In an era of cost reduction across the board, business experts are urging CEOs to take advantage of Brexit. But are there wiser choices?
When the going gets tough, business leaders frequently make cuts. They do this to secure financial viability, but experts suggest that refocusing is a better solution.
Brexit is changing the business landscape
With Brexit on the horizon, consultants are urging CEOs to not make blanket cuts across their businesses.
In the wake of the 2008 financial crash, 79% of companies made sweeping cuts. However only a slim majority of this number felt the decision helped them weather the storm.
In fact, 47% of those who cut costs felt the strategy had an adverse impact on their recovery.
Consultants advise that businesses must attempt to take advantage of market turbulence.
Spotting what could make an organisation competitively distinctive and restructuring accordingly can be extremely effective. The 2008 recession saw companies doing exactly this.
CEO of Zeta Interactive (previously XL Marketing), David A Steinberg states: ‘We were able to acquire smaller companies for very favourable multiples since there was less competition bidding for these businesses.
‘Moreover, their limited access to capital stunted their growth allowing us to gain leverage very quickly once they were part of XL Marketing.’
Now valued at over $1 billion, it’s fair to conclude that harnessing uncertainty and investing as opposed to cutting costs was a genius strategy for Zeta Interactive.
Similarly, food outlet Smashburger seized the opportunity to invest in the face of insecurity while others slashed budgets.
CEO Scott Crane describes how ‘real estate was more affordable during this time, so we were able to take advantage of better economics and key locations’.
Property investment, as well as understanding of a budgeting clientele during uncertain times, has seen Smashburger excel. Smashburger is now valued at $335 million.
What if cuts are unavoidable?
Where cuts are simply unavoidable, experts emphasise the importance of prioritised decision making rather than equal cuts across the board.
For example, according to global management consultant firm McKinsey&Company, CEOs are able to generate capital and cut costs with minimal negative impact simply by reviewing efficiency.
The firm explains how, ‘shifting the focus from organisational structure to current and future strategic needs makes for smarter savings’.
Rather than viewing Brexit as an obstacle, it seems CEOs should use the ambiguous market to inject a sense of discipline to the core of their business. Seizing opportunities to prosper by taking advantage or market changes is also key.