No one can know exactly when the next U.S. recession will hit. Just ask the myriad of economists who entirely missed predicting the last downturn nine years ago. Even the policymakers at the Federal Reserve – considered some of the brightest economic minds in the world – failed to realize the country was in a major recession until a year after it actually began. So what happened?
“People went from confident to careful and conservative – everyone decreased their spending at the same time,” says economist Alex Rosaen.
For two years, the Fed frantically worked to jumpstart the economy, buying bonds until it held more than $1.6 trillion of bank debt. By mid-2009, the Great Recession officially ended, although Fed-fueled easing still continues in some forms today. Now with annualized GDP growth seemingly capped at about 2%, curious minds wonder: Could the next recession be coming soon?
Simple math says maybe. Since World War II, on average, the U.S. has faced a recession about every five years. Cyclically speaking, a dip is overdue – but does that mean a downturn is imminent? No. Does it mean you should worry? No. But should you get prepared in the event of a sudden decline? Of course.
“Many salespeople think there’s nothing they can do,” says consultant Joanne Black. “However, economists agree the companies that will not only survive but thrive are the companies that invest in themselves.”
Consider this your chance to do a little self-investing. Here, we present expert tips to help you strengthen your book of business so you can endure, and even grow, during economic winters. Plus, stay ahead of your peers by learning the warning signs that could lead to the next downturn.
Never Stop Prospecting
One of the worst mistakes you can make as a salesperson is to let your prospect pipeline run dry, yet it happens all the time. “The number-one thing I see when it comes to small-business owners is that even in good times, they go through boom and bust cycles,” says consultant Wendy Weiss. “They get super busy, take care of the flurry of orders and when the flurry ends, they panic because they have nothing coming in.”
During harsh economic times, the cycle gets worse, as many reps go after any orders they can get – ignoring the bigger picture. “It’s important to be consistent in your prospecting efforts and develop a replicable process for prospecting that you know works, in order to cure that cycle,” Weiss says.
Hold Steady In Tough Times
Marsha Londe, CEO of Tango Partners, offers four tips for sustaining success during downturns.
1. Focus on reasonably priced campaigns that can drive a client’s business and keep him visible with his customers. Present useful products that boost morale, drive safety or generate sales outreach.
2. More than ever, pay attention to messaging from the client’s perspective. Honor budgets, even coming in below allotted amounts.
3. Demonstrate in multiple ways that you’re on a client’s team. If a supplier product goes on sale after a customer has purchased, surprise them and adjust your pricing.
4. Offer marketing tips that don’t cost anything. You may not be selling product, but you’ll be demonstrating that you’re invested in an ongoing partnership.
Every rep “needs to devote minimally 10% of the time to prospecting, but ideally you should be spending 25%-30% developing new business,” says Mark Hunter, author of High Profit Prospecting.
Weiss advocates the 80/20 rule when counseling reps. “Spend 80% of your time looking for new business for the first three to four months, and then when you get some orders, you can flip the equation and spend 20% developing new business.” If a downturn occurs, Weiss believes a renewed focus on prospecting can see you through. “It’s a massive effort to build a pipeline,” she says.
Diversify & Target Wisely
Another way to prepare for downturns is to avoid being too heavily weighted in any one industry or geographic area, says Rich Patterson, owner of Patterson Brands (asi/291582). Based in Vancouver – known to locals as Hollywood North – Patterson serves many clients in the major motion picture and television production world.
“Every time the Canadian dollar rallies toward or even above U.S. dollar parity, this industry suffers locally as productions tend to stick closer to Hollywood if there is no significant tax or dollar advantage,” says Patterson. When this occurs, the company’s presence in a number of other industries helps offset that weakness.
When Will The Next Recession Happen?
There are few certainties in economics, but cycles prove at least one constant: There will be another recession. Could the next downturn soon be upon us? Or is it still years away?
“When I look at indicators, I see evidence pointing in both directions, but on balance, I think there are a couple of years before we need to worry,” says Alex Rosaen, director of public policy and economic analysis, at Anderson Economic Group.
The signs he sees that point toward a possible recession: “Personal consumption, consumer spending and car sales are near the peaks we saw before the last recession and student loans are high, which can further drag spending. In addition, the number of unemployed people vs. jobs available has come down, which could mean the expansion is coming to an end,” he says.
On the other hand, there’s ample evidence the U.S. economy still has room to grow. Rosaen points out there are plenty of working age people that aren’t employed. Their eventual return to the workforce, possibly after receiving a new college degree or specialty training, will be a positive for the economy. Also, bond markets are forecasting that inflation will be well below the Fed’s target rate of 2% for the next 10 years – meaning rapid, unsustainable expansion isn’t in the offing.
Additionally, household debt payments have come down, due in part to lower interest rates, and housing starts are very low, Rosaen adds. “There is a lot of spending waiting on the sidelines, which means the economy is not in danger of overheating.”
No doubt, certain markets have a rougher time during recessions. Just ask Steve Flaughers, whose business was negatively affected during the Great Recession because of its presence in manufacturing. “We had clients in the building industry that placed orders and then didn’t want to pay us when their business slowed down. We got stiffed on invoices across the board,” says Flaughers, owner of Proforma 3rd Degree Marketing (asi/300094).
Conversely, some sectors tend to weather economic storms much better. Flaughers points to two of them: higher education and the medical field. “Typically, these sectors have been there for a while, and don’t usually spend outside their means. In a recession, you want to locate and identify industries that are forced to out-market their competitors, or else they are gone. The strongest survive,” Flaughers says.
The products you focus on during downturns also matter. “Products for employee recognition and uniform programs are great during uneven periods,” says Tom Economou, VP of sales and marketing at Sunrise Identity (asi/339206). Anything considered a value-add item will also work well. “The deeper you get in with a customer, you can identify these opportunities and provide different services that are valuable to them,” he says.
Watch For Weakness
Salespeople aren’t economists, but there are warning signs smart reps can look for to gauge threats. “Following the trickle-down concept, corporations know their own profit pictures, their own economies and business potential, as well as what’s in their own pipeline,” says Marsha Londe, CEO of Tango Partners. “Our industry begins to feel the effect as client management starts to restrict departmental budgets or stops hiring.”
Some other red flags according to Londe: Sudden consolidations, a volatile stock market, increased gold values and fast-falling oil prices. “Frankly, in our news-infused world of multiple news websites and an app for everything, there’s no excuse for not being attuned to potential downturns,” she says.
Hunter, meanwhile, keeps an eye out for other specific trends in looking to spot troubles. He commonly looks for answers to these questions: How is package delivery volume at UPS and FedEx? How are over the road trucks doing in hauling volume? And how busy is railroad freight hauling volume?
Each industry has a leading indicator that measures how things are going, so a smart sales rep will learn what those signs are for their particular client base, according to Hunter. An example? Silicon Valley investors measure ping pong table sales. If sales are up or down, venture capitalists feel they can get a decent pulse on what’s really happening in tech.
Of course, having meaningful conversations with industry players helps quite a bit, too. “I reach out and talk to people, and ask them what they’re going through,” says Flaughers. “Some competitors have had people stiff them, and then those bad clients may seek out a new target and call you.” This type of scenario played out more frequently could point to underlying weakness within a niche, market or regional economy.
When hard times do come, there are still plenty of opportunities to be had. Here, your attitude counts a ton. “Each recession or slowdown is a chance for you to worry, fret and stagnate or grow, innovate and strengthen,” says Patterson. Use a slowdown to your advantage to sharpen technical skills or add a new service to your business. Similarly, you can jettison an old business practice or underperforming staff, Patterson adds. Downturns also place a premium on personal touches. “Don’t be afraid to pick up the phone and call your clients,” says Flaughers. While the internet and social media are important for prospecting, recruiting and selling, “there is a human element that will never go away and is greatly preferred.”
Hunter recommends calling clients and leaving a short voicemail message, 11-14 seconds long, that has energy and ends with a call to action. Call a week later, with a different message, along with supplementary emails. “I equate one phone call with a billboard along the side of the road. One billboard won’t change my behavior, but if I see 20, it will,” says Hunter.
He typically makes eight “touches” in a five-week period, calling people at the top of the hour, no matter what time of day. Why? This is when meetings typically start or end, and you have a better chance of catching someone, especially mid-level managers and higher.
If he doesn’t get through or get a response, Hunter steps away for three months and starts the process all over again. “Existing customers do sometimes move on, so you need to keep at it,” he says.
Black agrees that the most personal touch is the best, especially in an age of over-emailing. “People always tell me they’re so glad I called,” she says.
Jean Erickson is a contributing writer for Advantages.