Invest in Growth or Cut Costs? 3 Things Top Companies Do Well Despite Economic Uncertainty

Opinions expressed by Entrepreneur contributors are their own.

Will there be a recession? Are we in a downturn? Even economists can’t agree. Still, entrepreneurs are busy planning, projecting, and looking into the future. There are countless decisions to be made, but one of the most critical is what strategy your company will pursue this year — is it a year of growth or status quo?

Since founding my PR agency in 2008, I’ve had a front-row seat to high-growth companies — or those with the ambition to be high-performing. CEOs of hyper-growth companies look at the world differently; external conditions are a consideration, not a driving force, because thriving companies know the cream always rises to the top and build their strategies around getting there.

When uncertainty is clouding decision-making, there is a lot of pressure to turn to cost-cutting.

The reality is: It doesn’t matter if a recession is looming — a company in your category will be No. 1 in revenue this year regardless. If it’s your company, it will be because you controlled the things you could. Since 2008, I’ve seen thriving companies do these things with total clarity, regardless of economic conditions.

Related: 10 Growth Strategies Every Business Owner Should Know

Reinvestment that aligns with growth

Ambitious companies know cost-cutting has never led to growth — ever. It may increase profitability, but that’s a different strategy. Growth strategies require investment.

Commonly, bean counters say things like “our salespeople make too much” or “there’s no direct line to sales with this initiative,” that’s their job — to point out these potential concerns.

But high-growth CEOs know companies in high-growth mode operate knowing that every dollar they invest has a return because they invest in the right places for growth. When that ROI starts to flatten, you’re in maintenance mode, not growth mode.

Thriving companies align investment with growth. They spend money on marketing, sales and PR because those are the levers you pull when you’re growing or want to grow. The average company with $10 million to $25 million in revenues spent 15% of its revenue on marketing initiatives. If you want to be average, there’s your baseline. If you want to be dominant, you must stretch that budget, and it may mean giving up some profitability in the short term.

Growth-oriented CEOs know spending on growth is essential for the next phase, whether IPO, acquisition or capital infusions. Everyone loves a winner — the goal is to be the winner in the eyes of your stakeholders who carry you to your ultimate goal.

Related: Why You Need to Reinvest Half of What You Earn Back Into Your Company

Support their sales process vigorously

It doesn’t matter if you sell to businesses or consumers. Not all sales activities have a direct line to a sale.

What does lead to sales is consistent exposure and relationship building. Relationships are a differentiator in today’s very crowded, very competitive marketplaces. According to the U.S. Census Bureau, in the first half of 2023, 3.12 million businesses were started, meaning new business starts in 2023 are trending against historical averages. Starting a business has never been easier; every business has competitors chomping at their heels. Now, only 6% of businesses ever reach revenues over $1 million, so those companies aren’t your competition — yet. But one of those companies that started three years ago is probably creeping up on you, and you don’t even know it yet.

Salespeople or sales channels need visibility, and they need a reason to engage and start a conversation with potential buyers. If every discussion begins with “we have a deal for you,” then you are conditioning your buyers to wait for a sale to buy. That’s not a winning tactic unless you can win the race to the bottom.

Enterprise and publicly traded companies often use this strategy — and it’s sometimes a reason companies want to IPO, so they have the budget to win this battle and be the dominant player; once they own the marketplace, they’ll be able to raise rates with impunity — at least for a while. Most privately owned businesses cannot win this war, so they must be growth-minded and remember to support the sales process.

Your marketplace positioning dictates how you support your sales team and sales initiatives. If you want to be No. 1, you need to be the most trusted and visible, so allocate your marketing budget with that split in mind. If you’re already the most trusted of your competitors, you may only spend 40% of your budget on trust-based initiatives like PR, face-to-face initiatives or events. If you’re already getting visibility but aren’t closing the deal, investing in trust is essential. One reason people invest in PR is because it provides both exposure and trust. Trust isn’t a line item on a spreadsheet, but you can plainly see it in key performance indicators (KPIs).

Related: This Strategic Growth Lever is Right Under Your Nose. Harness It To Multiply Your Company’s Success.

Track success metrics unique to the initiatives

Everyone tracks revenue and profitability. But companies in growth mode track KPIs that give them insight into trust and reach. Thriving companies value their reach and reputation together.

Trust KPIs should be a steady build with noticeable year-over differences. If you were building a house, trust is your foundation.

Trust KPIs could be:

Time to convertDirect website visitsBrand mentionsBrand associations (how trusted are the other brands you associate with)Revenue per new customerReturn on ad spend (ROAS)

Awareness KPIs are important because exposure matters. Back to the house analogy, awareness KPIs would be your framing.

Awareness KPIs could be:

ImpressionsIncoming leadsReach (ads, media mentions, social media)

Growth CEOs track these metrics over time. Monitoring over time is essential because growth is like a train. It moves slowly at first, but once it starts to build steam, the speed of growth happens faster, assuming you keep fueling growth.

It’s a radical idea to ignore external factors — but that’s exactly what CEOs of ambitious companies do to grow. Growth mode isn’t a way of life; aggressive growth is the pathway to the next step, and during that time, there will be some eggs cracked to make an omelet. But I’ve noticed CEOs investing in, measuring and staying the course with growth do so with laser focus and focus on controlling the factors they can control.

>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : Entrepreneur.com – https://www.entrepreneur.com/growing-a-business/invest-in-growth-or-cut-costs-3-things-top-companies-do/466457