ITR Economics expects macroeconomic business-cycle decline in the US in 2019. That means a period of slowing economic growth is ahead, with many market sectors likely to present fewer opportunities for expansion. There will also likely be industries that contract over the next 12 to 18 months.
What should business leaders and decision-makers do to prepare their companies? ITR speakers and economists are passing on several Management Objectives™, or pieces of actionable advice, to our clients right now.
First, we’re telling leaders to focus on those segments of their businesses that are most profitable in Phase C, Slowing Growth, of the business cycle. Analyze your company’s past performance to identify the areas of your product portfolio that have outperformed in similar economic conditions. Then, develop a cohesive strategy that involves shifting costs, adapting to customer demand patterns, and leveraging targeted marketing and selling techniques to trumpet your Phase C competitive advantages.
Second, ask yourself, "What shouldn’t I be doing?" After you consider this question, your actions will involve strategic resource management, including allocating scarce resources to more profitable parts of your company. Have a plan for technology implementation but play to the trough and do not fall victim to straight-line thinking and spending. Be judicious with your capital; conduct a cash-flow assessment plan for proper allocation during the upcoming period of slowing business expansion and weaker topline growth. Continue to focus on talent development but include some redundancy and cross-training initiatives to protect your company in the event that the slowdown becomes a full-blown recession.
Finally, look for ways to go countercyclical. You can accomplish this with regard to markets you serve directly, or you can evaluate the markets into which your clients sell. The ITR Trends Report™, our cornerstone monthly publication, presents three-year forecasts for dozens of industries, including specific verticals in the manufacturing, construction, and financial sectors of the economy. Industries expected to perform better in 2019 than they did this year include nonresidential construction markets such as the educational, multi-retail and manufacturing segments. In the equipment space, the aircraft and medical device markets should do well.
Whichever of these strategies you choose to implement, it’s important to start planning for the slowdown now. Do not allow yourself to be blindsided in 2019 just because your business has done well this year. As Benjamin Franklin is believed to have said, “By failing to prepare, you are preparing to fail.” ITR Economics wants to help you prepare to succeed.
Senior Consulting Advisor