By Seth Richtsmeier
Walt Disney once famously said, “I heard there’s a recession coming. I’ve decided not to participate.” Mike Michalowicz — entrepreneur, speaker and author — echoes this sentiment wholeheartedly.
Michalowicz has studied every recession dating back to the Great Depression.
He’s identified commonalities and patterns throughout each, coming up with tactics to navigate, sustain and grow your business during the next recession, whenever it hits.
Thryv recently hosted Michalowicz in a webinar where he shared his small business ideas to rally during the recession. (You can access a replay here.)
Three Phases of a Recession
To start, every recession is triggered by a big event. In 2000, it was the dot-com bubble burst. In 2008, it was the housing market collapse.
And today, it’s the combination of COVID-19’s lasting effects and the Ukraine-Russian war.
“Recessions are really a shift in mindset,” Michalowicz suggests. “People become very constrained in their spending. Very nervous to spend. So, we see the flow of cash-constrained, and businesses are affected sometimes dramatically.”
1. Shock phase
After the trigger event, business owners become startled and freeze up. They get nervous, which leads to inaction.
During this shock phase, a portion of the competition will go out of business because they didn’t act.
2. Desperation phase
This phase is where businesses tend to panic and overreact. They may offer discounts or run a massive sale to maintain cash flow for the moment.
“They do things, shooting from the hip just to survive for the day,” Michalowicz says.
The problem? These actions aren’t sustainable for long-term profitability.
3. Evaluation phase
This final phase is where your business makes strategic decisions to trigger a rebound. How can you leverage the recession until the economy booms again?
By identifying ideas for your small business to thrive during a recession, you’ll position your business for exponential growth once the recession starts to fade and the recovery begins.
Small Business Ideas to Rally During the Recession
Your small business doesn’t have to crumble from uncertain economic times. Some of the biggest brands in America have used recessions to better position their business.
“Ocean Spray, Publix, King Colin, Yellow Pages, ADP, Hewlett-Packard, Google, Apple — all these businesses were created during a recession,” Michalowicz says. “They’ve leveraged the recessions to their advantage and positioned themselves for explosive growth.”
There are many ideas for small businesses to rally during the recession and emerge better than ever. These are Michalowicz’s seven tips to do so.
1. Monitor your competition
Set up Google Alerts to get notified about your competition. In the event of a merger and acquisition, a group of clients will leave. That’s an opportunity for you to target these potential customers.
You can also use LinkedIn to research people those businesses employ, to see what they’re doing. If the CEO or key employees are leaving, it may be an opportunity to interview them and bring that talent to your business.
2. Block control
“In a recessive period, that’s when there’s a lot more reactions from the hip and so forth, and from the gut,” Michalowicz says. “And now we want to chunk down to the smallest bite. What do I need to do now?”
Consider your long-term business goals. Maybe you want to have 1,000 customers or make $10 million in revenue. Then rewind this into bite-sized pieces or micro goals.
- What can you do in the next month?
- What can you do in the next week?
- What can you do in the next day?
- And what can you do in the next hour?
3. Prioritize tasks
“You’ve got a lot of stuff on your plate in recessions,” Michalowicz says. “There’s a lot of stuff coming at you very quickly, and it can get overwhelming.”
So he advises to write down all the tasks you have to accomplish, including marketing, managing, sales, etc. Then create symbols to represent:
- Generates revenue
- Serves your clients
- Improves systems and processes
Then put those symbols beside any task that delivers on those goals. That’s how you can then prioritize any task that both generates revenue and cares for your clients.
4. Use the 80/20 Rule
According to this principle, 20% of your client base is yielding 80% of your revenue, and 20% of your products are yielding 80% of your profitability.
Using the 80/20 rule, you can identify your best customers and best products. You can also reveal your worst customers and worst products.
“Best clients buying your highest-margin products where you’re making the most profit — these are clients you must protect,” Michalowicz says.
Call these clients, thank them for their business and ask what you can do to serve them better. Then, cut ties with bad customers who aren’t profitable.
“That horrible customer that you’re not making money on, why are you trying to retain them? Let your competition deal with them,” he explains.
5. Try the “one-step-back” method
This is how you can identify other products or services with the greatest potential to monetize.
“Look at all the steps you take to assemble the final offering and consider, how can I amplify what I’m already doing?” Michalowicz asks.
For example, many restaurants used this approach throughout the pandemic to offer carry-out, delivery, cooking classes and grocery services.
6. Take deliberate action
Reach out to your clients to share that you’re still in business despite the recession, and ask for ideas on how you can better serve them. Another good option to show clients you still care about them is to offer a benefit that costs you little to nothing.
Additionally, you can take deliberate action using a technique called “sell the tell.”
Before investing in the production of a new product or service, reach out to your clients and try selling them on the idea. Ask if they’d be interested in giving feedback, and offer a discount on the product or service.
“When you ask for money, people speak the truth with their wallets — not through their words,” Michalowicz says.
“If no one bites, if no one’s willing to put down some money, the idea isn’t persuasive enough. You haven’t wasted time. You just put the idea out,” he says.
7. Think of the long-term impact
When faced with a stressful period, we tend to think of the immediate and imminent impact without considering the long term.
Try using the 10-10-10 method. Set up three columns and label them 10 hours, 10 months and 10 years.
Then use that structure to imagine what a decision or initiative could look like for each of those timeframes — that will help you assess whether they’re worth pursuing. It helps you look past any short-term pain and envision long-term gain.
Recession-proof Your Small Business
Small businesses aren’t just the backbone of the economy. They are the economy. Big businesses were small businesses at some point. They just chose the right moves to get to where they are.
The world isn’t just in need of your success. It’s starving for it. The only way to sustain the economy is for you to succeed — for your small business to surface ideas on how to not only survive but thrive during a recession.
Your responsibility is to see through the recession and make it your progression. And yes, improving your company will serve you. It’ll serve your family. And it’ll serve your community. It’s also serving our world.
To join future webinars with our featured guests, please visit Thryv.com/Events.