Steve Swinney is CEO of Kodiak Building Partners, a leader in the building materials industry that manages locally led companies.
Recent interest rate cuts by the Federal Reserve are a welcome sign for most businesses, and some have said they could signal the next phase of the current economic cycle, which has been marked by inflationary pressures and higher costs for some time. Economists generally focus on four distinct phases of the economic and business cycle: expansion, peak, contraction and trough. However, the many variables influencing the cycle make it hard to predict when one will give way to the next.
What we do know is that innovation and adaptability are key to running a resilient business that is primed for growth in any market. As we head into 2025 and establish goals to build more resilient businesses, leaders should focus on three pillars:
1. Sustainable Business Practices
While some businesses may be more susceptible to market fluctuations than others, a strategic focus on sustainability, continuous value creation and a long-term vision for success can help any business owner navigate short-term economic pressures and drive growth.
Diversification is one way to position your business to thrive under various market conditions. Sustainable businesses tend to have multiple streams of revenue from variable sources. This can not only provide protection against economic downturns but can also create more opportunities to generate value.
Workforce development is another area where business leaders can invest to sustain the health of their organizations. Oftentimes, businesses try to adjust their teams based on fluctuating customer demand, which can lead to costly hire-and-fire cycles that create instability. To avoid this scenario, consider making long-term investments in workforce development programs, culture-building initiatives and locally led leadership. These strategies can facilitate a loyal and engaged workforce, protecting both your employees and your investment in human capital from volatile economic cycles.
2. Risk Management And Decision-Making
Effectively managing risk and making informed, timely decisions are perhaps the most important variables in determining resilience. It’s easy to lose sleep over market conditions and how they might impact your business, but it’s far more productive to spend that time strategizing your response.
Be proactive in how you manage production and sales, and look to experts on your team who can provide useful, data-driven forecasting. Involve your CFO and others in the finance department to improve predictions and enable better decision-making well in advance, rather than reacting when changes occur. While not every decision will yield perfect results, encouraging your employees to be data-conscious and skilled at forecasting will lower your risk and position you to make impactful decisions before the full effects of economic shifts are felt.
Growing a business also requires leaders to be creative when it comes to mitigating risk and managing variables that can threaten to stall growth, including cash flow challenges, supply chain disruptions and labor shortages. Fluctuating market conditions can impact any of these variables, which underscores the importance of diversification, data utilization to improve forecasting and investment in research and development. In addition to strategic partnerships, technology integrations and advanced planning for various scenarios, these strategies can help business leaders navigate obstacles to growth.
3. Embracing Technology And Adaptability
In business and life, change is the only constant we can depend on. To move your business forward in each phase of the economic cycle, you must embrace this philosophy. While diversifying your portfolio is crucial, it is equally important to be open to change—to adapt your products, services and delivery methods in meaningful ways that continue to add value for customers and stakeholders.
One of the biggest challenges for business owners is knowing how to respond to change. By using insights to map and anticipate trends in consumer demand, you can identify where products and services are creating essential value today and what that could look like in the long term. Additionally, analyzing these insights against market conditions can reveal opportunities for value generation or highlight threats that could diminish it. If you aren’t paying attention to these dynamics, it will be difficult to adapt your business for success.
Considering a long-term vision in your strategic planning is also beneficial. This perspective can serve business leaders in evaluating opportunities, improving decision-making and responding effectively to economic pressures. Moreover, I believe that strategic investment in technology is critical to shaping the future of your business. The business world is evolving at an unprecedented pace, with no signs of slowing down. To remain competitive, leaders should leverage technological advances and innovations that enhance their ability to adapt to changing market conditions with ease.
Business leaders will never have a crystal ball to signal changing economic cycles, but there are steps you can take to improve your position, respond effectively and capitalize on opportunities in any market. It starts with understanding the potential for growth during each stage of the economic cycle. With a forward-thinking approach and commitment to adapt your business as external forces shift, you’ll likely find yourself in a stronger position to succeed in downturns, boom times and every cycle in between.
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