But you can make better, smarter decisions when equipped with the knowledge and expertise of those who have been there in the past – be it the subprime mortgage crisis of 2007-2008 that led to the Great Recession or the savings and loan crisis of the 1980s and 1990s.
Kevin Hancock of the Hancock Lumber Company shared one of his favorite quotes with us in terms of business survival planning: “In this life, there will be lessons. Those lessons shall be repeated until they are learned.”
So why not find out the lessons firsthand? We did, and picked up some great insights from those who’ve been at the front lines and lived to tell about it. Here are five major takeaways from what they shared:
1. Act quickly
The worst thing you can do is be idle in the midst of the storm. This is regularly advised by Workable COO Grigoris Kouteris, who himself has been through 2008 in a management capacity. Doing nothing means your ship continues to sink.
Kevin – whose Maine-based family-owned lumber business was hit hard by the housing and mortgage market collapse of 2007-2008 – regrets that he didn’t do enough to keep the boat afloat at the time:
“One of the biggest lessons for me is to manage in real time. As a company, we waited much too long to respond earnestly to that crisis. We kept convincing ourselves that perhaps markets were about to recover. The longer we waited, the bigger the required adjustments became and the more perilous our situation got.”
In hindsight, Kevin realizes waiting it out was not the best approach.
“Any time there is economic risk, it is imperative […] to start making adjustments quickly, in real time.”
John Crossman, a writer and speaker for college students on career planning and growth – and president & former CEO of Florida real estate company Crossman & Company – regretted that he had to lay off people for the first and only time in company history, and acted quickly to mitigate further damage from the crisis:
“Once we restructured, we then pushed very hard into marketing and client relationships. We also got very active with trade associations. We felt that it was important to be as visible as possible. This was in the beginning of the social media era and we became very good at social media.”
Kean Graham, the CEO of MonetizeMore, an ad technology company headquartered in Victoria, Canada, found himself in the tough position of having just started his business in the midst of the downturn. He moved quickly to benefit not only his client base but himself as well:
“Getting my first clients was very difficult! In fact, my first client couldn’t even commit to a retainer. Instead, I convinced them by only getting a percentage of the increased ad revenues my company would earn for them. If I didn’t increase their ad revenues, they wouldn’t have to pay anything.”
Kean’s quick thinking set MonetizeMore on track to becoming an eight-figure company with 100-plus staff all around the world.
In short – even if you’re in a stage of damage control or mitigation, there’s always something you can do to soften the impact on your bottom line. That’s essential in business survival planning.
2. Make many small corrections
Imagine you’re driving an 18-wheeler truck down a highway in wintertime. You hit a patch of ice, and your truck loses its grip on the road. You start skidding to the side. What’s the worst thing you can do? Over-correct by turning the steering wheel too hard to bring the truck back under control.
A common token of advice in maintaining control of that truck is the ‘small correction’. When you’re moving at that kind of speed, even the smallest change in direction will have considerable impact. That’s very hard to do in a state of panic, but do it, you must.
Cass Bailey, CEO of Philadelphia-based marketing and communication firm Slice Communications, recounts that she started making quick changes as soon as she realized clients were being affected by the 2008 downturn. She noticed a decrease in overall marketing spend – a major source of her company’s revenue stream and a leading indicator of upcoming trends.
“Quite often, companies will cut their marketing expenses first, so we were able to act quickly. We made some changes to staffing, eliminated software that was used to make the business more efficient, renegotiated contracts with subcontractors, and reduced our fees. All of these things made us more competitive.”
Her company’s quick thinking in her business’ survival planning meant a rosier future: “We survived and had great years in 2010, 2011, and 2012. We made the hard decisions quickly, kept an eye on cash flow, and were willing to hustle.”
Kevin, who also shared insights on shared leadership in business in his book, The Seventh Power: One CEO’s Journey into the Business of Shared Leadership, attests to this as well in navigating a development that directly impacts your business.
“It’s better to make a hundred small adjustments based on the actual conditions on the ground than to wait, and wait and then a few massive corrections at the end.”
He also emphasizes the importance of everyone being involved in that process to mitigate the overall damage:
“Lots of small sacrifices shared by everyone (including the company) are better than cataclysmic change at the very end.”
The benefit of quick, small corrections and fixes also means that if you’ve made a wrong move, you can act on it right away. It does require greater attention to detail from one day to the next, but in the short-term it’s crucial to your business survival planning.
3. Maintain a healthy cash flow
Money, obviously, is the lifeblood of a business. Without it, there’s not a lot you can do. You must act quickly and make adjustments so you can stay afloat in the midst of the storm.
Wayne Lorgus, partner of Arizona-based advisory and consulting service B2B CFO, recommends thinking about cash flow at the first sign of trouble:
“The first question a business owner needs to answer is: if my customers delay payments, how long can I afford to keep paying my employees, suppliers, and landlord? Knowing that point is critical, and to conserve cash, the business owner may need to contact those suppliers and landlords to notify them they will be paid when business restarts. Employees may need to be furloughed or laid off to preserve cash.
“[…] Cash flow needs to be watched intensively to make sure the business can keep going.”
Wayne also recommended keeping an eye on new developments in government-supplied emergency funding such as the recently passed $2 trillion stimulus package which includes $500 billion for a major corporate liquidity program and $377 billion in small business aid.
Brooklyn-based Marc Prosser, currently CEO and co-founder of Choosing Therapy, a mental health content site connecting people with therapists, lived through the dot-com bust, the housing market collapse, 9-11, and now the COVID-19 crisis as a New York native. He says many small business owners are too slow to make decisions on closing or ramping down business due to the personal and community-based nature of running a small business. He suggests SMBs need to look at the numbers right away and start planning for different scenarios:
“I strongly encourage business owners to map out the financial forecast of their business over the next 3, 6, 9, and 12 month period. What would a 50% drop in revenue look like over this period?”
Wes Guckert, CEO/founder of the traffic engineering and planning consultancy The Traffic Group and an instructor at Harvard University, lamented the pain of having to let employees go in the wake of the savings and loan crisis and subsequent real estate crash in the late 1980s and early 1990s. Vowing never to do that again, he has a different strategy for business survival planning this time around:
“We have put into effect cost-cutting measures, including travel restrictions and, unfortunately, temporarily suspending monthly donations to charities. There is always ‘low hanging fruit’ that can be plucked from monthly budgets. Find it and act.”
Wes also looked at other cost mitigation measures in the spirit of ‘every little bit helps’: “We are contacting our banks to delay payments, we have suspended 401(k) matches, and I have suspended taking a personal salary. We have stopped with auto allowances since driving is limited.”
Money isn’t just a Pink Floyd or ABBA song. There’s a reason why “streamlining” is such a popular term in the business lexicon – it’s about making things less expensive and less wasteful budget-wise. You already have some funds in your account – the key is to live longer off what you’ve got right now because you don’t know when new revenue will start picking up again.
4. Innovate and adapt
Business agility is crucial at a time like this. There are always new opportunities, new sources of revenue, new markets you can pursue. Look for them in your own area of specialty – and capitalize on them.
Paige Arnof-Fenn of Mavens and Moguls, a marketing consultancy based in Cambridge, Massachusetts, saw three six-figure projects get postponed within a few days just as the stock market started to free fall in 2008. She acted quickly in her business survival planning, adding a “Listening Tour” in each city she had scheduled to visit for presentations and board meetings – including NYC, Chicago, the Bay Area, and Boston.
Likening it to what politicians do when on the campaign trail, Paige notes the idea was to not speak, but hear what others had to say. She made a list of big-name players, people she admired, and prospects, and heard them out – and they responded in kind, much to her pleasant surprise.
“With things so slow they were more than happy to get together and tell me what was on their mind,” says Paige.
“If you listen to what they share with you, there will be plenty of opportunities to help them. I did it when business slowed then and picked up several new clients, but you can do it any time.”
Paige picked up some valuable lessons that made her business stronger as a result, noting a shift in the services being offered:
“Our growth rate slowed and we shifted from doing mostly monthly retainer-based work to a project-based approach but, in the end, our clients spent roughly the same with us over the year. It just required us to sell in multiple projects as each one ended versus just sending out a monthly invoice automatically. The listening tour added some new project offerings for us to include which was great.”
She emphasizes that companies can easily do it now with the technology at our fingertips: “It does not cost anything; with social distancing now it is all video & conference calls and virtual coffee meetings anyway and you will get an earful.”
Mark Evans saw his summer camp operation collapse in the midst of the 2008 recession. Looking back, he recognizes where he could have been more adaptable with his existing resources as a part of his business survival planning.
“I could have used my sports fields to host sports leagues which would have really helped with side money. I could have also offered after school activities or even make deals with schools to have field trips to my facilities. If I had done this, I would have at least been able to survive one more summer, and by 2010, things were stable.”
Rick Terrien, a self-declared entrepreneur who has run businesses through multiple recessions, including a regional economic development agency in a rural area in the Midwest in 2008-2009, urged a quick pivot in the business plan as the crisis reared its ugly head:
“We needed to abandon traditional economic development strategies to focus exclusively on entrepreneurship and innovation,” says Rick, whose new book, Ageless Startup: Start a Business at Any Age, is scheduled for general release in late April 2020. “Our own economic development agency lasted until the recovery had fully kicked in and it wasn’t needed on the front lines any longer.”
To that point, Rick highlights the importance of business agility:
“Innovate, innovate, innovate. Launch new products and services. Enter new markets. Launch new businesses. Create new partners. The world will emerge from this but it will need new approaches to most everything.”
You can act quickly – and many of those actions can be positive rather than mitigative.
5. Diversify, diversify, diversify
It’s always interesting to see what kinds of animals would survive if their main source of survival was taken away or if they were moved to a different and unfamiliar environment. Panda bears, for instance, are notoriously fragile because of their limited diet which consists almost exclusively of bamboo stems, leaves, and shoots. If they lose their one source of survival, that’s it.
Raccoons, rats, cockroaches, and yes, humans, are far more adaptable – all survive relatively anywhere because they can eat just about anything. That’s the power of diversifying your sources of survival. Same applies to business survival planning.
Rick focused on helping companies develop and launch new products during the recession so that they’d be ready to grow through new and differentiated products.
He’s now moved to Pittsburgh to continue this work and urges other entrepreneurs to recognize the opportunities in this new crisis:
“The story seems eerily similar. […] Existing companies, especially those in food, need to use this time to develop new, stronger product lines, with more secure and stable supply chains.”
Wes at Traffic Group advises the same:
“Our businesses survived the last recession because we were not tied to a single portion of the real estate and traffic engineering industry. We diversified after 1992. We provided services to both government and the private sector. This became a goal of mine as a result of the 1992 real estate crash caused by the savings and loan crisis.
“Our sales dropped 33% as part of the Great Recession, but we survived because we had been through trying times before and knew what it took to be successful.”
What’s unique about the COVID-19 crisis is the way in which some industries – such as hospitality and events management – have been hit hard while others including supply chains and e-commerce have benefited hugely. If you have a business with a unique niche serving more than one industry, you can survive on the healthier revenue source for the time being. Just don’t be the panda bear.
The ground is always fertile
John F. Kennedy famously said: “The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.”
In the current crisis – and in previous ones, too – there are many dangers that need to be recognized. This isn’t about hoarding toilet paper and masks and reselling them at a hundred times their value, but rather, being the kind of nimble and agile business that can survive and even thrive in the face of adversity.
Mike Kawula, founder of HelpaTeen.com, a service aimed at supporting teenagers at the start of their career paths, noted that the birth of one of his previous operations stemmed literally from the ashes of the 2008 economy. At the time, he owned and operated a cleaning franchise in South Jersey of 40-plus employees.
“I was bored, saw opportunity and wanted a place to employ my team, should the market impact our cleaning company. I started an online company that week selling cleaning supplies and office supplies via a dropship model and by 2012 we were ranked the 144th fastest growing business by Inc. Magazine and had three warehouses.”
Even at the time, he wasn’t sure if it was a great idea to start a new operation in the midst of the fray. But, he adds:
“I’ve learned that the best times to start and claim your stake is when others aren’t thinking rationally. I know it’s hard for entrepreneurs, but don’t panic. Be nimble, be customer-focused and buckle in during tough times.”
Even if your business collapses altogether, that’s not necessarily the end of days. Mark’s own story is a testament to that. He now operates Summer Camp Hub, a consulting firm for summer camps that sprouted from that collapse:
“On the bright side, with my knowledge of summer camps and with the experience I had built over the years of running them, I ended up creating my consultation firm which has grown to be successful over the years.
“I am in a much better place than I was before the recession occurred, so like I always say, when one door closes another one opens.”
As in life, be nimble and adaptable in your business – and be open to whatever comes. That kind of optimistic yet pragmatic approach coupled with quick thinking and acting, can make all the difference in business survival planning through rough waters ahead.