At ITR Economics, our unique four-phase business cycle is a reference that helps your company make the right decisions at the right time. This business cycle is the basis of our Trends Report™, and its phases are fundamental to providing you with appropriate and actionable Management Objectives™. Knowing what each phase of the business cycle entails is key, but there is more to it than that. How exactly should your business approach those Management Objectives as you enter new phases? Do you know the actions best suited for each phase?
The following information about Phase C, Slowing Growth, and Phase D, Recession, can assist businesses in navigating a downturn.
Phase C – Slowing Growth
Often, businesses are not aware they have moved into Phase C, Slowing Growth, until they have been there for a while. There may be chatter – "It feels like the business is slowing down,” or something to that effect – but firms will often lack the solid data to substantiate such chatter. A business that has been keeping track of its 12/12 rate-of-change, however, will know that it has hit its cyclical peak and should consider pulling certain levers: revisiting capital expenditure plans (cash is king right now!); dropping products that are not profitable; focusing efforts on products with higher profit margins; and evaluating vendors and pricing packages that could help reduce costs.
As your business is running above year-ago levels – i.e., still growing – such actions may seem counterintuitive. The above tactics, however, can help you finish this phase of slowing growth more profitably than if you had just “let it ride."
Phase D – Recession
No business owner likes being in Phase D, Recession. The word alone causes shudders! However, there are no "bad" business-cycle phases as far as ITR Economics is concerned. Each offers its own opportunities for better positioning a business. We challenge you to lead with optimism, rather than negativity or nervousness, during the down cycle. Here are a few reasons why:
1. This is the perfect time to generate ideas for new products to release down the road. When your business is growing – perhaps quickly – there are often too many projects going on for you to sit back and take a holistic look at the company. Phase D gives you this time back!
2. It also creates time for your company leaders to evaluate your departments individually and identify efficiency gains to be made.
3. Your team can spend more time crafting advertising campaigns and growing in creativity. Then, when you hit your cyclical low and transition to Phase A, Recovery, you will have your plans in place and ready for launch.
While these ideas can help you lead with optimism, we have also provided a more comprehensive list of maneuvers that can be useful during the recessionary phase. Having this arsenal at your disposal should help you remain confident and project the positivity your management team will appreciate during what for many is a nerve-wracking time.
Fully understanding the phases of the business cycle can help you apply analysis and Management Objectives to your business in an optimal way.
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