Economic conditions impact all businesses, though small businesses often feel the effect of economic changes faster than their larger counterparts. I work mostly a lot with small businesses and so this is a concern of many of my clients. How does one prepare for the unknown? Have you taken the steps necessary to ensure you success in this changing economy? If you want to come through a changing economy unscathed, you need to view your company, customers, and processes in a whole new light. To do so, consider the following six guidelines for making the most of any economic
6 Steps to Prepare Your Business For a Changing Economy
1. Observe the world around you. When you get wrapped up in your own head, creative ideas can slide under your nose. The most creative people are always on the lookout for interesting things, even if they don’t apply to whatever they’re working on now. Keep a notebook or a computer folder full of interesting ideas, articles, images, or even passing thoughts. They will likely come in handy at a moment you least expect.
2. Build A Strong Network. Develop a network of individuals that have a skill set that is beyond your expertise that you can call on and consult with. Call it your board of advisers. These are individuals that you want to get to know your in your business and that you can call at at anytime for whatever reason. Examples:
- Consultants – HR, Social Media, Finance, Marketing
Also be open to individuals you respect that may not be in business, someone outside of needed expertise may notice invisible assumptions right away. They may help you see a problem or idea in a new light. We often discuss important ideas with the same inner circle of colleagues, but in doing that we can miss the obvious answers and be surprised by the solutions they help you discover.
3. Implement A Succession Plan. Succession planning is a process for identifying and developing internal people with the potential to fill key leadership roles. Succession planning is one of those initiatives that many companies don’t find the time to start until it’s too late. If you don’t address succession planning now your organization may end up facing the burden in the middle of a crisis. Its clear to see that succession planning and development of future leaders does not exist in isolation – it needs to reflect the company’s strategic objective and strategic goals. For any organization to implement an effective succession plan it must be part of an integrated HR process that includes training, development and performance appraisal. There are a number of key issues that need to be considered:
- Identify what skills the organization will need in 5, 10 or 15 years
- Analyze the workforce and identify who will be eligible for retirement within the next five years
- Managers need to identify the responsibilities, skills and competencies that will be needed by their replacements
- A system for communicating succession planning information to managers must be established
- A systematic approach for identifying, nominating and selecting potential successors must be established
- The training and development requirements of potential successors needs to be determined
- Succession planning must include a system for providing feedback and encouragement to potential successors
- Succession planning is basically a “numbers game” that requires good organizational skills and the ability to pay attention to details
- Finally, the succession plan must belong “to the organization” and not to the HR department in order to make sure it has the attention it deserves
Read Jack Welch‘s, of General Electric, thoughts on Succession Planning. How successful was his strategy?
4. Pay Yourself First. As a small business owner, you may want to pay yourself last to conserve money, but sometimes putting yourself first is the trick to succeeding. With so many business expenses to pay for your company – utilities, rent, inventory, staff wages, marketing – it can be hard to fit your own salary in. And as a business owner, you may assume you should put everything you make back into the business. Not so. The first thing you should do with your money is pay yourself. Many business owners who bootstrap their companies feel like paying themselves is a luxury, however it is a necessity for the success of your business. If you’ve got a nice cushion of savings, you may not need a salary right now to pay your bills. But that could change, so it’s best to prepare for the day when your funds run out. Getting into the habit of paying yourself, even just a little bit, will give you money for personal expenses when things get tight or the economy gets worse.
5. Be Nimble. Be flexible and build a strategic plan around how to be flexible and realize “this is the economy”. It’s not changing. Or actually, it’s always changing…and that is what is not changing.
6. Be Innovative. Just because we are faced with an unknown economy doesn’t mean there isn’t room for new businesses or ideas. In fact, an entrepreneur’s odds of success are the same whether he or she starts a company during a boom or during a bust. If you don’t believe me, take it from Fred Smith who founded FedEx in 1973 at the start of a two-year recession. Bill Gates and Paul Allen started Microsoft in 1975, when the country was still suffering financially. Ted Turner and Steve Jobs were also successful during economic busts. Entrepreneurs like these, who launch when no one else seems to have the guts, do reap advantages.
Check out this video of another entrepreneur who made billions during an uncertain economy. Groupon CEO Andrew Mason spoke about his entrepreneurial path, what it’s like to be the CEO of a public company, and the importance of having the right people on your team. I really like what he has to say about the value of VALUES (starts at about the 11:00 min mark).
Change Can Be Good!
Think of it always as an opportunity. While a changing economy can contribute to a difficult time, it’s actually a prime time for growth. So be aware of economic changes and the potential downfalls, but don’t make it your reality. Remember, only you and the decisions you make can create your company’s reality. If you simply look for opportunities, you will find them.
“A leader’s job is to look into the future and see the organization, not as it is, but as it should be.” ~Jack Welch