Navigating Economic Uncertainty: 12 Financial Planning Strategies for Consumer Brands

It's no secret that the global economy has experienced significant shockwaves over the past several years, and the U.S. is no exception. While 2024 has witnessed a general upswing in consumer economic optimism, inflation and political unrest continue to threaten that already precarious trend. Growing brands — who are uniquely vulnerable to the ebbs and flows of consumer behavior — must stay vigilant and prepare for an uncertain future in 2025.

While you can't predict the economic future, you can take pre-emptive measures that help you successfully navigate these rough waters. To do that, lean into your strategic finance function to make decisions that mitigate risk and drive growth.

Let's look at 12 savvy financial planning strategies consumer brands can use to navigate an uncertain economic climate.

Why consumer economic sentiment is in such a precarious place

Many factors influence consumer economic sentiment, but today, the most forceful pressures involve inflationary price increases, the political climate, and personal debt. Let’s examine how each factor impacts consumer interactions with your brand.

Concerns surrounding prices and inflation

Ask a passerby, “What’s up?” and instead of “the sky,” you may hear “inflation.” It's become common knowledge that inflationary forces are harshly affecting the value of the dollar. And in 2022, inflation hit a 40-year high. 

Consumers don’t recall that inflation has incrementally decreased over time. After all, most people aren’t economists. Instead, the 40-year high has them reeling, experiencing a phenomenon known as "inflation overhang.” It will take them years to adjust to higher prices.

The recent rises in inflation have increased prices for essential goods and services more dramatically than people expected. Some experts try to reframe the issue by emphasizing the dollar’s reduced purchasing power, not “rising prices,” but the result is the same: diminishing consumer sentiment.

Understandably, today’s buyers are laser-focused on bare essentials over frivolous purchases. For brands, that means an increased need to make offers even more relevant and valuable.

Qualms about the current U.S. political climate

Another concern antagonizing consumers is the uncertainty surrounding direction of the country as a whole. 

Will trade policies lead to tariffs and supply chain troubles that further increase prices? Will tax policies hurt or benefit costs at home? Questions like these always flare up during election cycles, and consumer behavior manifests their legitimate concerns.

Unease regarding rising consumer debt  

In Q2 2024, consumer debt reached an all-time high (at $17 trillion). And unlike corporations that use debt as strategic leverage, consumer debt reveals a picture of everyday people struggling to stay afloat. Unwanted loans place additional secondhand financial stress on consumers who would otherwise spend and invest more freely.

While it may be an uncomfortable exercise to analyze this trend, the companies that do will achieve a more realistic view of the landscape and an empathetic perspective that could unlock tangible value once consumer debt begins to ebb once again. 

12 must-have strategies to navigate an uncertain economic future

From diversifying risk to leveling up your FP&A function, here are the essential strategies every consumer brand should consider during uncertain economic times.

Optimize costs and capital at every turn

Some costs can be cut, and others remain more fixed — but true optimization requires a surgical approach to your P&L.

1. Conduct a thorough cost analysis

Start by reviewing all your common expenses. Identify areas for potential savings where you can spend less without compromising on product quality or the customer experience. 

For example, you likely won’t be able to reduce COGS (without selling lower-quality products), but you might sell SKUs in bundles to increase average order value and improve profit margins. Or, you could reduce outflows by optimizing discount strategies and ensuring you’re not offering incentives to customers who don’t need them to convert. Another example could be making the most of losses with strategic tax moves like depreciation and end-of-year giving.

2. Consider strategic outsourcing

Evaluate which functions can be outsourced to reduce costs and increase flexibility. Functions like customer service and data entry are often the easiest to outsource to agencies, consultants, and freelancers. 

If you’re a smaller brand, you should consider outsourcing certain functions with more viable paths, like FP&A, sales and marketing, and legal. Since these functions are core to a small business, they cannot be eliminated. But on the other hand, they also involve many tedious, often manual tasks, and those can be entrusted to external teams.

Strategic outsourcing also enables you to hire on an as-needed basis instead of investing in roles that don’t necessarily require a full-time workload. The flexibility of this arrangement also enables you to expand or contract since steady growth is rare.

3.  Optimize working capital

Carefully dial into inventory levels, accounts receivable, and accounts payable to ensure efficient cash use. Reach out to vendors to extend A/P terms while building a process to contact delinquent customers, thereby cutting your aging A/R. This move requires more than mere discipline — it calls for relationship-building and sharp negotiation skills. 

Consider Simple Modern, who asks its overseas suppliers to hold finished goods at the factory until inventory is needed. Freeing up this capital enabled them to invest more in growth initiatives.

On the receivables side, prepare to go beyond the most basic ask. Incentivize early customer payments, but only for those you can identify as past or potential at-risk defaulters.

Diversify your risk

Derisk your decisions to help hedge your bets and edge out unprepared rivals. We’re seeing various creative ways to do this, from adding revenue streams to reevaluating contracts, talent vetting processes, and insurance policies. Many risk mitigation plans take time to manifest their positive downstream effects, but when volatility arrives, they’re worth the effort they took to implement. Here are a couple to consider first:

4. Explore new markets

Spend time researching new geographic markets, demographic segments, or distribution channels to reduce dependence on a single market. 

For example, consider moving from DTC to omnichannel (marketing, sales, support). The move could neutralize risk by giving customers more ways to engage, ensuring no opportunity slips through the cracks. Look again to Simple Modern, who moved its products to Target and Walmart to “get more water bottles in hands.”

The omnichannel approach also equips you to respond to emerging and developing consumer behavior, like the increasing shopping habit of researching online and then buying brick-and-mortar. Remember that risk mitigation goes beyond defensive measures. It also involves ensuring you are at least aware of — if not actively pursuing — nascent opportunities that you’d otherwise inadvertently miss.

5. Strengthen your supply chain

While some may say the global COVID-19 pandemic created supply chain inadequacies, we also point out that the black swan event exposed already-present trouble. The good news? A crisis of that scale has pushed many of today’s businesses to build more resilient supply chains and QA processes.

To diversify risk within materials sourcing, factory engagement, logistics, and compliance, start by reducing reliance on single suppliers or regions within each step of production. Avoid putting all your eggs in one basket, and you’ll mitigate disruption risks, preparing your operations for inevitable volatility that could otherwise devastate your brand’s production engine. 

Other tactics could involve analyzing demand cycles to keep inventory moving when possible. Doing this preserves customer satisfaction (and cuts waste). Or consider investing in technologies that streamline supply chain operations and provide more visibility. Just to name a few:

• Ordering and inventory management tools
• Fulfillment and shipping tools
• Warehouse staffing and labor management tools
• RMA providers
• Returns processing tools

Strategically invest to balance short-term gains with future growth

While cost-cutting is important, strategic investments during periods of uncertainty can position your brand for robust future growth. The following opportunities will get you started:

6. Double down on innovation

Economic instability doesn’t bring innovation to a standstill. Continue investing in R&D to develop products that meet evolving consumer needs. Let’s draw some inspiration from Daily Harvest. Its team is boldly expanding from its core offering of smoothies to grain bowls, soups, snacks, and more.

It’s also viable to consider developing new products that align with consumer sentiment during economic downturns. For instance, consumers might not spend on lavish items, but they’re more likely to make small, everyday splurges due to the lipstick effect. This economic theory emerged during the COVID-19 pandemic and revealed that individual consumers spend more on small luxury items when under financial pressure than in favorable economic environments. Today, the trend is back. Smart, innovative consumer brands will appeal to this appetite by offering high-end “feel good” products that are small enough to be affordable.

7. Shift your marketing strategy

During uncertain times, it’s safer to invest in marketing that drives short-term retention/LTV instead of making 10-year (and more) bets. This shift can effectively reduce your CAC payback period and preserve working capital when you need it most. 

The only caveat? You can’t do it loosely. Make sure you can precisely determine which marketing dollars are driving top-line growth. Consider Made In’s finance leaders, who run through sales data with their marketing team to identify the highest-ROI channels. Cross-collaboration like this ensures no lesson goes unlearned, so that when times turn around and stability reigns, you’ll know exactly how and where to throttle.

Keep the customer at the center of your strategy

It’s tempting to focus solely on financial planning, but these tactics don’t serve customers directly — and customers are the foundation of your success, both immediately and in the coming volatility cycles.

8.  Enhance your customer experience

Invest in improving service quality and personalization to attract stickier customers – and then work to retain them. Remember that during uncertain times, most people will need a substantial push to convert. 

Our best tip for this is to coordinate with cross-functional teams to get a better pulse on customer needs. For instance, your product team sits on a wealth of valuable customer feedback, customer service representatives can solicit (and document) even more feedback, and logistics partners can actively look for ways to optimize shipping, boxing, and reverse logistics experiences on your behalf.

9. Offer multiple product entry points

An alarming 50% of consumers say they’d switch to less expensive products in the event of a recession, a revelation that can shake confidence in customer loyalties.

Our advice? Focus on evolving your product line with the current economic climate, which will attract both new customers and repeat business. How? Develop products and pricing tiers that serve the needs of budget-conscious consumers without sacrificing brand integrity. Again, Simple Modern has shown the way by offering a variety of price points — from the affordable water bottles that appeal to big-box shoppers to its premium “Getaway Bag” that DTC customers love.

Level up your FP&A function

Uncertain economic environments require a nimble FP&A function that can both plan for the big picture and adjust for the unexpected. Big picture plans can be achieved through scenario modeling and the latter adjustments through frequent and granular reporting. 

10.  Use data analytics as your foundation for demand forecasting

Start by ensuring you’re ordering and marketing based on customer actions. How? Use current and historic customer data to inform demand forecasts and adjust marketing efforts accordingly.

Cohort analysis and retention prediction models are another especially powerful way to measure customer behavior. The models go beyond just enabling more timely marketing — they also help you understand which products are driving conversions and retention. 

Take a page from the book of the renowned insole brand VKTRY, who uses a retention prediction model to identify days between first and second purchases. The marketing team uses this data to time marketing flows in a way that optimizes for purchase intent and transaction likelihood.

11. Implement rolling forecasts

Most CFOs are looking for ways to supplement their static annual budgets with more frequent, adaptable planning cycles. Rolling forecasts update in real-time, so you always know what’s around each corner ahead. 

Monthly and quarterly forecast updates are a must. But in volatile times or if preparing for an event like a growth phase or acquisition, it makes more sense to update weekly or even daily. In the past, this increased reporting frequency meant more human capital was devoted to the task. But with the right tools, this exercise won’t consume valuable analyst hours. Plus, the more up-to-date forecasting gets stakeholders on the same page faster, saving executives time and ensuring you can make fast adjustments as a well-informed, united front.

Do rolling forecasts outperform the rigid projections of yesterday’s FP&A? Ask the leaders of Oats Overnight, who use precise forecasting and scenario planning to keep cash cycles tight. With real-time intelligence, they always have plenty of inventory and cash on hand to adjust for products moving faster or slower than anticipated. 

12. Set contingency plans

Develop action plans for various economic scenarios to enable quick, reliable, and pre-determined responses to market changes. Tech-enabled FP&A enables you to model upside and downside scenarios based on a wide range of assumptions and possibilities. The analysts at Graza exemplify this foresight by using scenario planning to model every possible outcome of their retail rollout. They even plan for worst-case hypotheticals (like skyrocketing olive oil prices) because as we’ve all seen, unthinkable scenarios become reality all too often.

Stand up to economic uncertainty with Drivepoint

Drivepoint is a strategic finance platform that gives brands the tools and financial visibility to weather any storm. Leaders like Simple Modern, Graza, VKTRY, and dozens of others use Drivepoint to:

• Access data from all sales channels in a single, user-friendly interface
• Accurately forecast and re-forecast financials with near-100% accuracy
• Analyze and compare a variety of scenarios to illuminate the most strategic path forward
• Unlock unexpected financial insights and growth opportunities
• Generate accurate, relevant, shareable reports both regularly and on-demand for internal and external distribution 

Even during uncertain economic periods, our customers have achieved impressive results. But don't just take our word for it. See what Drivepoint can do for your team's FP&A strategy today.

Schedule a Personalized Demo