The yield curve inversion continuing to re-invert and the threat of broad tariffs are mounting an increasing amount of uncertainty for companies across virtually every industry.
During a similarly uncertain time at Capital One in 2015, we were so prepared for a potential recession that we had a strong confidence a recession would make us better off in the long run, by capturing a larger market share from competitors that were clearly over-leveraged.
Here are three essential goals that leaders of growing companies should focus on to turn this uncertainty into an opportunity:
⚖️ Optimize operations to bolster up margins
💲 Prioritize the P&L for financial health
📈 Define a strategic growth plan
Lets break this down--
⚖️
"𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝑖𝑠 𝑑𝑜𝑖𝑛𝑔 𝑡ℎ𝑖𝑛𝑔𝑠 𝑟𝑖𝑔ℎ𝑡; 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠 𝑖𝑠 𝑑𝑜𝑖𝑛𝑔 𝑡ℎ𝑒 𝑟𝑖𝑔ℎ𝑡 𝑡ℎ𝑖𝑛𝑔𝑠"
This should always be a top priority for any organization. With smooth operations that produce strong margins, a company gets traction fast, and stands out as a winner when the money stops flowing in the economy.
𝗦𝗠𝗔𝗥𝗧 𝗴𝗼𝗮𝗹𝘀:
1️⃣ Read Traction by Gino Wickman
2️⃣ Build a scorecard and select KPIs that are strongly tied to the P&L
3️⃣ Set goals for each KPI and keep responsible teams accountable for them
4️⃣ Each week, dig into the root cause of key performance and take away one action item for the following week to slowly iterate towards operational excellence
💲
"𝐶𝑎𝑠ℎ 𝑖𝑠 𝑘𝑖𝑛𝑔"
This is especially true when there's less cash flowing through local economies. Also, a recession tends to be followed with lower interest rates and stricter lending policies, so now would be a good time to pay down debt and improve credit worthiness.
𝗦𝗠𝗔𝗥𝗧 𝗴𝗼𝗮𝗹𝘀:
1️⃣ Optimize operations as a pre-requisite
2️⃣ Build a cash reserve of 6-12 months of operating expenses
3️⃣ Identify loans with the highest interest rates and increase payments
4️⃣ Create a cashflow plan and stress test it against best case and worst case scenarios
3. "Adversity is the chisel that carves out excellence".
With the first two goals in place, growth companies would be in a good position to expand. In a best case scenario, there is a strong financial position to invest in new product lines or double down on marketing. In a worst case scenario, there is a strong financial position to acquire struggling competitors or capture their market.
𝗦𝗠𝗔𝗥𝗧 𝗴𝗼𝗮𝗹𝘀:
1️⃣ Have the leadership team formulate a strategic growth plan under best and worst case scenarios
2️⃣ Identify a few leading indicators of how a slow down affects your industry. Automate measurement of these indicators with proactive alerts so you can respond quickly.
You may have noticed these goals weren't just about survival. They are about taking advantage of an opportunity.
Whether a business leader or employee, which of these three goals would you want your company to tackle first?
Alright, so your business has a ton of data—great! But now what? It’s like having a pile of ingredients in your kitchen but no recipe. Data is fantastic, but without a game plan, it won’t do much for you. So how do you turn all those numbers into something that provides incremental value to business leaders that they don't already know?
According to a Salesforce study in 2023, 80% of business leaders said data is critical in decision-making at their organization. They cited benefits like faster decision-making, building trust within the organization, improves focus and reduces uncertainty. However the same study found that 67% of leaders were not leveraging data for complex strategies like pricing due to having inadequate tools to generate insights from their data.
Business leaders are experiencing one of the toughest economic markets of our time, but they have an untapped advantage for better decision-making: their data.
Juan Perez, Chief Information Officer, Salesforce
The CIO of Salesforce is focused on data literacy training for employees to establish a data culture that supports business goals and improves resilience ahead of a potentially turbulent economic future. “The secret to driving true insights is marrying data with analytics. A combination of data, analytics, and the necessary data skills enables companies to maximize their technology investments and uncover opportunities that drive business strategy and strengthen customer trust,” said Perez.
Data literacy is critical for success in any organization in the modern economy where data is everywhere and tells the unspoken tales of potential opportunity and existing waste. Getting value from data is simpler than you might think--we'll break it down into steps with a digestible example.
Step 1: Data - You’ve Got a Lot, but So What?
First things first, you've integrated data from all your business software and stored it in a data warehouse, including marketing, sales, customer interactions, and website traffic data. But just having data isn’t enough. It’s like having a phone book (remember those?), but no idea who to call. What matters is how you are using your data.
Let’s say you are selling online and in-store. Over the past year, you’ve been tracking customer behavior. Tons of people are buying your products, but where do you go from here?
Step 2: Information - Organizing the Chaos
Now that you’ve got all this data, it’s time to organize it into something useful. This is the step where you turn random numbers into valuable information. You do this by segmenting your data into categories. Think of it like decluttering your closet–grouping similar things together makes it easier to figure out what’s really going on.
You might separate your customers into groups–those who shop online vs. in-store, those who subscribe to a service vs. those who make one-time purchases. Suddenly, the data makes more sense because you are looking at it in buckets.
Step 3: Knowledge – Spotting Patterns
Once you’ve organized your data, you can start spotting patterns. This is where your data turns into knowledge. It’s like noticing that every time you put out a curtain display ad, more people end up on your website. Patterns are what turn data into something that you can actually use.
You may discover that customers who see your display ads are landing on your website and buying more often than those who come through other channels like organic search. Now you’re onto something!
Step 4: Insights – Digging Deeper Into the Why
Alright, you’ve got your patterns, but now it’s time to take it a step further. Insights are where you dig into the why behind those patterns. Why are certain customers responding to certain ads or offers? When you can answer that, you’re moving toward actionable insights.
Maybe you find that families with young kids are way more likely to become repeat customers after clicking on Ad A. That’s a huge insight! It tells you something important about your audience that you can use to shape your marketing strategies.
Step 5: Wisdom–Telling the Data Story
Now it’s time to put all of those pieces together and tell the story your data is revealing. This is where your data turns into wisdom–understanding the bigger picture. You can now see how everything is connected, from the initial ad click to the final sale, and what it means for your business.
For example, picture that you now know that families with young kids are a key audience, and they love your messaging in Ad A. That’s a golden nugget of wisdom you can take straight to the bank (literally!).
Step 6: Impact–Taking Action That Moves the Needle
Finally, the big moment. This is where all your data work pays off. The impact comes from taking what you’ve learned and actually applying it to your business strategy. It’s about making changes that lead to real results, like increased sales, better customer experiences, or more targeted marketing.
Imagine you decided to shift your marketing strategy to focus more on families with young kids. You create more ads like Ad A, tweak your messaging to speak directly to an audience, and watch your sales soar. That’s how you drive impact!
Data isn’t Just Numbers–It’s your business GPS
There’s no shortage of data, but the real value lies in how you use it. More and more companies are investing in data infrastructure solutions to support decision making at a faster rate than ever before. To make a lasting impact on your business, don’t just collect data–proactively organize it, analyze it for patterns, extract insights, and make informed decisions based on the data your story tells.
Remember, the key to unlocking the power of your data is taking a problem-solving approach at each stage–moving from raw information to insights and, finally, to impactful action that drives growth.
Did you know that 90% of the world’s data was generated in the last two years? Crazy, right? Despite this surge in information, most businesses are still struggling to use it effectively; so what’s the secret sauce? In the current data-driven landscape, businesses have more access to data than ever before, but just having access to the data isn’t enough - It’s how you are leveraging your data that could determine the rise or fall of your business. While many companies focus on monitoring current performance, true growth comes from balancing this reactive approach with innovation that comes from proactive data analytics. Businesses that are too focused on day-to-day metrics are missing out on valuable opportunities to differentiate themselves.
Almost every business you know of is monitoring its performance in one way or another. This is what we call reactive data analytics. This provides leaders with a real-time snapshot of performance metrics, enabling them to monitor processes, address issues, and ensure that everything is running smoothly. Businesses use reactive data analytics to track sales numbers, monitor inventory levels, or evaluate customer satisfaction scores. Businesses utilize this data to quickly react to problems. This is essentially data used to keep the business operating smoothly.
While monitoring operations is essential to business stability, it doesn’t drive future growth or differentiate the business in any way. This is where proactive data analytics comes in handy. In contrast to reactive data analytics, proactive data analytics is strategic. While reactive data analytics looks to the past and present, proactive data analytics is all about the future. It requires a forward-thinking approach. This means using data to explore possibilities, challenge the status quo, and push beyond what’s possible. Instead of waiting for problems to appear, businesses actively seek out areas where they can improve, experiment, or differentiate themselves from the competition. This is business innovation - using data to fuel exploration and identify opportunities before they become obvious to everyone.
A recent Forbes article builds on this concept, emphasizing the need for businesses to balance reactive and proactive data analytics to truly thrive. While reactive data analytics is crucial for managing day-to-day operations, focusing solely on it can cause businesses to miss out on growth opportunities. Proactive data analytics use, as Forbes explains, is what sets innovative businesses apart - it involves using data not just to respond to problems but to anticipate them, test new ideas, and discover untapped potential. This balanced approach - using reactive data analytics to manage current performance while leveraging proactive data analytics to innovate - ensures that businesses can maintain stability while also driving future growth and differentiation in competitive markets.
A recent study by Harvard Business Review and ThoughtSpot shows that empowering frontline employees with data is the key to unlocking business success - and safe to say it’s a game changer for growth. Think of all the doctors, retail staff, or customer service reps making critical decisions every single day. Now what if they had access to the right data at their fingertips to make those decisions even smarter?
The research found that organizations empowering their frontline workers with data-driven insights are seeking big boosts in productivity, customer satisfaction, and innovation. Here's the kicker: only 7% of businesses are fully giving their teams the tools they need to make these game-changing decisions. While 86% of companies know their employees need better tech to perform at their best, they haven’t quite made that leap yet.
Companies that are considered leaders in this area have seen huge benefits. This includes higher revenues, better customer engagement, and improved product quality. These businesses are training their teams and creating a culture that thrives on data. On the flip side, many businesses are falling behind, with many managers holding back their frontline teams from making empowered decisions.
The message is clear: empowering your frontline employees isn’t just a nice tool to have in your back pocket, it’s essential for differentiating and driving growth in your business in any competitive market. When workers have the tools and insights to make smart decisions, everybody wins - your business, your customers, and your team.
Let’s face it - every business today is swimming in data, but here’s the thing: just having access to it doesn’t magically solve all your problems. Data isn’t a genie in a bottle; it's more like a toolkit. You’ve got to know which tool to grab and how to use it if you want to build something incredible. Whether you're using reactive data analytics to keep the lights on or proactive data analytics to push boundaries, it's all about turning those numbers into real-world action.
And here’s where the real game changer comes in - empowering your people. Frontline employees are the unsung heroes of your business, and when you give them the data and tools to make smart, in-the-moment decisions, everyone wins. Your team feels more empowered, your customers get better service, and your business grows like never before.
So, remember this: having data is great, but it’s what you do with it that counts. Use it wisely, mix it up with some proactive thinking, and watch your business stand out from the crowd. Your future success? It’s in your hands - and in your data!
With just 1:30 left on the clock in the 2002 Super Bowl, the New England Patriots were locked in a 17-17 tie against the powerhouse St. Louis Rams. The pressure was immense as Tom Brady, a relatively unknown quarterback at the time, took the field on his own 17-yard line with no timeouts remaining. Displaying immense resilience, Brady navigated the offense efficiently down the field while simultaneously managing the clock carefully, culminating in an opportunity for kicker Adam Vinatieri to kick a 48-yard field goal through the uprights to seal the W in a thrilling ending as time expired.
Tom Brady's brilliance isn't that he suddenly received inspiration to know how to lead an offense in those final 90 seconds on the biggest stage in sports. His brilliance instead is on how much work and focus he put into designing and practicing their 2 minute playbook before the season started and again before each and every game.
You might be wondering how does football tie back to business.
In some ways, the 60 minutes of a football game resembles the various stages of the economy. There are ups and downs, and external pressures that might put your company in a situation that you'd rather it not be in. Nevertheless you might find your company in that position, and so the next best thing is to prepare your team to win by creating and practicing a playbook that outlines the strategy and specific calls you will make, and lead your team to victory just like one of the most decorated team captains in sports.
As a business leader, you probably plan to run your business for a long time, in which it is likely to experience the full lifecycle of an economic cycle, which includes periods of good times (expansions) and periods of bad times (contractions or recessions).
Your curiosity may naturally try to figure out what part of the economic cycle we're in right now. After all, the Fed just decreased rates by 0.50% in response to unemployment increasing to 4.2% in August 2024, up from a healthy 3.4% we experienced in 2022. Jamie Dimon at JP Morgan recently made a prediction that we'll begin to see more economic deceleration in 2025 and on top of it all, economists agree that the global economy has been in the late-stage of the business cycle for the better of the last two years. Lower interest rates could take some of the pressure off, but the Fed may just be trying to play catch up after leaving rates high for too long, and it may already be too late.
We don't know for sure where we are and when the next recession might be, and trying to make any accurate predictions is a fool's errand.
What is important is that you do have a plan for when it does happen, so your company can thrive through it all. While less intuitive, the same is true for why you would want a playbook to build the strategy to thrive through a period of rapid expansion.
While it may seem intimidating at first, creating a cycle playbook is as simple as following 3 steps, outlined in the TAP framework below:
We'll follow these steps to create a sample playbook using an example with a fictitious company, LaunchMinds, a marketing agency that helps clients with running their digital marketing strategies.
Businesses exist to create a profit, and you'll want to have a good sense of what your key performance metrics look like that drive that profit. These key performance metrics will look differently in each industry, but what they all have in common is the following components:
Do you need help with identifying and measuring the right key performance metrics for your company? Before you hire a consultant, we recommend setting up your own data infrastructure. Read our full guide for a breakdown on the costs to implement data infrastructure for companies of various sizes.
For LaunchMinds, their key performance metrics might include the following:
Cost per Acquisition (CAC): $15,000
The total cost, including marketing and sales costs, to acquire a single customer. Since professional services companies are consultants who take fewer and higher value clients, it is not too surprising for a company like LaunchMinds to spend as much as $15,000 to acquire a customer.
Acquisition Cost Payback: 3 months
The duration it takes for a new client acquisition to pay back the total costs of acquiring that customer. If LaunchMinds spent $15,000 to acquire a customer that adds $10,000 revenue per month with a 50% margin, then it would take 3 months for that customer to payoff the total costs of acquiring that customer.
Annual Profit per Employee: $300,000
Total annual profit divided by the number of employees working at the firm. This represents the value that each employee adds to the business.
Now lets stress test the company. The exercise of "stress testing" is to stress components of the aforementioned key metrics to see at what point company profit falls to its breakeven point. We'll start with two immediate observations of how LaunchMinds could go from a profitable to unprofitable business in a short period of time:
First, their acquisition costs are very high, such that they do not breakeven until 3 months after acquiring a new customer. If the customer stays with the firm for 12 months, then 9 months are adding value. If the average duration of a client gets cut in half to just 6 months, then the profit added from that client would decrease by 67%! If the average duration of a client falls to 3 months, then LaunchMinds would not make a profit at all. In other words, LaunchMinds is resilient to a decrease in duration of a customer up to 75%.
Secondly, the annual profit per employee is quite strong at $300,000. If the company experiences customers churning and a tougher time acquiring newer customers, this number could gets dangerously close to the breakeven point as well. If we plotted LaunchMinds profit per employee by decreases in client acquisition, we would see that Launchminds would become unprofitable if the total number of clients drop by 60%.
Once you've identified your key metrics and stressed them to the point of breakeven profitability, you will have a better idea of what needs to be done today to increase your resilience to external stressors. In general, you'd like to button up the business to reduce exposure to the biggest points of failure, and diversify on your key vulnerabilities.
"People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm actually as proud of the things we haven't done as the things I have done. Innovation is saying no to 1,000 things."
Steve Jobs
By focusing on what your company does exceptionally well, and saying no to the other good ideas, you are able to create an extremely compelling value proposition to your customers externally, and can create an extremely efficient operation internally. Ask your best 2-3 customers why they chose to work with you. If they say "you're the most reputable marketing agency serving the manufacturing industry in the southeast," then you can get a pretty good sense on what they want you to continue focusing on-- manufacturing and the southeast. It might be a good idea to decline the temptation to expand to a different industry or geography unless you've already captured the majority of the market share in those segments of the market.
Working Capital is the amount of money you have in your cash balance today, and excludes how much you expect to get paid tomorrow from an Account. Contracts with your clients may offer a payment plan that allows the client to pay after work has been done. This constitutes your Account Receivables in accounting. This is money that you might not ever actually see, in the scenario where a client runs out of money or goes bankrupt before they can pay you back in a scenario of widespread financial distress in the economy.
Work with your CPA to do an audit of your existing contracts and your financial KPIs (key performance indicators) like Weekly Net Cash Flow and Current Ratio. Make an assessment of the impact to your own company's solvency if you had to charge off your 2-3 largest accounts.
If this scenario looks bleak, you have a few options to optimize your working capital:
At the end of the day, the most important thing is to look at the numbers and address anything that surprises you (disclaimer: you will most certainly find a few surprises, including wasteful expenses you did not approve). Work with your FP&A team to do a deep dive to find more ways to increase your working capital.
Don't put all your eggs in one basket, as the saying goes. In your business, this can be represented in a few ways:
For the first two questions, diversification is quite simple-- don't get too comfortable with a business that relies on a few good clients and a few good suppliers. Make it a priority to acquire more larger clients and negotiate multiple suppliers. When it comes to the last question, however, there is a fine balance to walk between focus and diversification.
Focusing on one product allows you to be exceptional at delivering value efficiently to customers. But it only works until it doesn't. Never forget the iconic example of Blockbuster. I remember walking the aisles with my siblings on a Friday afternoon in the early 2000's, picking out a movie and snacks for family night, and we loved it despite the price and the inconvenience. Believe it or not, the leaders at Blockbuster turned down a chance to purchase Netflix for $50 million in 2000. We all know what happens next--Netflix leaned into modern technologies while Blockbuster simply kept doing what used to work well for them, and now our family night experience is convenient, inexpensive, and ridden of late fees, and Blockbuster simply does not exist. They went from generating $6 billion annual revenue in 2004 to filing for bankruptcy 8 years later, and Netflix continued to grow to $36 billion annual revenue in 2024.
I recommend re-evaluating your business strategy every 6-12 months. Assess what is going well and genuinely listen to your customers' complaints about what they dislike about your product or service. If customers are leaving to a competitor, give them a call to understand why. Work with the team to identify how you could make your offering even better. Lean into incremental improvements that make sense to incorporate to be continue being a dominant leader in your space.
Once you have stress tested your KPIs and addressed (or created a plan to address) the biggest points of failure in your business, you now have the full context to build your playbook. Don't feel the need to do this all alone. Often times you'll receive the most value from frontline employees who have a deep understanding of the specific vulnerabilities your company is experiencing, and equipped with the right tools, they can help you solve these challenges for you.
Determine what you will stop, start and continue doing in response to a change in the economic environment, namely at the start of a contraction period as well at the start of an expansion period.
For example, at the start of a contraction period, LaunchMinds would respond by 1) stop spending on long-term investments on market research that isn't expected to generate revenue for 18 months, 2) start offering a loyalty program with discounts to existing customers, as well as expanding referral bonuses, and 3) continue focusing on its core marketing service to their specific industry and geography.
Get started with applying the TAP framework and building your business resilience playbook.
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