Strategies to survive the next recession
If firms employ these operational and financial strategies, their chances of weathering a downturn, regardless of how bad it is, will increase.
Another recession is coming. It is inevitable. Based on past history, it should be next year. But these things are hard to predict, so all I will commit to at this point is that another dip is coming. And we don’t know how bad it will be.
What I do know for sure is that a lot of our clients are not thinking about it too much right now. The A/E industry is doing very well. Our clients are growing and hiring and profitability is up for the first time. But it feels like a bubble to me and that is why I am worried that our clients are not doing everything possible to prepare for the eventual downturn.
So what can you do to prepare for the next recession? I believe there are at least 10 strategies – five listed here – that you can focus on that will make your company financially and operationally stronger, and enable you to survive possible tough economic times ahead – regardless of whether that is next year or five years from now. Enabling a number of these business management improvements will also help your firm to grow and thrive even if there is not another downturn (but there will be):
- Get a steady flow of work in the door. I know this is obvious but it is crucial in good times and bad. And I’m sure you are already working very hard to make this happen. But sometimes when times are good and we have too much work, we lose focus on expanding our client list, diversifying our services and broadening our client base. Improving our seller-doer results through sales training and processes is a great way to improve competitive results.
- Retain your best people. Retaining your best staff is critical to firm success, yet I don’t think that the industry overall is very innovative in rewarding, developing, and recognizing our top performers. A few trends I’m seeing in this area are broadening the net of ownership in the firm, investing in developing future leaders, and improving the performance management process and approach. A more professional approach to employee success will help to keep employees satisfied and committed.
- Differentiate your firm. Breaking the commoditization trap is something that many A/E firms are struggling with right now. Even though work is plentiful, pricing your services based on the value you offer clients is still a new concept for the industry. By exploring where you firm is better, and saves your clients’ money, you can start to put together messaging that is different than your typical competitor.
- Explore different strategies. Many firms meet on an annual basis to discuss strategy but either don’t explore new options, or fail to implement the ideas from these retreats. Deciding to pursue a new strategy – whether it is a new line of business, client industry, different services or geography, requires sticking with a plan and refusing to pursue work that is not in line with the new strategy. Make sure your go/no-go process is in line with your strategy and communicated to your entire team.
- Improve automation. In the event of another recession, being efficient and automated will give you a competitive advantage and allow you to be leaner. Technology is cheaper than human capital, and optimizing the use of the systems you have already invested in is a great start. Those firms that use their systems, and especially those systems that improve project management, already have a competitive advantage.
By increasing the operational and financial performance of your firm, you can make your firm more valuable, efficient, and better prepared for any economic climate. Whether the next recession is big or small, long or short, having a lean and operationally optimized business will go a long way toward long-term survival and growth.
June Jewell is president of AEC Business Solutions. Connect with her on LinkedIn and learn more about how to improve your firm’s financial performance at aecbusiness.com.