Defining a Stagnant Business
Is your business stagnating? It’s not growing fast enough or revenue is declining? You’re concerned. You know that every company needs to evolve to survive. Your concern is that stagnation can lead to the slippery slope of decline. You need to take action when you recognize that your business is stagnant.
Stagnation vs. Recession
I don’t know if we’re in a recession at the moment or not. However, we are in a time of decline in terms of overall economic performance – we’re not growing as fast as we’d like to. When the Fed raises interest rates, it is telling consumers and businesses that it’s going to be more expensive to invest and spend. That means that your customers will be spending less than they would be without interest rate increases.
Your business may stagnate due to this reduction in spending. That’s only natural. But you also need to understand how much of the macroeconomic situation is causing stagnation and how much is due to weaknesses in your business. By addressing what you can change, you can adjust your strategy to grow again, even if the growth doesn’t happen immediately.
Hundreds of thousands of companies across the globe recognize they need to do things differently. What about you?
Here are ten steps that can help.
1. Manage Your Cash Flow:
The number one reason companies go out of business is they run out of cash. Determine where you can extend payments. Look for ways to collect cash sooner. In B2B, offer “2/10 net 30” and give a ten percent discount for clients paying within 10 days.
In addition, ensure you know exactly when you’ll run out of cash if things remain the way they are now. For example, if your expenses are higher than your sales and neither of those changes, you can project the exact date you’ll run out of cash. Always know that date. The sooner you anticipate running out of cash, the more urgent it is to change.
2. Reduce Your Burn:
When business is slow, it’s important to reduce your burn rate — the amount of cash you’re spending each month. Look for ways to cut costs, such as renegotiating leases or contracts, and consider temporarily reducing salaries or hours worked.
You may have to lay people off. If you do, do it kindly and quickly. While layoffs are always difficult, don’t worry too much about the affected employees. We are still living in a high employment world. There’s a very good chance they’ll find other employment quickly.
3. Tighten Your Strategic Focus:
When business is slow, it’s a good time to take a step back and reassess your business strategy. See if there are any areas where you can tighten your focus and become more efficient.
For example, if you have been experimenting with new offerings or new markets to pursue, now is probably not the time to extend those experiments. Invest more in the areas that will provide you with a return quickly. Ask yourself where you are most confident in investing to turn your business around.
4. Watch Your Competitors Closely:
It’s important to keep an eye on your competition, especially when business is slow. See what they’re doing and try to learn from their successes—and their failures.
In addition, see what kind of opportunities may open up for you. For example, if a key competitor reduces its marketing spend, that opens up an opportunity for you to fill that void.
5. Determine Who Your Best Customers Are and Why:
When business is slow, it’s a good time to take a close look at your customer base. Determine who your best customers are (e.g. most revenue, easiest to work with, highest profitability, etc.) and what they value most about your product or service. As you begin to understand what they value – at a deeper level – this will inform your positioning and even your product roadmap.
6. Figure Out How to Get Customers to Love You:
Once you know who your best customers are, it’s time to focus on making them fall in love with your business. Find ways to give them an exceptional experience—one that keeps them coming back for more.
You may have some loyal customers, and that’s great. However, there’s a higher level to achieve with your customers, and that’s to turn them into advocates. Customer advocates will not just stick with you, but they’ll willingly promote you as well. Create more customer advocates, and they will help you grow your business.
7. Develop Two Plans, One For a Good Outcome and One For a Poor Outcome:
It’s essential to have a plan B when business is slow. Develop two specific plans — one for a good scenario and one for a poor scenario. While it’s tempting to have only one plan that assumes success, be realistic about the fact that you can’t control outside forces that can negatively affect your business. Be prepared.
8. Align Costs with Your More Pessimistic Plan:
Once you have your two plans, it’s important to align your costs with the more pessimistic of the two. That way, you’ll be able to weather any storms that come your way.
In your more pessimistic plan, you’ll lower your spend. If it turns out that your profitability is increasing more quickly than what you expected in the more pessimistic plan, you can always increase your investments. It’s much harder to do this the other way around.
9. Align Your Team Behind the New Plan:
It’s important to get buy-in from your team on the new plan when business is slow. Make sure your employees understand the new plan and are on board with it.
Work with your team to have them understand their role in the new plan, and gain their commitment. People may take time to adjust. Communicate frequently to speed up the changes required by the new plan.
Now that the plan is in place, it’s time to move from strategy and planning to execution. People will take some time to adjust – they always do. Your job as the CEO is to accelerate the change and ensure everyone is focused on just doing their job.
By following these ten steps, you can help ensure that your business doesn’t stagnate—even in tough economic times. So, get started today and put yourself on the path to growth.
Contact an Experienced CEO Coach
My name is Glenn Gow, CEO Coach. I love coaching CEOs and want to help make you an even better CEO. Let’s decide if we are a fit for each other. Schedule a time to talk with me at calendly.com/glenngow. I look forward to speaking with you soon.