A deep recession combined with a lengthy coronavirus pandemic has caused considerable concern for Wisconsin’s small and mid-size manufacturers.
Despite the unprecedented challenges, there are strategies manufacturers can take now to lead them out of the economic downturn.
Long term trends favor manufacturers who play offense and are proactive in their strategies, said Marie Mansheim, a senior consultant with WMEP Manufacturing Solutions.
Mansheim is the growth and strategy leader for the organization and has more than 15 years of experience assisting manufacturers in the areas of profit improvement, market diversification, customer acquisition and strategy formulation and execution.
The accelerated bear market and the impact of the Covid-19 outbreak has caused a downturn in business for many manufacturers, as evidenced by a recent WMEP Manufacturing Solutions survey, which found that 77 percent are experiencing a downward trend in sales, with 10 percent flat and just 12 percent showing a rise in revenue.
Manufacturers often will take a range of steps in dealing with an economic downturn, including layoffs, cost cutting, adjusting or eliminating capital expenditures, consolidating operations, eliminating research and development, halting new product rollouts, reducing spending on sales and marketing, and restructuring debt.
Many of these steps tend to be defensive actions. But there are offensive strategies that can be implemented during a recession, Mansheim noted.
“Many research studies show that companies have accelerated and gained market share following and even during a recession, but the key is to act proactively as soon as possible.”
Proactive measures include seeking new markets; bringing work back that had been outsourced; diversification; investing in lead generation; outsourcing non-revenue generating services; acquiring companies in new markets; and opportunistic hiring.
“These strategies can allow you to come out the other side as a recession winner and ahead of the competition,” said Mansheim, who has a diverse management and consulting background. She has experience in strategic business planning, marketing, market research, competitive intelligence, and sales and operations.
Manufacturers that come out on the losing end of a recession tend to follow dead-end strategies, Mansheim warned. They implement slash and burn cost cutting, reduce research and development, scale back sales and marketing efforts, lay off valuable employees, and completely rule out acquisitions.
Winning companies have deliberate plans to go out and capture opportunities – before, during and after a recession.
“I like to think about recessions as opportunities to re-set an organization to drive company growth faster not slower,” Mansheim said.
Successful steps include restructuring costs without cutting the muscle out of the core of a business, she explained.
“It’s important to reinvest for growth and go so far as to be proactive in looking for an acquisition that could provide you with a new product line, customer segment or capability
There are four steps to help elevate your probability for success in a recession:
- Focus on where you want to be at the end of the recession and work backwards. Create strategies and growth scenarios around new and existing customer segments, value propositions, sales and investing in growth.
- Just like the banks, stress test your P&L and balance sheet against those various growth scenarios.
- Identify potential M&A targets, have a plan on what add-on businesses or product lines would make sense for your company – be proactive vs reactive.
- Manage costs with a focus on refueling your growth now and in the next stage.
“The sooner you start the better,” Mansheim said. “Strategies can be redefined and refreshed as information surfaces, but opportunities can be fleeting. You should really be thinking about what kind of strategies I need to implement now to lead yourself out of the recession and come out on the winning side of the equation or, better yet, pull ahead of the competition.”
Mansheim has worked as a business unit manager for a small manufacturer and industrial automation firm. As a consultant she has looked under the hood and interacted, facilitated, and collaborated with management teams at more than 500 companies to drive strategy, growth, innovation, and profitability.
She lives in the Madison area with her husband and enjoys hiking, biking, kayaking and fishing. She has hiked at elevation in the mountains of North and South Carolina within the Shining Rock, Mountain Bridge, Ellicott Rock, Middle Prong and Nantahala Wilderness Areas.
For more information about WMEP Manufacturing Solutions’ growth services, go to https://www.wmep.org/growth-services/