Beating the Recession – Strategies to Grow Your Company in an Economic Downturn

April 15, 2009 by  Filed under: Management 

Most companies envision recession as a time to tighten belts and safeguard reserves. Any plans for acquisitions and mergers are often placed on hold until the economic turmoil blows over. But what many companies don’t know is a recession yields tremendous opportunities. Because while other companies are holding onto their cash tightly and shrinking their workforce, many opportunities are overlooked that can provide a huge competitive advantage.

Companies that learn how to take advantage of special opportunities that are unique to a recession will pull ahead of the competition. Because while the competition is struggling, successful companies are implementing growth strategies that will ramp up stock prices and grow revenue.

Ignoring Conventional Wisdom

When creating strategies in times of recession, conventional wisdom should be thrown out the window. Instead of locking up your assets and stopping growth activities, you need to create new strategies that foster growth. Because finding the right opportunities during economic downturn can propel your company ahead of the market leader.

Reinventing Management Strategies

Some senior managers get stuck in the traditional way of accomplishing business. But management has to accept innovative growth strategies for a company to succeed. Everyone needs to understand that while a growth strategy during a recession isn’t traditional, there are huge gains to be made during this time. Having buy in from all senior managers will promote success.

Keep All Options on the Table

Most companies clam up during hard times – tabling plans for acquisitions and mergers. Historically, successful companies have done the complete opposite. They seek opportunities to grow through acquisitions and mergers. And because other companies aren’t participating in these types of activities, there are special opportunities available.

Conservative Companies May Fall Behind

Getting ahead in tough economic times means not being conservative. Instead of hunkering down to weather the recession, look for opportunities to grow and acquire. In previous recessions those who were conservative didn’t come out ahead. Successful companies become market leaders by focusing on growth and taking over market share.

Loosening Up on Cash Reserves

It’s natural for companies to hold onto cash during a recession. But this strategy won’t get you anywhere with growing your business. Loosening up on your cash reserves will allow your company to participate in growth activities such as strategic acquisitions and mergers. The companies that thrived in previous recessions allowed their reserves to dip 41% lower than other companies.

Focus on Smaller Deals

Acquisitions and mergers are important to a company’s growth. These activities are advantageous because it’s much more expensive to grow a company organically then to acquire an established business. But during a recession, it’s important to focus on a large amount of small deals. Companies that implemented this strategy during previous recessions experienced the most impressive results.

Don’t Slash Your Operating Expenses

Many business owners are focused on cutting operating expenses during tough economic times. But companies that don’t cut these expenses do better then the competition. Because cutting operating expenses doesn’t support growth activity – it can actually limit your company’s ability to grow. Instead, focus on strategies that promote growth while maintaining the current level of spending.

Ramp Up Research and Development

Research and development is an area that often gets cut. But this area is essential in providing opportunities for growth. Ramping up research and development will enable a company to grow instead of lagging behind the competition. Because companies that came out ahead in previous recessions more then doubled R%26D expenditures compared to the competition.

Increase Advertising Expenditures

A company needs advertising to grow and expand. Yet some companies believe that trimming expenses in the advertising cost center will help them stay afloat. However, successful companies take the opposite approach to advertising. Industry leaders actually spend more money during a recession. Advertising is an important component to growing business. So don’t be afraid to ramp up your advertising budget.

Don’t Avoid Risk

Some business owners are steering clear of potential risks, afraid it will put their company in danger. But not taking risks during a recession may cause your company to fall behind. Because with the untapped growth opportunities available during this economic downturn, those who fall behind may not have an opportunity to recover. And for those willing to take risks, the payoffs are huge with the potential to take over market share and become an industry leader.

If your company is willing to change its approach to handling a recession, the rewards can be well worth the effort. Creating a strong growth strategy can change your businesses’ course in a very positive direction. Because historically market leaders have emerged during these tough economic times.

Resource:

Richard F. Dobbs, Tomas Karakolev, and Francis Malige. “Learning to Love Recessions.” The McKinsey Quarterly 2002.

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