How to Grow Your Business in a Slow Economy
The US and global economies will slow considerably this year, with the IMF expecting US growth to drop from 5.7% in 2021 to 2.9% in 2022. The outlook for 2023 and 2024 is even bleaker, with respective predictions of 1.7% and 0.8%. As the US economy enters a new era of slowed economic growth, CEOs face greater challenges with growing their companies.
All CEOs should be asking this question NOW: How do I vigorously grow my company amidst a somber economic environment?
Here's my roadmap of six disciplines for visionary CEOs.
1. Keep Your Team Engaged and Optimistic
In a slower economy with high inflation, pessimism can easily affect employee sentiment. Employee perceptions may shift when every dollar counts, and purse strings are tight. If morale is down, leadership teams need to get ahead of watercooler talk about perceived deteriorating conditions or poor corporate performance, which could negatively impact company culture.
During times of uncertainty, good leaders articulate how invaluable employees are to organizational success and highlight how individual contributions improve more than business; they also improve the clients' lives and communities served. Focusing on purpose and vision empowers key executives to lead their teams with courage, resulting in a trickledown effect rippling throughout the organization.
In leadership, actions speak louder than words. Earlier this year, a Leading Peers member who owns a tech business with a footprint in the Americas opened a company branch in Dubai. With this move, he told his team that their growth prospects and opportunities were vast and unique, creating a sense of excitement around the company's vision to be a global player.
Another avenue to keep your team engaged and optimistic is recruiting people with a positive outlook who are incredibly motivated by the company's vision. As counterintuitive as it may seem to hire during periods of slower growth, onboarding new people with fresh ideas, excitement and passion can ignite optimism across the organization.
2. Invest in Marketing
A significant slowdown calls for a fresh marketing approach. As customers feel the economic pinch, a creative marketing campaign could spin the situation with a message to customers and prospects that your company is ready to weather the storm and come out better on the other side — and that you’re taking this journey together.
I’ve said this before, and I’ll emphasize it again. The all-in mentality goes a long way toward generating growth opportunities and sets your company apart as an innovator ready to buck the trend.
During the second quarter of this year, a Leading Peers member who owns a private lending business decided to create a website for his company — a move he had previously considered unnecessary given his company's success with cold-calling prospects. His decision to create a simple yet professional website conveyed that his firm is open to trying new ideas, which resulted in growing its reach and gaining prestige among prospects. The financial investment was minuscule compared to the company’s message sent to its market. Creative marketing can use a minimal budget to generate a phenomenal ROI.
Another example of creative, low-cost marketing comes from a Leading Peers member who owns a business brokerage firm that buys and sells companies. He recently hired a firm in East Asia to create an email list of prospects. This small investment has already produced a 10,000X return on their investment in less than three months, landing them their most important deal ever. Sometimes the best marketing ideas are incredibly affordable. The key is to explore options, measure results, and think about your customers' evolving needs and perceptions.
3. Take Care of Your Customers
Taking good care of your customers is a prerequisite for sustained growth in any business. For one, receiving more business from an existing customer is always easier than acquiring a new client. In an international corporate events company that I founded in 2003 and led until 2020, my team focused on delivering excellent service always (ESA), honoring the acronym in our name. As a result, the 10 largest event management companies in the world became our clients, and over half of them offered Preferred Supplier Agreements making it increasingly easy for us to win new projects. These companies' leadership and purchasing teams took care of marketing our company to their employees, significantly reducing our cost of winning new projects.
Also, a referral from an existing customer is the most effective way to reduce the client acquisition cost and increase the customer's lifetime value. A Leading Peers member that owns a CPA firm acquired two new high-potential clients within the first three months of joining Leading Peers by simply having a solid endorsement from a fellow member.
4. Diversify Your Client Base
In businesses that depend highly on one customer, be cautious of focusing too many resources on that client who may falter and put your business at risk.
A Leading Peers member that heads a marketing firm delegated the servicing of a customer that accounted for over 60% of company revenues to focus on launching a lead-generation campaign. As a result, the business is pivoting in a direction that diversifies its risk, attracting new clients who need its most scalable service.
5. Monitor Cash Flow
Growing the top line is never as important as improving the bottom line, which is never as important as managing your cash flow. CEOs that disregard cash flow projections, blindly trusting that the money will be there if the profit projections are solid, are likely to face catastrophe. A lack of cash often leads to the immediate extinction of the company.
Inexperienced CEOs underestimate the importance of making cash-flow projections for the coming days, weeks, and months. When the business runs out of cash, they learn a painful lesson.
6. Maintain a Strategic Focus
The brightest ideas seldom come from exhausted minds. Busyness is the most common addiction of business leaders. Staying busy with work all the time is much like other common addictions, numbing the pain of facing the challenges that are an inevitable part of life. Maintaining a strategic focus is my sixth, and final discipline CEOs can adopt to grow their companies vigorously during a slowing economy.
Therefore, a peer advisory board is crucial for every CEO. Whereas a small Board of Directors is prone to groupthink, a CEO peer advisory board with members from different industries will always bring fresh ideas, perspectives, and approaches to your challenges. Moreover, while any CEO can hire advisors, an arrangement based solely on financial compensation makes it less likely that they'll challenge you with honest input or provide the emotional support you need to overcome obstacles and roadblocks.
You and your company can thrive during economic slowdowns by adopting six disciplines:
Keep Your Team Engaged and Optimistic
Invest in Marketing
Take Care of Your Customers
Diversify Your Client Base
Monitor Cash Flow
Maintain a Strategic Focus