support them.
COVID-19 supports this alternative strategy, especially as businesses look to lockdowns easing in the coming months. If you want to “restart” your business, you’ll need to put the effort into sales and marketing to let your customers know you’re still operating. Marketing can help you get the word out now, support existing customers, and even find new audiences. Experienced sales staff will help your team weather a busy fall season as lockdowns lift.
The past always holds lessons about what to do and what not to do in certain situations. Looking back to the wisdom gained from the Great Recession can help you avoid missteps and create a better strategy for weathering the post-COVID recession ahead, no matter how long or deep it happens to be.
With a better plan in hand, you’ll be ready to adapt, adjust, and evolve your business.