How Can CEOs Keep Businesses Profitable & Expanding In Recession?

16th December 2022
illustration of how CEO's keep business profitable and expanding in a recession

Welcome to instalment 4 of our Manager Challenges Series.

This is the penultimate entry and we’re going to be looking at what CEOs can do to ensure their businesses remain profitable and keeping expanding despite threat of recession.

This season we’ve been thinking ahead, due to the looming potential of recession, to how managers can bring the most value in difficult times.

To help businesses strategize before difficult times hit, we’ve been offering tips and advice on how the smartest businesses operate during recession to maintain profitability.

If you’re just joining us for the first time, be sure to go check out our previous posts for:

There are many ways that CEOs of companies of any size can help their businesses perform well in spite of recession.

Why Is There A Recession?

recession in businesses illustration

The pandemic had already created economic instability. Since it was unprecedented in the modern business world, there was a great deal of uncertainty. Markets, investments, stocks, they all work off predicting what will happen and what buyers will do. During the early stages of the pandemic everyone was unsure. Some industries became stronger and more profitable, others suffered, and some took heavy loses during lockdowns but rebounded strongly.

While still recovering from the unstable period, the UK and the world have been hit by rising inflation and a cost-of-living crisis. Essential goods are costing more money while wages are not rising alongside this.

There is, of course, the war in Ukraine. This has had a detrimental effect on fuel and energy prices, which were already on a sharp rise. Due to scarcity and Russian control of many significant supplies, this is greatly exacerbating an already troubling situation.

Food exports from Ukraine have also been affected and the country is a massive exporter of grain for Europe.

With individuals’ money going less far, they are spending less, which causes an even greater knock-on effect on the economy.

Government turbulence and constant changing of tact has also negatively affected bank confidence in policy.

All of this is a perfect storm for a severe recession if not addressed quickly.

What Does This Mean For Businesses

Rising costs of fuel, energy, and every day goods don’t just affect consumers but businesses as well.

If you put prices up, you could risk customers turning away from your company, at a time when convincing them to part with their diminishing disposable income is already challenging.

However, if you don’t put up prices, you could still lose business, and even if you don’t, the money could stretch less far to cover your overheads.

Businesses might, therefore, become less profitable. Meanwhile, they might find that staff are asking for pay rises to combat the fact that their money has less value.

All this puts tremendous financial pressures on companies. This is why businesses so sensibly fear recession.

It is not all cause for doom and gloom. While most global CEOs are anticipating a recession in the next 12 months, over half believe it will be mild and short, according to a survey by KPMG.

The Main Ways CEOs Can Brave The Recession

leadership in recession illustration

1) Leadership

2) Support Heads Of Department: Education & Listening

3) Make The Tough Decisions

Leadership – The best thing CEOs can do to ensure continued expansion and profitability even in recession is ensure they deliver strong leadership. The whole point of being a CEO is to delegate tasks to a capable and savvy team. You will find that, if you have chosen well for your heads of each essential department and selected great managers, they will develop excellent recession survival strategies. However, with so many team members vying for their share of limited budgets to enact their ideas, you must be the guiding force to mediate between them. Recognise which ideas are most sensible in the current climate and how best to enact them, then empower your teams to act.

Support Heads Of Department – A major part of being a good leader will be to support the heads of each department. You can do this in two important ways. One is to actually really listen to their visions, concerns and needs brought about by the recession. That doesn’t mean say yes to everything because on the other side of support is education. You need to inform your teams of the financial situation of the business and what might happen during a recession. Ensure everyone is on the same page with plans and the ultimate goal of those plans.

Make The Tough Decisions – Part of being a leader is making hard decisions, such as when to say no to your teams’ ideas. You are ultimately responsible for the cashflow and profitability of the business. In recession, there is the opportunity to invest to remain profitable and to hire and expand, but some cuts might be inevitable.

However, it doesn’t stop there. Let’s look at some specific tactics for aiding profitability and expansion in the wake of recession.

Tactics For CEOs To Keep Their Business Profitable During A Recession 

Processes – Now is the time to review all your internal processes. This is everything from project brain storming, launches, hiring, manufacturing, ordering etc. Review each system to augment them for maximum efficiency. You should also try to identify any areas where you can cut dead weight.

Listen to your CFO – While you should listen to all your teams, your CFO is in the best position to guide you through challenging times like a recession. They will have the know-how and software to help you make a priority plan for projects and earmark what can be delayed.

People – Work on reassuring and motivating staff without pay rises. Learn how to do more with less people. Try hiring less and outsourcing more. You can also train current staff to a higher degree to help them fill more roles. Consider their happiness and wellbeing and how you can improve their lifestyle without pay rises.  

WFH – You can improve staff wellbeing, while saving on overheads, including heating, fuel, water, and electricity during an energy crisis by allowing staff to work from home. You can also justify saving on salaries if they do less commuting.

working from home in recession

Cashflow – Facilitate multiple revenue streams, such as offering subscriptions and educational products alongside your main offering for more profit. Choose subscriptions for your own used services as well, such as computer hardware and software to spread costs.

Stay eco – Don’t abandon green initiatives. They will soon be a legal requirement and could save you money by reducing the use of traditional energy sources.

Tech – Keep investing in tech that is useful in the current financial crisis. Environmental tech, and automation tech can improve efficiency and energy usage for more profits. One tech you should never skimp on is cybersecurity, especially with WFH employees.

Communicate – Be transparent with customers about any changes like price increases and why they must be done. Simultaneously cultivate strong communication with customers and listen to feedback to improve your offering.

Efficiency & Balance – Make cuts early and swiftly but not too zealously. When you cut back too much, or in the wrong area, you potentially run the risk of not being able to meet demand when circumstances improve.

Simplify and Streamline – Review your offering and how it can be more cost effective to produce and market for your business. Consider constructing a ‘digital twin’ of the most critical parts of a supply chain.

Supply Chain Care – Increase data sharing with suppliers so they know exactly what and how much you will require at the right time. Devise ways to speed up production and delivery of your own products and service. Identify issues in the supply chain and strategize for compensating.

Time Management – Look at how you use staff’s time in meetings. Are they essential or do they waste time? Think about what could work as an email or if all members need to be there for the entire duration.

Using these tactics can ensure that your business and teams are working at full productivity and can meet the challenges of recession in order to remain profitable and keep growing.

Join us next week for our final Manager Challenges Series instalment. We’ll be looking at how entrepreneurs can continue to foster innovation during recession.

Series One

Series Two

Series 3