Prepare for the Next Recession

What sales teams should do

To prepare for the next recession?

According to the ink by Mark Kovac, a partner with Bain & Company & Jamie Cleghorn, the current economic expansion is long by historical standards, and thus the risk of recession rises with each passing month. Recessions catch many companies by surprise, with predictable results. In the 2001 recession, total sales for the S&P 500 declined by 9% from its pre-recession peak to its trough 18 months later-almost a year after the recession officially ended. But these periods also present opportunities for well-prepared companies to take advantage of the turmoil and gain share. 

The best time to undertake major changes that will strengthen a company during recession is before it hits. Prior to the past recession, both eventual winners and eventual losers in a group of 3,500 companies worldwide experienced double-digit growth rates. Once the recession struck, however, performance began to diverge sharply – the winners continued to grow while losers stalled out. The performance gap widened during the recovery.

What did the winners do that losers didn’t? They pursued a variety of tactics before the recession that were designed to fortify the firm when the downturn hit – moves both within sales and beyond like adding a low-cost channel to serve small accounts or simplifying the product assortment.

We’ll focus here on what the sales organization should be doing now to prepare for the next recession, with an eye toward using new digital tools. The starting point, of course, must be to make sure you have the basics squared away: aligning sales capacity with the market opportunity (capacity tends to get rusted in place, leaving companies over- or under-resourced); sweating the details of daily execution (things like putting controls around discounting); and getting the back of the house in order (a nimble commercial operations groups is critical).

Digital tools and analytic techniques that have flourished in recent years can help make sure those basics are taken care of. Our recent benchmarking of nearly 900 B2B companies underscores the importance of these tools. On average, roughly four times as many winners – defined in this case as those companies that grew absolute revenue at a significant rate and gained market share within their industry over the previous two years – as losers have digital tools embedded into their core commercial capabilities. Digital tools can also open new go-to-market approaches.

The report suggest, 1: Zero-base sales capacity, 2: Know when to walk away, 3: Amplify low-cost sales channels, 4: Detect and reinforce effective behaviors, 5: Automate account management, 6: Streamline and digitize the back office & 7: Raise the game in pricing.

Start small, fail fast:

The vast number of digital sales tools can be overwhelming.  Where should sales executives start? We have seen commercial organizations successfully work through these questions with small teams that test and learn as they go. Many use agile principles, setting up sprints to produce real business results, not just an improved process.

Their sole measures of success are incremental sales and profit margin. Starting small allows the team to quickly work out kinks in the process and try things that might not work, because the consequence of failure is also small. And successes can be scaled up quickly.

There’s little point trying to predict a recession with any precision, because most often you’ll be wrong. But winning companies focus on controlling what they can control well before and during the recession, including their sales organization and go-to-market tactics.

And becoming more proficient at digital sales technologies gives companies an upper hand over competitors that lag in digital adoption. Armed with the right digital tools, sales teams might almost look forward to the coming recession rather than fearing it.