How to Prepare for a Recession
In a recent economic confidence survey, 98% of CEOs said they are preparing for a recession in the next year.1 These five strategies will help to manage your business through economic uncertainty.
- Actively manage pricing
Companies that actively manage pricing are usually more profitable.2 But carefully consider impact to customers, costs, competitors, and cash (Oracle’s four “Cs”).3 The most common method is to implement a blanket rate increase for all goods and services. But this can be tricky. So, ask yourself if you can afford to gain income but lose market share in the long term. You should also consider short-term pricing strategies like product bundling and installment plans. You might also include pricing language to cover inflation-related remedies in contracts.
- Prioritize products and services
Evaluate profit margins on every product and service. You can then develop sales strategies that will move the most desirable products and services. For example, if customers are eager for quick delivery, suggest a product with a higher profit margin that’s ready to ship. Refine your customer and prospect lists to focus on those who are interested in the higher-margin goods.
- Investigate technology options
Technology is a critical enabler. Forecasting and scenario planning are vital as they provide valuable insights to inform decisions. Pricing, inventory, production, and operational analysis can also help develop and implement responses to marketplace changes.
- Increase efficiencies
Most businesses have become much more proficient at managing through crises in the last three years. Continue to look for opportunities to cut costs and be more efficient. In earlier inflationary periods, companies that made “judicious cost cuts" that didn't impact the company's profitability achieved higher shareholder returns. Eliminating redundant positions or processes, controlling payment timing, consolidating real estate, and cutting underperforming initiatives were among the most effective tactics. Improving supply chain resilience is also critical.
- Focus on growth
Eighty-three percent of business leaders say they will focus on growth in the next year.4 It may require casting a wider net. Could an acquisition expand your market footprint? Is your research and development team exploring alternative products and services? Discuss these options with trusted advisors and your executive team.
We’ve helped many businesses just like yours achieve their goals for growth. Contact a Synovus Commercial Banker for more details.
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This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- The Conference Board, “CEO Confidence Deteriorated Further Heading into Q4,” October 13, 2022 Back
- McKinsey & Company, “Pricing During Inflation: Active Management Can Preserve Sustainable Value,” August 19, 2022 Back
- Oracle NetSuite, “8 Strategies to Deal with Inflation in Business,” August 18, 2022 Back
- PwC, “Pulse Survey 2022: Managing Business Risks,” August 2022 Back