There are multiple reasons why growth hacking isn't an optimum strategy for many (if not most) businesses. But here's another. If a recession is on its way, there are different strategies you'll likely need to take to weather the tough times.

The stock market seems happy enough, but in the real economy, which is often quite distinct, business economists are nervous. The latest National Association for Business Economists member survey, released yesterday, showed that economic forecasters working in large companies see things slowing down, with many survey indicators "at their lowest level in several years."

That's not the same as a recession, which would be negative growth for at least two quarters running. But it means that the growth we've been seeing continues to slow and two-thirds of the economists expect it to be between 1.1 and 2 percent for the next 12 months. Materials costs have been rising for the last 14 quarters, but price increases were only slightly ahead of price cuts. Put differently, companies are feeling cost pressure but find it very difficult to pass those costs along to customers. As many are seeing falling profit margins as rising.

Companies are less optimistic about sales rising, with 51 percent reporting rising sales and 39 percent saying that sales are falling (a score of 22, according to their methodology of subtracting the percentage seeing falling sales from the percentage seeing increased sales). That might not seem so bad, but the differential was 37 percentage points in April and 28 in July.

More worrisome for the economy is that hiring has fallen to a five-year low. In July, 34 percent of respondents said that employment at their companies was on the rise. By October, that dropped to 20 percent. Anything jobs-related is a serious advanced indicator for the economy because 68 percent of GDP owes to consumer spending.

For example, the Conference Board's Measure of CEO Confidence says that CEO confidence "declined to its lowest level in a decade" in the in the third quarter of 2019, with a score of 34. (A score of 50 means an equal number of CEOs were positive and negative about the immediate future and the lower the score, the more negative.) The last time it was lower was in the first quarter of 2009, when it hit 30. In other words, during the Great Recession.

There's also been a change in investment. About a fifth of CEOs are increasing capital spending plans since January 2019 while another fifth decreases them, leaving 60 percent staying where they've been. The organization's measure of consumer confidence has also been down.

None of this is a cause to panic, by any means. One of the perversities of economics is that it is as much, if not more, psychology than mathematical science. Sentiment drives everything. When companies worry overly, they stop hiring, reducing money available to consumers for spending. That, in turn, means less consumer spending and a reduction in GDP growth at the very least. Or, possibly, a recession that turns helps create a vicious circle and probably requires government intervention to prevent it from spiraling out of control.

So, you need a balance. On one hand, work to keep pushing your business forward. On the other, balance that with intelligent planning to adapt with changing times. Focus on long-term business development that can build a base to tide you through slower periods. Look at your cost structure and see if it's where it realistically should be. Have alternative plans to put into place should things start to change quickly without warning (as they are apt to do). Cross-train employees (if you haven't already) to be sure it's possible to shift workers around if necessary. In general, let your optimism be cautious and your execution and planning, meticulous.

Published on: Oct 29, 2019
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