Co-founder and chief executive officer of AvidXchange, a leading provider of accounts payable and payment automation technology.
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Our current environment of economic uncertainty offers a powerful catalyst for business transformation.
While we may face many unanswered questions about a possible recession, rising interest rates and persistent inflation, waiting out macroeconomic factors that are beyond our control and wondering how they will impact our business doesn’t serve us well.
Instead, leaders who lean into transition, rather than taking a wait-and-see approach, can accelerate faster when uncertainty turns into visibility. As several of my mentors have echoed over the years, never let a negative economic downturn get in the way of taking advantage to make your business better.
There’s ample research to prove it. Examining several studies on how companies fared during earlier recessionary periods, the Harvard Business Review found that about 10% of companies didn’t just survive a downturn, but emerged stronger with higher revenue because they acted proactively, switching gears to stay focused and agile.
As we weather our current storm, here’s how to shift your leadership approach by first taking an inventory of what really matters to your business—your growth strategies, talent (making sure you have the right people in the right seats), execution rigor and extending your cash runway—and then taking swift action to protect it:
Strategic focus is key: Less is more.
Most businesses typically focus on long-term strategies that span three to five years, and they often have eight to 10 key initiatives. Now is the time to do fewer things with higher impact. Reduce your sightline to the next 18 months and simplify your approach to focus on what you need to do to ensure your business survives the downturn and can thrive when it’s over.
For example, pick three to four key initiatives that will strengthen your business and accelerate them. Increase the urgency around those areas and communicate the changes to your leadership team, ensuring that the messages are cascaded throughout your organization. Dozens of people communicating the same message is far more powerful than shouting it out on your own.
This doesn’t mean that your longer-term strategies, or those that didn’t make the top cut, aren’t important; it’s likely that you are sequencing them for a later time. In wartime planning, you need to prioritize those initiatives that can actually have a material impact on the next 18 months.
Remember that business is the ultimate team sport.
Your team is your No. 1 asset. Together, your people create a special culture, which is a key ingredient to successful companies. Industry-leading companies believe that their culture and talent strategies give them a competitive advantage. Historical data has proven this, with companies considered to have a top-tier culture outperforming their peers in revenue growth, profitability and talent retention.
During times of uncertainty especially, keep your people connected and updated with clear, concise communication. Avoid confusion and speculation by providing simple, transparent information. Highlight the broader factors that are impacting your business and explain why strategies have changed to address them. Remember that vulnerability provides for flexibility when you have better visibility.
If you need to transition your leadership to maintain structure and balance during uncertainty, start by identifying and rewarding your top performers, the people that will help you weather the storm and be able to have the greatest impact. Focus on retaining them through incentive plans, inclusivity and by stronger collaboration and communication.
Rather than hiring to fill new roles, consider upskilling your current people and amping up their responsibilities to give them a more vested interest. They already know your culture and your business. You might actually lose time and money if you resort to hiring from the outside during this time period because the assets are greater in-house.
Invest in survival.
During strong economic times, businesses invest in the long term. But now is the time to understand which resources—products, services, hires and expenses—you need and how impactful they are for your short term. In other words, you need to make sure you survive before you thrive.
Consider which of your products and services can make the biggest impact over the next 18 months. Remember that your aim is to do less for greater impact.
Also, look at hiring investments and slow them down to focus on only mission-critical key hires, saving others for when you have more insights into the future.
Use an eagle eye when evaluating your expenses. Every expenditure is critical to ensure short-term success.
While it may seem counterintuitive to spend during tight times, consider investing in technology like automation that can create efficiencies to save time and money while also providing transparency and better visibility into your cash flow.
Ensure your oxygen is accessible.
Extending your cash runway and managing that cash flow is especially critical. You don’t want to be in a position of having to raise capital during times of uncertainty and inflation. Instead, focus on options for maximizing and extending your cash runway to support the business and extend your balance sheet.
Transitioning your approach to strategies, investments and your people will help you get a better handle on cash flow. As you gain clarity into how macroeconomic factors like inflation and rising interest rates will impact business, you’ll be empowered to double down on those initiatives before you accelerate.
Prepare for the future.
While uncertainty is unsettling, don’t wait for the macro environment effects to play out before you start taking action; be proactive in preparing for the future.
Now is the time to aggressively simplify and focus, evaluating and redefining your leadership to ensure continuity and position your business to thrive as we gain better visibility into the future. Your business will be better off for it, and you will be more competitive and a stronger peacetime leader when the economy starts showing signs of recovery.
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