This year, there’s potential for businesses to find value in times of economic uncertainty
“Uncertainty is bad for business” is a truism accepted by all economists. But whilst it applies across an entire economic system, it doesn’t need to apply to you in 2023. You can simultaneously agree that the year ahead feels horribly uncertain while also thriving.
The Collins English Dictionary recently named “permacrisis” as the “word of the year” for 2022. Hopes for a post-pandemic bounce were dashed by the impact of the Omicron variant and then crushed by the invasion of Ukraine and the resulting cost-of-living crisis.
2023 feels like yet another year of uncertainty as the UK hits recession, strikes continue, feelgood evaporates and cost pressures mount. Scanning the horizon, there are geo-political risks around Taiwan and North Korea to add to the ever-increasing threats of critical suppliers or customers going bust.
So this January, each of us could easily choose to accept a false inevitability about our fate. Or, we can resolve to actively prepare for uncertainty. Most vegetation loves rain, good soil and sunshine, but we also know that many hardy plants adapt and grow in dry deserts and dark places. It’s the same for your business or your team, however large or small. You can choose to adapt, and find a way to thrive, during uncertainty.
Companies and teams that do well are decisive about what they focus their resources on and what culture they encourage.
How you invest your cash and your hours will be crucial, especially as there is less cash available in 2023 than in previous years for most businesses. Not only is cashflow under pressure from tighter customers and from internal costs rising, but raising cash from banks or investors is proving harder.
Successful applications for bank loans have dropped “precipitously”, according to a survey released this week by the Federation of Small Businesses. The stock market, for most companies, continues to suffer from a “buyers strike”. Even Private Equity is offering reduced valuations and tougher terms. So the potential for companies to raise cash by either selling equity or borrowing debt is greatly reduced.
The first strategic move for companies preparing for uncertainty should be to focus investments on projects that bring relatively short-term cash benefit to the company. That’s not only about financial focus but people too. At times of clarity and relatively cheap money, it can make sense to have some of your best operators working on long-term projects and honing year 4 of a 5 year plan. At times of uncertainty though, you want your best people working on what will improve the business in the next 3 or 6 months. The companies that thrive in uncertain times happily operate on shorter time-scales.
Leadership should still communicate the near-term decisions in the context of the longer-term vision. Cash is king for many in 2023 but purpose is what gets most employees out of bed in the morning, and it creates the foundation for better decision-making.
This leads into the other key to thriving in uncertain times; organisational culture. During a crisis, leaders can feel like they need top-down control to help manage risk. But in short, the opposite is true. Leaders need to give autonomy to those who are closest to the operations so they can respond quickly to the customer, to risks and opportunities. In a fast moving, unpredictable situation, companies benefit from teams who are in the habit of responding quickly, unafraid of being told off by the high-ups for taking action.
So, if uncertainty is what you expect from 2023, then refocus your resources and develop a culture for swift action.