The business landscape has changed. As the recovery kicks in, many companies are ramping up sales and marketing and putting on staff so they won't be caught short when the economy is thriving again. Expansion is back on the agenda.
Gregory Will, a partner in private clients at PricewaterhouseCoopers, says leaders need to change their downturn mindsets and embrace the recovery.
\"If you don't break out of the downturn mindset, other businesses will be taking market share from you,'' Will says.
\"The first way to break out of that mindset is to spend more on marketing and advertising to really focus on that top line growth\"
Still, he concedes that not all businesses are in the same position.
\"Some businesses are seeing clear signs that the upturn has come, some are still very much in that downturn mode and there are others somewhere in between,'' he says.
\"The upturn hasn't come for everyone just yet, it's horses for courses.\"
So what should businesses do if the orders are starting to come back in and demand is picking up again?
Will identifies 10 challenges, priorities and changes in strategy.
Shift the leadership focus from cost to growth
\"As we move into this upswing, businesses should look at sales and the top line and really move away from focusing on the cost side of the business and minimising their overheads,'' Will says. \"They need to look at marketing and sales activity\"
Challenge the high performers
\"The last technical recession we had was 1991-92 so most people aren't aware of how to manage in a recovery. Leaders should be challenging their management teams to say what the company should be doing. They can use that as a succession tool. If they come up with the right strategies and ideas, they would probably be the best leaders\".
Look at revenue opportunities
\"Look at existing gaps that you are not selling into, talk to your clients about how you can do better business with them.\"
Tend to supply relationships
\"One of the things that will come in the upturn is you might get a big order or a lot of orders very quickly. But companies have run down their costs and stock during the downturn so it might take weeks or even months to get that stock up-to-date. What you need to do is talk to suppliers and work out how you can quickly turn it around when the orders come in.\"
Challenge the business model
\"During an upswing, a lot of new businesses start and people come into the market with a niche product or service that is looking to fill a gap. What management should be doing is look at how those competitors can hurt the business or take market share and how they can change their business model to deal with it.\"
Assess competitor activity
\"Certain products can come into the market that would take market share from your product. What products should you be looking at to develop to take back your market share?\"
Examine your valuation
\"Valuations are still very low in terms of private business. In terms of merger and acquisition activity, the clock is ticking on how long people can wait before the models for valuation come back to the multiples we had prior to the downturn. If they are looking to do that, now is the time.\"
Watch overseas markets carefully
\"Australia is ahead of the curve globally so a lot of economies are looking at us and seeing how their businesses can take advantage of it. What that means is there might be more activity from an overseas competitor coming in and trying to gain some market share here.\"
Look at other states for opportunities
\"New South Wales and Victoria are still coming out of the downturn whereas Western Australia and Queensland are moving a lot quicker. Focus on those areas to get some market activity happening there.\"
Set the upturn agenda
\"Management teams should have a set agenda or form a committee that is really focused on how to do things coming into this upturn in order to shift the focus of the business and take market share very quickly\"
However, this needs to be done with caution. Recovery does not mean another boom and there are two sides to the coin. There is still a credit squeeze and many companies are still struggling to raise capital. Despite such positive signs as falling unemployment, interest rates are set to rise.
The Westpac-Melbourne Institute index shows that activity has recovered at its fastest pace since the volatile period of the mid-1970s but at the same time, questions are being asked about the sustainability of the Chinese bubble and the potential impact of the Greek meltdown here. With the recovery, business is still in a protracted and risk-laden period as the world grapples with the legacies of the credit bubble and bust.
How should businesses prepare themselves for a recovery when the picture is so confused? What sort of strategies do they need to build market share and win new business? How do they get out of the downturn mindset and expand, but stay safe in uncertain times?
Christine Christian, chief executive officer of Dun&Bradstreet Australia and New Zealand says businesses can move ahead, but with caution. Recovery does not mean a return to pre-GFC boom times.
\"You need to be careful and not ridiculously naïve,'' Christian says.
\"We have just experienced one of the worst economic downturns in history and to think overnight we will be back to pre-GFC levels is ludicrous.\"
She says recovery can be a dangerous period for many businesses. \"We have been plotting failures for decades now. Our research shows that business remains vulnerable to financial stress and failure in the early years of economic recovery.\"
\"We have examined business failures in the recovery period. Following the dotcom bust of 2000, business failure jumped 20.5% as the economy returned to positive growth.\"
The key to expansion in this market, she says, is to treat it as a managed investment program and to watch cash flow carefully. That means companies need to get teams re-focused on recovery and growth opportunities but, at the same time, totally accountable and watching carefully.
\"The smart companies will be those who have carefully and realistically assessed the market opportunity and demand, but they have not been so shell-shocked that they don't do anything at all.\"
\"It's really about having a very realistic view of where the market is at so you are not over capitalising, but at the same time you don't want to be frozen to the point where you are so shell-shocked by what happened that you miss the boat. It's about getting very robust business cases and staying on top of these cases and making sure everyone responsible for that part stays focused.\"
Unlike a boom time, she says, companies now have little margin for error when funding is hard to access.
BIS Shrapnel senior economist Richard Robinson believes the recovery will well and truly kick in next year when there is a return to business investment. In the meantime, the upturn in housing will continue to drive growth, although it will not be that strong. Don't expect another boom until the end of this decade, he says.
\"There is enough momentum going on to drive the recovery this year,'' Robinson says.
\"But it's not going to be an enormously strong recovery. It will be along the lines of what we have seen in the last quarter or two. The two big factors that are weighing against recovery now are the spare capacity and the cost and availability of money.\"
Robinson says the big challenge and priority in this upturn will be maintaining staff when the job market is starting to recover. The trick will be working out how to retain them without necessarily handing out massive pay rises at a time when cash flows need to be monitored and interest rates are likely to rise. The challenge in the recovery will be about getting close to staff.
\"A number of businesses instigated pay freezes during the downturn and a lot of employees are now asking whether that was justified,'' he says.
\"If people start securing better deals elsewhere, because they probably haven't been looking around for the past year or so, that could become a key challenge.\"
\"In the absence of giving a large pay rise, which they can't afford, businesses will have to get close to their people and makes sure that conditions beyond pay are amenable to keeping their staff.\"
He says businesses might want to start hiring as part of their strategy for recovery.
\"What you might want to be doing is looking to hire people. You would be wanting to plan, not so much for a strong economy this year, but certainly in 2011 and 2012, the economy will be picking up.\"
\"So probably some time this year, you might be wanting to get people in at a lower level to train them up. Maybe it's a good time to take on apprentices and trainees. If you get in now and train them up, by the time business is picking up they will actually be able to make a contribution.\"
How does management change its downturn mindset? Robinson says the mindset is changed for you.
\"Once you start seeing the figures and the work is coming through, you have to change your mindset.\"
This article first appeared on SmartCompany.com.au, Australia's premier site for business advice, news, features and blogs.