Whether or not we’re in—or inevitably awaiting—a recession, you need to prepare your revenue planning process for a downturn. In times of higher inflation, quickly rising interest rates and volatile economic conditions, you already know it’s critical to be proactive and make decisions fast—faster than the changes in the market.
So what’s your course of action? Not sure how you should proceed? Can you position your business to succeed after the recession concludes?
We have seven tips on how to recession-proof your business’s revenue planning process:
1. Plan To Be Wrong
Remember the adage, “Failing to plan is planning to fail?” Conversely, Vena Senior Manager of FP&A Thomas Krolak advises businesses to plan to be wrong.
While nothing ever goes according to plan perfectly and your forecasts will always return with variances, you need to focus on mitigating the magnitude of those inaccuracies. Identify—quickly—when your plan has traveled off course and how to adjust and update those plans when that’s recognized.
If you can accept that perfection is unattainable, then you can proceed with the positive mindset of placing your business in the best position possible, considering the unfavorable circumstances, to recognize and seize opportunities—especially when the economy improves.
Hear Thomas Krolak, Senior Manager of FP&A at Vena, talk about adjusting plans and capitalizing on opportunities.
2. Use Your 2008 (and 2020) Experience
The economy will improve, right? Just ask the most experienced people on your team. If your finance team employs financial leaders who’ve been through the 2008 recession, leverage their experience. Did they exit the recession of 2008 in a healthy and enviable position? If so, how did they do it? If not, what did they learn?
And of course, what learnings have you gleaned from the uncertainty of March 2020? Talk to your most experienced financial decision-makers about how they succeeded or failed in 2008. Surely, they’ll have stories to tell, and ideally, lessons to share.
3. Collaborate With Non-Finance Teams
When you’re consulting your finance leaders, talk to the leaders outside your department. What are you hearing from the marketing team? What are the sales leaders telling you? That’s what Andre Proulx, Director of Marketing Operations at Vena, advised.
He talked about resource and budget shifting—upon learning marketing had generated more leads than planned—dedicating fewer resources to outbound sales development and shifting headcount accordingly.
The result? Better headcount planning for teams to focus on where they should. That was just one of the benefits of collaboration. Watch the next video to find out where else should teams should be placing their focus.
4. Think High Growth, High Margin
Target customers in high-growth markets and prioritize your high-margin products or services. Efficiency has never been more important, so focus on the bigger deals in a shorter time.
Monitor these KPIs closer:
- Average Deal Size / Average Order Value
- Net Profit Margin
- Customer Acquisition Cost
- Sales Cycle Time
- Customer Churn Rate
And after a closer look at your highest margin products or services, what else are you offering?
5. Create New Revenue Streams
What do your prospects need?
And what do your customers need?
Listen to your prospects and customers to understand how their needs have changed and emerged during these uncertain time. Now isn’t the time to cease marketing—the businesses that continued marketing spend during previous recessions helped them exit better positioned than their competitors.
If you have an idea, and then your product or service is ready to launch, do it. If it fills a specific customer need, a recession shouldn’t stop you. Just remember to forecast how your new revenue streams will affect your scenario analyses.
6. Plan for Potential Outcomes With Scenario Analysis
In Planning [as we know it] is Dead, the latest e-book from the Business Partnering Institute (BPI) which explores a new planning paradigm for the next normal, Vena VP of FP&A Tom Seegmiller said, “Those that have continued to adapt … are probably doing scenario planning.”
So if you’re performing driver-based forecasting, scenario analysis helps you better prepare for market changes by exploring possible responses to positive or negative events. That way you can see how internal and external factors in a range of possibilities may impact your bottom line.
When you’ve prepared scenarios to analyze—best case, base case, worst case and anything in between—you can be more decisive. Which leads us to our last tip.
7. Be Hyper-Decisive
Howard Dresner, Chief Research Officer at Dresner Advisory Services, said during Excelerate =SUM(it) 2022, “Being able to very quickly figure out what's going on and be able to respond appropriately, be able to execute with precision as quickly as possible—that's what differentiates companies.”
The businesses that are hyper-decisive are the businesses that move the fastest and become better-positioned post-recession. Don’t watch and wait—be hyper-decisive.
Recession-Proofing Your Business's Revenue Planning Process
The impending recession likely won’t be your first disruptive event, nor will it be your last, unfortunately. So just move forward.
By following these seven tips on how to recession-proof your business’s revenue planning process, when that inevitable next disruption arrives, you’ll have a success story (from the 2022 recession) of your own to tell—and some lessons to share.