Last week, our blog was centered around how to approach business in a downturn economy. This week, we want to focus on how different approaches you take now could impact your business in the long-run. Specifically, we want to talk about why being forward-thinking is so beneficial when the economy seems to be going backward.
PLAYING DEFENSE MIGHT NOT BE THE ANSWER
As we are in the midst of an economic downturn, one might think this is the time to go on the defense and take actions that will prevent damage to your company. This might mean cutting spending wherever possible, letting employees go to save cash, or lowering operating costs. While this may seem like a good idea in the moment, it usually doesn’t work out well in the long run. In fact, according to Harvard, companies that took very defensive stances during a time of recession performed much worse in the three years after the recession ended, when compared to more progressive companies.
According to the yearlong study by Harvard:
- After a recession, companies that took hard preventative measures only grew by 6% in sales compared to 12% growth by more progressive companies.
- In the three years post-recession, companies grew by an average of $12 billion. However, of these, companies that were more focused on prevention only grew by an average of $5 billion.
So why doesn’t this tactic work well? In essence, it’s because companies are only planning for now, without thinking about the future. At some point, the recession is going to end and the economy is going to pick back up. If your company focused on cutting costs, recovery and scaling back up will be much harder when the economy turns around.
TAKE STEPS NOW TO HELP YOU LATER
During a recession, the prices of many things fall. And while you may think this would be a bad time to spend significant capital, it’s actually one of the smartest decisions you could make. Investing in certain assets now can glean both immediate and long-term benefits.
Property, plants, and equipment all see price drops when the markets are lower. Demand is definitely lower right now, yes, but what happens when the economy picks back up? If you fired staff, cut costs, and tried to save money wherever possible, it will be much harder to scale up production to meet the new demands of buyers. Now, imagine you purchased assets when they were at their lowest price. When demand increases, you will have the upper hand when it comes to meeting the needs of consumers. Not to mention, you will have saved money in the long-run by being smart about your purchases.
It’s clear that thinking about the future will be most beneficial in terms of the overall health of your business in the long run. Marketing Works remains fully prepared to be a trusted resource for you during this time by providing solutions for your business. Reach out directly to me at bill@marketingworks360.com to schedule a PULSE session, or to simply brainstorm ideas for your new initiatives.