Sales Handbook in Recession

Even the most experienced sales experts are feeling anxious. Whether we are in a recession or it’s merely a future possibility, fundamental economic knowledge tells us that economies go through cycles of prosperity and downturn, and this is inevitable. 

So, the question should not be whether to do something about it or not, but rather what you should do to prepare your business for an uncertain economic environment ahead. These recession periods also present rare opportunities for well-prepared companies to thrive amidst the chaos and gain market share. Companies actively seizing opportunities during a recession are more likely to reap significant profits in the pre and post-recession years.

In this article, we explore the challenges related to selling in a sluggish economic context, the mistakes to avoid, and effective strategies to help your business survive and prosper in the future.

Challenges

Unfortunately, economic recessions often come with a set of challenges that your business needs to prepare and overcome. The impact on businesses may vary depending on the industry, scale, or even location, but all companies should anticipate new challenges when selling in a sluggish economic context. Companies that can foresee these challenges and plan early to address them are more likely to navigate through difficult times. Here are some of the most common challenges that businesses of all sizes may face during a recession:

• Declining Sales: As economic growth slows down, consumers and businesses become more cautious about spending or investing in products or services. Your business may struggle to generate normal sales volume, so you’ll need to make adjustments accordingly.
• Prolonged Sales Cycles: Depending on the industry, you may still have interest from potential customers, but as buyers become more cautious, each sales transaction may take longer to complete. Decisions that previously took weeks could easily turn into months and involve more stakeholders in the tightened economy.
• Customer Attrition: Your customers may also be under strain. Whether your business model is B2B or B2C, customers might stop using your products to cut costs or because they no longer have the ability to use the products or services you provide.
• Disrupted Supply Chains: Economic recessions also often pose challenges for industries with strict supply chain requirements. Minor changes in credit rates or inflation may not be significant for regular consumers, but they can be damaging to industries dependent on commodities and sensitive to prices.
• Reduced Internal Budgets: A common reality in recession periods is spending less and potentially cutting costs. Whether it proves true or not (we’ll discuss it later), the expectation of achieving more with less is a common reality for many leaders in a tightened economic context.
• Uncertainty: All these fluctuations in buyer demand, supply of goods, credit, etc., make predicting the future extremely difficult. Many leaders simply don’t know how things will play out or when things will improve, making planning and adapting for the future an incredibly challenging task.

Pitfalls

Whether you have experienced a previous economic recession in a leadership role or the next economic crisis will be your first, always remember the lessons from the past. Avoiding these critical mistakes can make a difference in facing immediate challenges and preparing for future ones.

• Don’t panic!

It’s natural to worry about how a recession will affect your business, but impulsive reactions without careful consideration may lead to long-term negative outcomes. Take a deep breath and maintain composure. Utilize your resources to gain a bigger picture and make informed decisions. Rely on your team and trusted advisors to find the best path forward.

• Avoid delaying hiring

One common way companies cope with a recession is by cutting management costs through delaying hiring or leaving key positions unfilled. This may seem better for short-term financials, but work still needs to be done. Staff shortages start impacting the productivity of other team members, and tasks not completed on time will cause bottlenecks, negatively affecting other aspects of the business.

• Avoid cutting business budgets

One of a company’s most significant investments is in its sales team. Sales and marketing are the lifeblood of an organization, especially in an uncertain economic environment. Ironically, the budgets for these teams are often among the first to be cut when things get tense. However, research shows that companies maintaining business budgets during a recession tend to recover faster and, in many cases, grow stronger than before.

• Don’t apply deep discounts

As new sales opportunities become harder to come by, you may feel the need to offer more discounts to ensure product sales. Discounting is a common tactic, but it’s a double-edged sword that can erode profits and require more effort for less return. Understand your limits and provide clear guidelines to your team.

• Avoid: pursuing potential customer

In a challenging economy, you may tend to invest effort and time in less promising deals that you wouldn’t focus under normal circumstances. However, in the end, these customers still may not make a purchase, and they will consume a lot of your business resources (time, manpower). Make sure you have a clear Ideal Customer Profile (ICP), appropriate sales processes, and always stick to targeting this specific customer group.

Experiential Lessons

Preparing for an economic recession demands discipline and rigor. A solid preparation allows sales leaders to confidently move forward and be ready for anything. Below is a brief list of proven and effective methods that past leaders have used successfully to prepare for and cope with a volatile economy.

Do: Seek advice

There are many smart people in your industry, so you don’t need to go it alone. Below are some proven strategies to help you stay updated on trends and events as they unfold.

• Reliable sources: Seek and learn from thought leaders, publications, information from associations, and keep up with trend reports in your industry.
• Build an advisory team: Assemble a team focused on trends they see within the market segment your business operates in and across the economy. Conduct regular meetings with the group to share feedback, develop insights, and collaborate on solutions.
• Monitor competitors and customers: Set up Google Alerts to track your top competitors and customers to be alerted early on any potential issues that could impact your business.
• Engage in specific customer conversations and ask them what they are experiencing – are they changing their projections, spending habits, narrowing scopes, etc.

Do: Focus on finances

One of the most frequently mentioned (and surprising) benefits of a recession is that it forces companies to tighten their financial belts. While we don’t recommend knee-jerk reactions to financial issues, there are steps that need to be taken to ensure your business remains healthy during a downturn.

• Cash flow focus: The difference between companies that survive after a recession and those that don’t? It’s all about cash flow. So, the first thing is to monitor your cash flow and ensure you have enough to cover expenses. Cash flow is king during uncertain times, so strengthen receivables and potential sales early on.
• Identify “uglies”: Find out about potential issues that could impact your business before they become severe. Start with forecasting your cash flow: your sources and uses of cash (for the next 13 weeks!). Stress test your cash flow forecast to see how your business will operate during a recession.
• “Trim the fat (maintain muscle)”: Earlier in this article, we talked about not delaying essential hiring or cutting business budgets. This doesn’t mean you shouldn’t adjust your finances, but rather focus on enhancing cost efficiency and cutting in non-essential areas of the business. Delay hiring for non-critical positions, hold off on peripheral projects, or invest less in expensive initiatives, and eliminate waste in less optimized or underperforming areas.
• Adjust expectations: Now that you have a better grasp of your financial situation, the last step is to reset short-term and medium-term goals. Pre-recession goals may have taken weeks to prepare for implementation, but they might no longer be relevant. It is important to give your business a realistic and achievable goal to empower your team and focus on success.

Do: Enhance sales effectiveness

One of the quickest ways to navigate a volatile environment is to use tools and processes to maximize your existing team. The first step is to understand your problem and improvement opportunities so that you ensure you can see and measure your team’s performance. Once you have a grasp on this, you can start finding ways to make your team more effective.

Do: Invest in sales training

Training your team to win in any situation is the key. Give them the skills and techniques to focus on what they can control, so fear of the unknown does not become a mental or performance block. Train them to address financial concerns with often-difficult customers by positioning your products or services as a valuable solution during economic downturns.

Do: Embrace digital transformation

You may or may not be surprised to hear this, but economic recessions actually encourage all industries to embrace digital transformation. When your business is healthy, your focus is typically on just keeping everything running smoothly, but that mindset goes away when your business faces challenges. If you’ve made some changes to your business, you might also consider adopting new technologies. If you’re looking for some new tech solutions on the market, make sure your investment is worth it. Focus on these questions to ensure your transition process is effective:

Do: Talent Recruitment

Mass layoffs have affected some companies in the technology industry. In general, unemployment is not a positive thing, but it also has certain advantages, such as making it easier to recruit new sales staff for your organization. Even during a recession, people still need jobs, and businesses still need performance to sustain their operations. Furthermore, this also brings additional benefits to the economy.

Do: Prioritize Customer-Centric Approach

It is essential to remember that your customers also feel the pain when facing financial difficulties. They want to be reassured that you are by their side and care about their needs. Being transparent, open, and honest with customers will not cost you anything, but it will go a long way in creating a positive experience and a long-lasting relationship.

Why is focusing on customers so crucial? Firstly, attracting new customers can be up to 15 times more expensive than retaining existing ones. Coupled with the fact that existing customers spend over two-thirds more than new customers and have a 60%-70% higher likelihood of making a purchase, you can see that your current customers are a vital part of your growth strategy!

Do: Seize Opportunities!

An economic downturn is the perfect time to capitalize on your competitors’ weaknesses and differentiate your products or services from theirs. Prepare compelling offers to encourage customers to make changes or focus on the value your products or services provide during uncertain economic times. If everything is going well, and you have the capital to reinvest in your business, consider taking advantage of low prices to acquire new assets!

Key Takeaways

The steps you take to prepare your business team for an economic downturn will be crucial in successfully coping with uncertainties and outperforming competitors. Here are some key benefits we have discussed:

• The best time to prepare for an economic downturn is when your business is operating on the right track. Plan ahead to respond promptly when things start slowing down.
• If you think an economic downturn is imminent, some signs indicate that you should start preparing: slowing sales, customers delaying payments, or increased debt.
• Adjusting your budget to reduce costs is prudent, but don’t go overboard. Avoid cutting essential business activities and be willing to spend more if there’s an opportunity to strengthen your team or position your business.
• An economic downturn is an excellent time to reassess your digital transformation needs. Since you might have already made changes, try to identify opportunities to integrate suppliers and enhance your technological capabilities.
• Your customers also feel the pain of a slow economy. Invest time and effort to ensure you can address potential customer issues and work with them to overcome their challenges.

Metta Marketing
Leading Brand Strategy Consultant

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