Thriving Through Chaos
Business Strategies That Work in a an Economic Downturn
Like it or not, we're on a roller coaster. Most business people don't like roller coasters. Volatility can destroy value but it also creates opportunity. Apple and Microsoft were founded during the 1970s' stagflation. HP and Disney were founded during the Great Depression. Mailchimp was founded in the wake of the 2000 dot-com crash.
Volatility creates opportunity because it:
Causes competitors to be timid, which can lead them to cut back on sales and marketing when these are most needed.
Leads to bad decisions. Many studies show that in a crisis, most humans become dumber. It's why payday loans exist. People overreact and act more rashly than they need to. They sacrifice too much of the long term for the immediate term. High performers may be let go because they “cost” more. R&D projects are slashed which not only will save a few bucks today but cost big tomorrow.
Encourages customers to consider breaking with the status quo. When times are good, customers are often reluctant to consider new ideas or products because what they are doing or using is already good enough and takes little work to maintain. But in a recession, customers want better value and performance and are willing to experience discomfort and spend time to achieve it
Lowers the prices of resources. What do sellers do when they see a potential contraction? They slash prices because they feel that they just need to raise cash. The profit motive turns to a survival instinct. In addition, many companies simply won't make it, and they will be selling their assets in liquidation. When you have cash, recessions can be opportunities.
Is easier to retain talent. When economic times are bad or uncertain, people instinctively hold on to their jobs. I don't think you should treat this as an opportunity to exploit your labor, but the bar to quitting is raised.
Creates opportunities in the supply chain. Chinese widgets just got a lot more expensive. China may even impose export controls (a nice way of saying embargoing) on the United States. Can you find a way to meet the demand gap?
Makes acquisitions cheaper. In volatility, business owners decide they don't want to go through another down business cycle, and they will price themselves as a motivated seller. You could get some great deals. It's not just bad businesses that will go up for sale.
Volatility is no fun, and by all means, take the steps necessary to defend your business or career. But don't forget to consider and take advantage of the opportunities that volatility creates.