Majority of business owners are living the entrepreneurs version of paycheck-to-paycheck. Without a substantial cash pool to fall back on, a significant downturn in the economy (aka recession) can end up paralyzing your business. And even wiping it out completely.
Is there a fool-proof way to get your business through a recession? The answer is “no” but you can give your business the BEST CHANCE with the elements below:
Watch Your Emotions & State Of Mind
Up to 95% of your decisions are directly influenced by your emotions. During a recession, there is a high degree of panic and unrest. Business owners will make decisions based on fear instead of sound investigation, logical and deliberation. Keep your cool and your energy levels high. Your energy levels impact your brain functions which ultimately impacts your decisions making. Business is just a series of decisions and actions, that’s it! There is no perfect decision, you just have to make better decisions.
Recessions separate real entrepreneurs from business owners who just have a job. Entrepreneurs have an “opportunity mindset”. Your brain must be focused on the possibilities as opposed to the restrictions. (For more insight on mindset training check out The Male Entrepreneur Podcast by clicking here)
Mitigate Your Business Risk
One of the first things you must do is reduce your exposure to the risks involved by performing an extensive risk mitigation exercise. Break it down to short-term risks (0-3 months), moderate-term risks (3-12 months) and long-term (12 months +). The best way to deal with risks is to have them identified first.
Most business owners get caught with their pants down with the factors they didn’t even think of. This is where you get creative and come up with all possible risks and scenarios. Then outline a plan for the at least your highest risk factors. You can’t mitigate everything so keep your cool knowing that you might not have the resources to do everything at this moment.
Focus On What You Can Control In A Recession (Instead Of What You Can’t)
There are some factors in a recession that you just cannot control. It’s important to focus on the things that you can. It’s that old defensive driving technique of looking in the direction you want to go when you lose control, not the direction you don’t. If you focus on the telephone poll, you’ll hit it. The same applies in business. You can’t control anyone else’s business, you can’t control the government, you can’t control your consumers but you can control your own business. You have choices, you may not like all of them but you do have them. Ultimately, you can control which choice you make.
Don’t Wait For The Government To Bail Out Your Business
The government does a lot of talking during a recession but this doesn’t mean that you’re going to get the help you need. The government’s role is to facilitate the economy based on what they think needs to be done. Not what you think.
The biggest mistake I see business owners make is waiting for the government to give them assistance or bail them out. You will most likely be waiting longer than expected and you may not get the help you need at all. So don’t wait and take charge of your future. (If you’re a Canadian business owner and you want to take control of your fate, click here)
Streamline & Reduce Waste (Not Costs)
Chances are that your business will be strained financially. Otherwise why would you even care about a recession. You may be tempted to cut costs by laying off employees, stopping to provide certain services, closing down locations, etc. But before you do this, keep in mind that there is a difference between costs and waste. A costs is a “thing” that you need to spend on to make money. Waste is a “thing” that you spend on that doesn’t necessarily make you money. If it turns out that your cost is a waste, cut it. If it’s making you money, think twice.
Get your hands on a Lean expert. Lean is a methodology that is used to reduce waste in a business. If you can’t afford an expert at this time, read the book The Toyota Way. There’s a significant amount of waste in most organizations and up to 90% of the “activity” in your business could non-value added work that doesn’t add to your bottom-line.
Watch Your Competition But Don’t Copy Them
It’s smart to watch your competition during a recession but it’s not smart to repeat their mistakes. What typically happens in a recession is that one business starts a trend and everyone else starts to follow. For example, they may start closing down locations and then everyone in the industry starts doing the same. Group think is one of the direct causes for recessions to become even worse. Make your judgments carefully based on your own assessments, not your competitions’. If they know something you don’t, find out before you follow the trend.
Look For The Gaps During A Recession
Most likely, your competition is in a similar position as you which means that they are feeling the same pain. In these situations, businesses tend to contract and either cut costs, services, markets, etc. This leads to consumers not getting the same attention or service they were receiving before. This creates a gap! A gap that you can fill. When most businesses were contracting during the 2008 recession, the ones that filled the gaps came out the most successful because they turned average customers into raving Super Fans. Customers become loyal to those businesses that create the experience that they’re looking. For more information on how to create Super Fans for your business, get your copy of the book Super Fans by CLICKING HERE.
Innovate, Innovate, Innovate
Business owners who know how to innovate will survive and even THRIVE. It’s one of the core functions of business. Peter Drucker (world’s most famous business management consultant) emphasized that the two core functions of business is to market and innovate. Amazing advancements are made during recessions because businesses are forced to do things differently. During the good times, many business owners become complacent. It’s the complacency that ultimately kills businesses, not the economy.
You may have to operate your business in different ways going forward. You may even have to pivot your business into a completely new market or industry. The more creative you can be, the better your chances of coming out of this with a head-start.
Understand What Makes A Business
Business is about creating a customer and serving a customer. It’s not your products or services, it’s not your intellectual assets, it’s not your technology.
Business is simply the ability to create and service a customer.
Your true value as a business owner is to find the best AVENUES to create a new customer and service them. Don’t get caught up in your product or service. Get caught up in figuring out how to solve a consumers problem or how to give them what they want.
Watch Your Suppliers
Keep an eye out for how your suppliers and your suppliers’ suppliers are reacting. This will give you a good idea of the impact it will have on your business. Big suppliers sometimes have the resources and connections to information and knowledge that you don’t have access to. Stay close to them and even ask them to give you updates on what they are seeing and hearing.
Form Strategic Partnerships
The smartest thing you can do in a recession is form strategic relationships. Reach out to others in your industry (if you’re comfortable with this) to identify how you can work together. Most often, trying to out-compete your competition leads to a lose-lose situation. Picture two drunks getting into a fight…you may end up knocking each other out. Perhaps there are different markets that you can agree to serve so you’re not stepping on each other’s toes. The key is to weather the storm so that when the economy picks up again, you’re strong enough to start competing again.
You can also form strategic partnerships or alliances with different types of industries. The key is to find partners that you can each provide value to. The more value you can provide for your business, customers and suppliers, the better.
Remember That You Have A Business, Not A Charity
You are a business owner, not the CEO of a non-profit. There’s a tendency to keep staff on payroll when you may not be able to afford it. Your employees are the crux of your business however, your business has to stay in business to be able to continue to pay their wages. Letting staff go is always tough but it may be a necessary step in keeping your business afloat. There are also other options such as reducing hours, asking them to take a pay cut, reducing benefits, etc. If it’s in their best interest to stay employed with you, employees will understand and be collaborative.
Take Care Of Your Customers
Your customers are king. No customers, no business. So take care of your customers during the tough times. Chances are that they are feeling the pinch as well and they will remember that you stood by them during the tough times. Look at the backlash that happened to the banks during the 2008 crisis. Consumers are still harboring their dislike for them. Treat customers as people, not numbers. When the economy normalizes, they will come back and do business with you, maybe even more than before.
Get Ready For The Upswing After A Recession
“This too shall pass” is a saying that you should keep top of mind. With every downswing of an economy, there is always and upswing, it’s just a matter of time. Set your business up for growth BEFORE you start seeing the signs of recovery. The faster you get out of the gate, the better your chances of growing your business beyond what it was before.
Yes, recessions are tough and they hurt many businesses. But the ones who weather the storm and see this as an opportunity for growth are the ones who actually make it and make it big!
Success is a 10/90 split. 10% is based on your external circumstances and 90% is how you deal with those circumstances.
I wish you the very best!
The Growth Strategist For Men In Business
If you have a business question that you want answered, contact us below: