Inflation is escalating at its fastest rate in nearly fifty years due to global governments flooding the markets with freshly printed cash. And to make matters worse, the true inflation rate might actually be as high as 17.3%. But despite our best efforts to deny it, layoffs are imminent.
Over the past few quarters, large corporations have worked hard to absorb as much of the labor force as possible by offering overinflated salaries and five-figure sign-on bonuses (in addition to offering double the going salary rate in multiple instances), effectively making it impossible for small businesses to hire the employees they need.
As I write this, big corporations like Shopify, Walmart, and Wayfair have already begun downsizing their massive payrolls. In fact, it’s estimated that 32,000 employees in the tech industry alone have already lost their jobs this year.
We’re sending jobs overseas, limiting opportunities for our workers at home, and supporting other countries’ economies at our own expense. Additionally, the international supply chain is so tangled that the only way to untangle it is—frankly—to cut the demand entirely. This indicates that when the bottlenecks and inflation reach predicted levels, an economic slowdown period will occur. Only this time, it will be significantly greater than the roughly -1% we’re observing currently.
Only Van Gogh could paint a more melancholic picture…
However, this story is not new. In the late 2000s, the “Great Recession” effectively wiped out $10 trillion (for perspective, that’s $10,000,000,000,000) of wealth from everyday Americans, resulting in the unemployment of nearly 15 million people. It was a scary time for anyone with families to care for, a mortgage to pay, and a lot to lose. Still, before that, we experienced recession after recession, as shown in the following graph (GRAPH: GDP Growth% + Annual Change% 1965-2021).
It was challenging, but some businesses chose to innovate, resulting in thriving entrepreneurs. Though the picture may be bleak now, there are three critical lessons to learn from those who found a path to thrive amid the chaos.
In this article, I want to paint a picture for you that isn’t as disastrous as the one above. I want you to walk away feeling equipped. But please note, I’m not writing this article as an expert economist, and I am not a certified financial planner; I am a serial entrepreneur and successful investor diversified across many industries, including FinTech, SaaS, News, and Ad Technology, to name a few. It’s my business to know and understand why and how people make buying decisions.
Additionally, I’ve read book after book, listened to countless interviews with prudent and pragmatic economists, and combined their knowledge with my experience to craft the following lessons.
Lesson #1: The Foundation – Plan to Win Now.
Prepare for the mental game by adopting your new reality.
The very first step you should take to ensure you’re protected from this downturn is to be mentally prepared to endure it. As economist Victor Cheng alleges: “you need to get a ‘recession-proof’ mindset.”
As a professional, I’ve been coaching business owners for several years now. And over time, I’ve developed the ability to distinguish between those who are desperate to win and those who are content to simply “ride out the storm.”
Unfortunately, I’ve seen businesses fail as a result of becoming complacent and choosing the path of least resistance, waiting for the change to stop.
Spoiler alert: change never stops.
Personally, I’ve experienced periods of stress and seasons when things seemed to be completely out of my control, and the temptation was to dial back a bit. When those seasons came, it felt like a tidal wave was barreling toward me, and there was no way to avoid it.
Obviously, it may seem tempting to stop and reevaluate the plan, but that approach never goes well. As a mentor of mine used to tell me, that’s “Paralysis by Analysis.” I’ve learned that when you make the decision to fight it out, your business will thrive.
If you want to beat the odds, there is only one recommendation I can make. The most successful business leaders are those who think and act in response to the new recession-minded customer. Another way to say it is how Ben Horowitz put it in his book, The Hard Thing About Hard Things, where he states there are three types of good leaders:
And very rarely you’ll find someone who can be both.
“Peacetime in business means those times when a company has a large advantage over the competition in its core market and its market is growing. In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths.
In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources, including competition, dramatic macroeconomic change, market change, supply chain change, and so forth. The great wartime CEO Andy Grove marvelously describes the forces that can take a company from peacetime to wartime in his book Only the Paranoid Survive.”
– Ben Horowitz, The Hard Thing About Hard Things
When you plan to win, you are much more likely to succeed. So, go into this recession with a winning mindset, prepared to overcome this crisis instead of allowing it to defeat you.
Lesson #2: The Strategy – Be Flexible.
Adapt Your Business and Yourself.
What was valuable yesterday may not be valuable today and most likely won’t be valuable tomorrow. Not because I believe we need to live in a perpetual state of change. I certainly don’t want to live like that. In this economy, however, you must constantly monitor your customers’ behavior so that you can adapt to maintain your relevancy.
If you see uncharacteristic seasonal changes, then don’t fall victim to the theory that it’s just a random coincidence. Recognize that the market is shifting and set aside a day with your leadership team or business consultant to develop a plan and find solutions.
Victor Cheng, a renowned economist and contributor to the global discussion of fiscal conservatism, once remarked: “Since customer priorities change in a recession, it’s not all that surprising to discover that customer spending patterns change to reflect these new priorities.”
While this seems like self-evident common sense, a shockingly high percentage of businesses that were built on the customer spending patterns of a booming economy don’t actually change what they offer during a recession. If customers’ spending habits shift during a recession, shouldn’t the products and services you provide also change?”
As a marketing strategist and business consultant, I work with many businesses that offer a wide variety of products and service lines. It can be daunting even to consider making changes to those products that have historically been successful.
Moreover, making changes can seem costly. According to a recent NPR article , many big box retailers have been doing that already. This means that you may need to invest in additional marketing, or you may have to liquidate inventory entirely. Nevertheless, it’s important to factor in the missed opportunity cost, weighing that against the cost of marketing, staffing, or inventory liquidation. Usually, missed opportunities outweigh everything else.
As an ancient proverb articulates: “A wise man adapts himself to circumstances as water shapes itself to the vessel that contains it.” In other words, your situation needs to dictate your strategy. If you remain rigid because “this is how we’ve always done it,” then your business won’t be able to adapt to the new normal and, in turn, will become irrelevant to the ever-changing market needs.
This approach can be taken to an extreme, so as long as you maintain your values and core passion, your niche can adapt to any circumstance. Here are some well-known companies that not only made successful pivots during recessions but were also able to grow exponentially and capture a larger market share.
When they first launched, they focused all their time and attention on high-value annual retainers for Fortune 5000 companies. However, during the Great Recession, they realized they needed a new business strategy. And in 2009, they decided to launch a freemium business. Within one year, the number of users had increased from 85,000 to 450,000.
In their San Francisco living room, Brian Chesky and Joe Gebbia came up with the idea of renting out an air mattress in their living room. They were unaware that the Great Recession would hit in December of that year, ushering in an opportunity window. And ever since, Airbnb has revolutionized the short-term housing industry for those who couldn’t afford hotels. In 2009, they secured funding from a venture capitalist, and their growth was exponential.
Switching the direction of your business during a recession is not impossible. But it will be even easier if you start that process before your competitors do. Being the first in your industry to make that pivot will signal to your customers and prospects that you are the leader in the industry; you’ll be seen as more trustworthy because you aren’t deaf to consumer demand. Therefore, you’ll end up owning a far greater slice of the market.
You may wonder, “How can I actually execute this pivot?”
It’s simple: provide your customers with a solution to a problem that worsens during a recession. That is the proven method to ensure there will be demand for what you have to offer and protect your long-term share of the market.
If you’ve been in business for at least a few years, I recommend the following strategic approach:
Document each of your business’ proven processes.
Evaluate which service or product is most valuable to a recession-minded customer.
Examine your bank account to determine where each penny comes from and where it goes.
Set 1-year, 3-year, and 5-year goals for both revenue and profits.
Write down your vision of your business at each year’s milestone (customer volume, demographics, value structure, staffing levels, etc.)
Following these five steps will prepare you to take action with the final lesson below.
Lesson #3: The Action
Scale like your life depends on it… because it does.
Tony Robbins infamously said: “In life, you need either inspiration or desperation.” Often, desperation is far more motivating than genius inspiration. Though it’s not healthy to live a life of desperation, nor is that something worth aspiring to, it certainly propels people into action.
In times like these, you must redirect the fear of failure as a motivator to propel you forward with your business. It will give you the courage to take risks you weren’t willing to take in 2019. Furthermore, keep in mind that what worked for you in the past may not work for you now. That means you need to reinvent yourself as a revenue generator for your business.
Now, if you have read the two previous lessons and applied them, then it is time to evaluate your growth track. Consider your 1-, 3-, and 5-year objectives and ask yourself: “How can I achieve them?”
You probably can’t get there by continuing to do what you’ve always done, so market your pivotal product and service, and make sure every single soul in your target demographic knows you exist. But you can’t stop there. Make sure they understand how you are uniquely qualified to help them overcome their problems.
Whether you are categorized as B2B, B2C, or both, you need to start out by clarifying your message. I’ve found Donald Miller’s book, Building a Story Brand, to be one of the most useful tools in ensuring your message is relevant to your audience, meaning that it is something they care about. If you’ve read the book but want help implementing it, then I encourage you to reach out, and the Reverent Media team can guide you through that.
Once you’ve clarified your message, you must ensure your sales engine is working. I love Donald Miller’s analogy of running your business as if it were an airplane. Think of sales and marketing as the engines of your business. If you don’t have big enough engines, you’ll never be able to get a lift and either get stuck on the runway or fall out of the sky.
With the economic downturn in mind, I recently restructured my own company, transferring account executives from daily account management to my growth department (sales team). We are in the midst, even now, of re-evaluating every square inch of our sales engine so we can give our prospects the best experience possible while guiding them to the understanding that right now, they can’t afford to wait to invest in their marketing. I strongly advise you to do the same.
Build up your sales team and provide them with the necessary resources to keep them as busy as possible by investing heavily in marketing. After you refocus your business and develop a product or service geared toward the recession, you will be ready to scale. You can take your marketing efforts in numerous directions, but I recommend concentrating on the most cost-effective ones.
Here are some affordable marketing practices that actually work if you follow our guidance:
Attend conferences, trade shows, and networking groups to increase awareness of your presence in the local market.
Join your local chamber of commerce and attend all of their events. Try to provide as much value as you can (everyone there is looking for leads and new business, so unlike everyone else, try to add value).
Get opportunities to speak about what you do and teach at chamber events and local community colleges.
Host a lunch and learn event and invite all of your contacts to learn something of value that you have to offer for free, followed by a call to action at the end of the event.
If you’re already doing these things, then we recommend investing in paid advertising; here are a few ways you can do that.
If you’re a B2B business, then LinkedIn advertising is definitely worth it. Firstly, set aside a minimum of $2000 per month and ask yourself: “How can I add value to my network?”
When our clients host virtual workshops or webinars, we see the greatest success. These can be free or paid, but they allow you to do the same thing you’ve been doing in the chambers of commerce and networking groups. The benefit is that you’ll have a captive audience who cares about what you have to say. After they attend the virtual event, be sure to give them a call to action!
Many people have told me that Facebook ads are ineffective. Indeed, it has become increasingly difficult to obtain qualified leads from Facebook and Instagram, but if your audience uses those platforms, you should at least be running branded ads for your target audience and/or retargeting ads for anyone who has previously engaged with you. I strongly suggest spending at least $2,000 per month on this, including both your advertising budget and marketing agency fees.
Depending on your industry, Google Search and Local Advertising are likely the most valuable ad campaigns you can run. This is due to the fact that you are paying to be a direct response to someone who wants to purchase your product or service.
Just make sure you are monitoring how much it’s costing you per click and what your conversion rate is on your website because, though it might be a good thing, it’s also a great way to waste an enormous amount of money with little to no return. For this reason, hiring a marketing agency –like Reverent– with the expertise required to guide you to success is fundamental.
The last thing I’d recommend in this context is that you consider running an SEO campaign. This means that you can appear organically in Google’s search results. As a long-term investment, this will be extremely beneficial, but please keep in mind that it typically does not produce immediate results.
An SEO campaign is an important part of a well-rounded marketing plan, but if you’re low on cash and need to make money right away, I’d suggest waiting on this one.
As a side note, my businesses have been built on SEO because I’ve invested immensely in ensuring that I’m able to own the market in moments like these when it’s becoming increasingly competitive. That’s why nearly 70% of all my business comes through Google organically, allowing me to walk away with millions of dollars per year. So, it’s worth the investment if you can afford it.
If you can take all three of these lessons and apply them, you will effectively “recession-proof” your business. And to follow Donald Miller’s analogy, you must have strong leadership (cockpit), a good product or service (wings), marketing and sales (engines), lean overhead (body), and reliable cash flow (fuel). This will give you liftoff and success, no matter how intense the storm may get.
This article does not necessarily reflect the opinions of the editors or management of LifeZette.
This piece was written by Clay Vaughan on September 12, 2022. It originally appeared on EconoTimes and is used with permission from the author.
The opinions expressed by contributors and/or content partners are their own and do not necessarily reflect the views of LifeZette.