The business landscape has changed. As the recovery kicks in, many companies are ramping up sales and marketing and putting on staff so they won’t be caught short when the economy is thriving again. Expansion is back on the agenda.
Gregory Will, a partner in private clients at PricewaterhouseCoopers, says leaders need to change their downturn mindsets and embrace the recovery.
“If you don’t break out of the downturn mindset, other businesses will be taking market share from you,” Will says.
“The first way to break out of that mindset is to spend more on marketing and advertising to really focus on that top line growth”
Still, he concedes that not all businesses are in the same position.
“Some businesses are seeing clear signs that the upturn has come, some are still very much in that downturn mode and there are others somewhere in between,” he says.
“The upturn hasn’t come for everyone just yet, it’s horses for courses.”
So what should businesses do if the orders are starting to come back in and demand is picking up again?
Will identifies 10 challenges, priorities and changes in strategy.
Shift the leadership focus from cost to growth
“As we move into this upswing, businesses should look at sales and the top line and really move away from focusing on the cost side of the business and minimising their overheads,” Will says. “They need to look at marketing and sales activity”
Challenge the high performers
“The last technical recession we had was 1991-92 so most people aren’t aware of how to manage in a recovery. Leaders should be challenging their management teams to say what the company should be doing. They can use that as a succession tool. If they come up with the right strategies and ideas, they would probably be the best leaders”.
Look at revenue opportunities
“Look at existing gaps that you are not selling into, talk to your clients about how you can do better business with them.”
Tend to supply relationships
“One of the things that will come in the upturn is you might get a big order or a lot of orders very quickly. But companies have run down their costs and stock during the downturn so it might take weeks or even months to get that stock up-to-date. What you need to do is talk to suppliers and work out how you can quickly turn it around when the orders come in.”
Challenge the business model
“During an upswing, a lot of new businesses start and people come into the market with a niche product or service that is looking to fill a gap. What management should be doing is look at how those competitors can hurt the business or take market share and how they can change their business model to deal with it.”
Assess competitor activity
“Certain products can come into the market that would take market share from your product. What products should you be looking at to develop to take back your market share?”
Examine your valuation
“Valuations are still very low in terms of private business. In terms of merger and acquisition activity, the clock is ticking on how long people can wait before the models for valuation come back to the multiples we had prior to the downturn. If they are looking too do that, now is the time.”
Watch overseas markets carefully
“Australia is ahead of the curve globally so a lot of economies are looking at us and seeing how their businesses can take advantage of it. What that means is there might be more activity from an overseas competitor coming in and trying to gain some market share here.”
Look at other states for opportunities
“New South Wales and Victoria are still coming out of the downturn whereas Western Australia and Queensland are moving a lot quicker. Focus on those areas to get some market activity happening there.”
Set the upturn agenda
“Management teams should have a set agenda or form a committee that is really focused on how to do things coming into this upturn in order to shift the focus of the business and take market share very quickly”
However, this needs to be done with caution. Recovery does not mean another boom and there are two sides to the coin. There is still a credit squeeze and many companies are still struggling to raise capital. Despite such positive signs as falling unemployment, interest rates are set to rise.
The Westpac-Melbourne Institute index shows that activity has recovered at its fastest pace since the volatile period of the mid-1970s but at the same time, questions are being asked about the sustainability of the Chinese bubble and the potential impact of the Greek meltdown here. With the recovery, business is still in a protracted and risk-laden period as the world grapples with the legacies of the credit bubble and bust.
How should businesses prepare themselves for a recovery when the picture is so confused? What sort of strategies do they need to build market share and win new business? How do they get out of the downturn mindset and expand, but stay safe in uncertain times?
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