When markets shift—and they always do—the winners are those who don’t wait to react. They move first, and fast. No matter which of the four cycles you’re currently experiencing, one constant remains true: waiting for things to be more favorable is a bad strategy. Additionally, doing nothing is not an option. Companies that anticipate, plan, and act in alignment with their current business phase can maintain resilience, capture opportunities, and outperform competitors who simply “wait it out.”
The key lies in knowing which strategies matter most in each distinct phase. Let’s explore the four phases—again they are Recovery, Accelerating Growth, Slowing Growth, and Recession—and the actionable steps leaders should consider taking.
When leading indicators turn upward, businesses often hesitate—unsure if growth will last. Yet, Phase A is when leadership courage matters most. The only way you finds yourself in the Recovery Phase is because you’ve exited a Business Recession, and boy, do you need to change your mindset as you make that turn!
Action Steps:
Change your money thinking. In a Business Recession, conservatism abounds and rightfully so. However, maintaining a white-knuckle cash mentality in Recovery can cause this positive growth cycle to sputter and stall. Don’t be that guy!
Invest early. Consider upgrading technology if it will help you accelerate growth, scale, and capture new business. Now is the time to capitalize on the increasing demand for your products and services by building healthy supply chains and phasing out low-margin products.
Strong people. Implement training programs to ensure your employees can deliver high-quality products and services, especially if demand accelerates. Consider adding sales staff as well.
Lean into the market. Conduct customer and competitive research (but be conservative about the investment here), then launch new marketing campaigns focused on driving your brand differentiation, and sharpen your go-to-market strategy.
Bottom line: Companies that act boldly in Phase A are best positioned to ride the peak of the emerging growth surge. That said, if you don’t have cash reserves or you’ve exhausted them in the Recessionary Phase, you’ll be stuck wishing you had more resources to invest in the demand that’s coming.
In Phase B, sales are climbing, and profits should expand. I must say, this is the most desirable phase of the four. But it comes with a downside: it’s easy to get swept up in the euphoria, falling prey to a Midas Touch Mindset. This is where disciplined leadership makes the difference.
Action Steps:
Focus on talent. Hire, retain, and train wisely. Outsource or subcontract if pressure mounts and your existing labor force is going to struggle to meet the demand.
Manage operations. Build inventory in advance, and double down on what your customers truly value. Don’t assume you know what is important to them, so take the time to ask and document what you learn!
Think ahead. Expansion plans launched early in Phase B have the best chances of thriving. Wait too long, and the opportunity passes, along with the cash you waited to invest too late.
Bottom line: Growth feels effortless here, but the most innovative companies use this time to add cash reserves, expand strategically, and prepare for the inevitable slowdown ahead. And there is a slowdown ahead of Phase B: Accelerating Growth. What goes up inevitably comes down. Which leads us to…
The pace eases. Sales remain high, at first, but gains shrink. When you step into this phase, it feels almost identical to Phase B—but these gators are very different animals. It’s tempting to cling to past momentum, yet this is the time for focus and discipline.
Action Steps:
Prioritize profitability. Protect cash reserves, tighten receivables, and consider reducing non-core offerings.
Right-size resources. Allow natural attrition to rebalance headcount and direct resources toward high-value customers.
Keep your edge. Market selectively, nurture top accounts, and double down on differentiated offerings.
Bottom line: Careful resource allocation in Phase C can prevent a slide into a Recession (Phase D) and set the stage for renewed growth. But be clear—cautious leadership is needed in Phase C.
Confidence dips, demand contracts, and emotions run high in Phase D. In short, it’s not a fun cycle to find yourself in. In many ways, a Business Recession phase is similar to Accelerating Growth (Phase B), except the emotion is negative, not euphoric. But Recession does not have to mean ruin. Companies that respond strategically can emerge stronger than before. And your focus should be on maintaining profitability, which can be done despite the challenges of a Recession.
Action Steps:
Cut with precision. Eliminate inefficiencies and underperforming products without undermining core strengths. If you can eliminate overtime, seriously consider it! Be careful about RIFs (Reduction In Force). If natural attrition can help alleviate headcount pressure, let it. RIFs may be necessary, but it's essential to understand the impact on company morale and your business reputation when you eventually step into an upturn in the business.
Reinvest wisely. Use downtime to train employees, refine processes, and strengthen your competitive advantage.
Play offense, especially when the marketplace is in a recession. This is where having cash reserves will bring you blessings. Consider acquiring distressed competitors, renegotiating leases, and seizing market share from weaker competitors.
Bottom line: With foresight, Phase D becomes a launchpad for the next growth cycle.
Navigating these phases successfully requires more than intuition. It requires disciplined, data-driven planning. Ask yourself:
Do we track 3- and 12-month rate-of-change data?
If you don’t, you might be guilty of managing your business from a snapshot mentality. Being up 15% over last year can give you a false sense of security—it does not tell you what direction your business is headed. The 3/12 rate of change does.
Are we aligning decisions with objective economic insights?
What’s happening inside the four walls of the business is essential, but not understanding what’s going on in the macro and micro markets means you’re flying with one eye blind.
Do we have a documented, measurable, and adaptive growth strategy?
If the plan is only dusted off annually for an update, all you have is a plan. And if it’s wired deep in the CEO’s head, what happens if she gets hit by a bus? Ensure your team has a documented growth strategy that is regularly measured and updated.
Is our executive team united in interpreting and acting on the data?
Companies that can answer “yes” to these questions are not only cycle-proofing their business—they’re creating a durable competitive edge for growth.
Yogi Berra said it well: “If you don’t know where you’re going, you’ll end up someplace else.” Yeah, it’s kind of dumb, but not knowing exactly which economic cycle your business is in, or the direction it’s headed, isn't a good thing. Tracking the 12/12 (lagging indicator) rate of change and the 3/12 (leading indicator) rate of change will ensure you have a healthy view of the state of your business and its growth trajectory.
The companies that thrive in the coming years will be those that understand which phase they’re in, where they’re heading, and how to act decisively. If your company lacks a data-driven growth strategy, you are already at a disadvantage. Now is the time to change that. If you don’t know how, give me a shout. I’d love to help.