1. Know how your business will be impacted
In 2021, industrial sectors experienced Accelerating Growth, creating crunches on capacity, exacerbating concerns surrounding the labor market, prompting a willingness to purchase raw materials at higher costs than perhaps would have otherwise been desired.
Folks, we are moving into a period of slowing growth. It is still growth, but not at the pace that you’ve come to know and most likely expect.
- Have you set robust quotas for your sales team?
- Have you considered what your cash flow and bank covenants will look like if growth slows to less than half of what you experienced in 2021?
- Now is the time to make plans to widen your customer base by slowly taking clients off allocation or by letting them order from you once again. This must be done early if you wish to get ahead of competitors who will be chasing the same customers.
You may want to take a moment to look at your industry’s Business Cycle Phase™ before putting “pen to paper” on those decisions.
“You must first fully understand your business’s relationship with your industry. Knowing how many months of Slowing Growth your industry will be in before you start to see slowing demand for your business is, of course, a must. Time after time, we see businesses overextend themselves because they’ve made what turned out to be a painful misallocation of resources at the peak of the Business Cycle. Not knowing that a shift in the cycle is approaching leaves you vulnerable to unnecessarily spending cash when perhaps you should have been conserving it,” says Kimberly Clark, Vice President of Sales and Marketing at ITR Economics.
So, how do you know when 2022 and 2023’s changed economic climate will impact your business specifically?
ITR Economics strongly encourages their clients to be calculating and tracking their Rates-of-Change and to be using Leading Indicator inputs in their business strategy.
<<Get the ITR Trends Report to keep up-to-date on economic trends >>
2. Shift your thinking
After watching your business post stronger sales performance than perhaps was expected over the course of this past year, you may be tempted into thinking linearly and projecting an equivalent performance for 2022. We at ITR Economics caution against this. Here are some other strategies to consider:
- Plan for rise in the overall US industrial sector, but at a slower rate.
- Use this time to focus on longer-term plans.
- Creative automation is increasingly vital to your success.
3. Key strategies to discuss internally
- Focus on your most profitable products.
With demand slowing, focusing your sales team’s efforts on selling your most profitable products will provide support to your bottom line while top line sales targets are potentially more difficult to reach.
- Focus your sales conversations around why potential customers should buy from you rather than a competitor.
The conversation is no longer “Yes, we have capacity to take on your order.” Now, it is “Here is why you should buy from me versus my competitor.” Touting your “uniques” rather than operating on a transactional basis will help your sales team close more deals during Phase C, Slowing Growth. Your team must become more relationship focused.
- Focus on conserving cash.
Most businesses are flush with cash, and today’s interest rates are extremely low. Be sure to borrow as much money as you can to finance expansions, acquisitions, upgrades, and new products. Conserve your cash for when interest rates move uncomfortably higher. Let your competitors spend their cash now and then be unable to afford the higher cost of borrowing.
A recipe for success
- Know if your markets are headed for a recession or just a period of slowing growth.
- Know when this change in economic climate will impact your business.
- Know what standard business strategies will provide the best ROI during this specific quadrant of the Business Cycle.
To help get you started, The Great Game of Business has partnered with ITR Economics to give you foresight into coming trends in US industrial activity through 2023.
Here is a forecast article by ITR Economics to give you a head start into your strategy development. We encourage everyone to read the article and incorporate this thinking into your 2022 and 2023 strategy planning.
“There is no bad phase of the business cycle,” says Kimberly Clark. “You simply need to know what is coming so you can position the business appropriately and maximize your profitability in any phase. That’s what we do. We help businesses create a roadmap of coming turns so their executive leadership team can build and execute the right strategy at the right time.”