During times of economic upheaval, it’s common for business owners to experience at least some level of fear; after all, we’re only human. Entrepreneurs need to be cautious, however, about making decisions based on those fears. Facts, not emotions, should always be the primary driver in determining the action and direction of any business.
A recent Harvard Business Review post provides insight into what CEOs need to consider in times of change—and break it down into a business survival formula:
Survival = (speed of your understanding of the situation) x (the magnitude of the pivots/cuts/lifeboat choices you make) x (the speed of your time to make those changes)
Although “speed” is emphasized in the formula above, emotion is not. Business leaders are instead encouraged to take a hard look at both internal and external environments.
The external environment includes factors you need to know, but that you generally can’t control.
- State of the economy
- Health of current target markets
- Emergence of new markets and opportunities
- Forecasted recovery date
Internal environmental factors are specific to your business. They are, in large part, within your control.
- Operating numbers, including A/R and A/P, sales pipeline, variable costs, and liquidity numbers
- Sources of additional capital
When you take time—however brief—to conduct these assessments, patterns will begin to emerge that can guide your business decision making. You will also be better able to separate those facts from feelings.
Odds are, you will find that the business plan and forecasts you created at the beginning of the year must change to adjust to economic cycles. But this isn’t the only outcome you may expect. Others include:
- Identifying the most urgent considerations.
- Uncovering areas of your business that have needed adjustment for some time, but which you may have overlooked.
- Discovering new target markets or methods by which you can deliver your products or services in a new way.
- Recognizing the need to adjust budgets to increase marketing and business development efforts to build your sales pipeline.
Regardless of what you discover, however, you will now have facts on which you can make strategic and objective decisions for moving your company forward. And then? It’s time to take action.
First, communicate your new plans and opportunities to your stakeholders. Let them know what you’ve identified as opportunities to get both their feedback and their buy in. And ask for their help in carrying plans out as well as championing them among your employees.
Communication is also a must when talking to your staff. The less you tell them, the more they’re likely to speculate and gossip about. Be honest and as open as you can be about the situation. Again, facts are always better than fear—so it’s okay to tell them the realities of where your business is today and how you are planning to protect it. And yes, it’s okay to ask your staff for help and ideas as well. They may share their insights for cost-cutting measures, improved efficiencies, or even new target markets.
Finally, remember that market upheavals don’t last forever…and don’t have to destroy your business. Exceptional businesses have been born in down economies, and there are plenty of strong companies that have made it through multiple rough patches. There is every reason to believe that you and your business can succeed when you take fear out of the equation and instead focus on facts.