The first quarter of the new year is typically an uplifting time for companies. Most businesses create annual operating plans, and the first quarter is when they launch them with enthusiasm and optimism. We typically know more about where we stand going into the first quarter than we know about how things will look twelve months later, so the goals seem more believable and attainable in Q1. Sales teams have their annual kick-off meetings with lots of fanfare, and marketing teams launch new and exciting campaigns in Q1. Based on Q4 sales successes, implementation and customer success teams enthusiastically engage new customers with renewed optimism for retention and expansion. First quarter rocks - normally.
However, with all of the recent economic and market turmoil, I am having a Covid-like moment as we enter Q2. I vividly recall when the Covid pandemic hit us just as we were wrapping up Q1 2020. Commerce came to a halt and every business went into survival mode. Unfortunately, it feels eerily similar right now. Back then, uncertainty about supply chains caused panic buying on one hand, and paralysis on the other. Today, nobody knows how permanent the tariffs will be, or exactly how the economy will evolve. There is reluctance to make big financial decisions, and that introduces uncertainty into every business.
For recurring revenue companies and SaaS technology vendors, this is a time to focus on retention of existing business. To do so, it is critical to understand your value to your customers. Is your offering a “vitamin or a cure?” Are you a “nice to have or a gotta have?” Do you really know why your customers do business with you and what value they attribute to your offering? Have you asked? You might be surprised to actually learn where your customers derive the most value, and that knowledge will be the key to ensuring you maintain the business you already have. Absolutely understanding your unique value proposition, based on real client feedback, will also be fundamental for you to convince nervous prospects that they should proceed to buy, despite the economy being in turmoil. The imperative in these crazy times is to recognize that it is not business as usual.
Step one is do not panic. However, take the time to formally assess how current events may impact your business. Determine your vulnerabilities and opportunities, and consider creating a revised plan that addresses the potential impacts. Establish the trip-wires that will cause you to activate your revised plan. This is not a time for ‘happy ears’ or blind optimism, rather it is a time for honest appraisal and realism. Consider the implications of rising costs of goods and operating costs. Evaluate your pricing model and the implications of increasing your price to offset increasing costs. If you anticipate the need to remove cost from your business, when do you expect to pull the trigger, where will you look for savings, and how will it impact your business moving forward? The objective is to put enough time into contingency planning to create a foundation on which to act if the world continues to spiral, and to identify the indicators you will watch in order to determine if / when it is time to act.
As a CEO, this is an ideal moment to engage your board of directors. Members of your board are likely to be involved in other companies, and you will benefit from the portfolio effect of their ability to look across different markets to understand the business landscape. Board members should insist on having this discussion with their CEOs. These are not normal times, and economists are all over the map in their predictions of boom or recession. The only prudent thing to do is to have a measured discussion of the implications and to formulate a shared perspective and plan for how the business should navigate the choppy waters ahead.