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For business leaders, this stage of the economic cycle always presents a unique challenge. Due to the uncertainty stemming from COVID-19, the stock market, and oil prices, it has become even more challenging. This cycle demands that CEOs prepare for prosperity at precisely the moment when business conditions feel weakest on the ground.
To manage this challenge, ITR Economics offers CEOs the following advice:
- Begin laying the groundwork. If you wait until the economy rebounds to develop and implement your strategy, you will be too late. Instead, start preparing prior to the low point of the business cycle.
- Get your timing right. Some companies lead the economy – that is, they feel changes in their business environments before those changes hit the overall economy – while others lag. As CEO, you want your business to be at a low point before investing for the next growth cycle, so you can capitalize on any excess capacity.
- Make talent a priority. In many downcycles, reducing staff is normal and a good plan. However, the labor market is tight right now. Rather than reducing your staff, invest in employee retention and training so you’re set up for success when the economy improves.
- Invest in technology. Utilize cheap money with the longer term in mind. To improve your firm’s productivity, consider making investments in automation or robotics now so you can outperform your competitors later.
- Focus on profitability. Remember why you’re in business. It is not to grow top-line sales; it is to make profits. As the economy improves, expect labor and input costs to rise. Attention to profitability now will pay dividends later this year and beyond.
Maintaining fiscal discipline and liquidity is critical in the short term as you take the necessary steps to prepare for future growth. By monitoring your rates-of-change, which you can learn more about here, you will know exactly when to take action to capitalize on the next growth cycle.