In this article, two entrepreneurs who owned businesses during the GFC share their insights on how to go about successfully navigating a downturn.
Many businesses around the world are facing significant challenges at present. There is hardly an industry that hasn’t been impacted by the COVID-19 pandemic, and the livelihoods and wellbeing of countless people remain in question as this health crisis continues to ravage global economies.
Words from the wise:
Small businesses are currently standing at the coalface of what is shaping up to be a serious economic downturn with scarce cash resources, hardly any liquidity and only offering niche products or services, each day presents more uncertainty and strife for today’s startup founders and small business owners.
It wasn’t all that long ago that small business owners around the world were faced with uncertainty of a similar nature. During the Global Financial Crisis (GFC) of 2007-08, the strength of many small businesses was put to the test, and the global economy became a ‘survival of the fittest’ environment.
While it is difficult to draw comparisons when dealing with something as unpredictable and unprecedented as the COVID-19 pandemic, the way in which small business owners reacted to the last GFC does give the SMEs of today a frame of reference for what, and what not do when things suddenly take a downward turn.
Since the last GFC took place a little over a decade ago, there is no shortage of business owners who are still in business today who endured their own fair share of difficult experiences.
Hearing from those business owners and adapting the lessons they learned from that difficult period to current challenges, can show the small business owners of today how to brace themselves for the storm of a recession and position themselves to come out on top.
For this article, I reached out to two people who owned businesses during the last GFC, both of whom shared a tremendous amount of insight on the things that small business owners can and should be doing now so their companies can stay afloat and cautiously make their way to the light at the end of the tunnel.
The first person I reached out to was Adir Shiffman, a doctor turned entrepreneur and passionate startup activist.
Having gone through the last financial crisis while at the helm of a young, fast-growing tech startup, Shiffman learned a fortune from his experiences during those difficult times and was not shy in sharing those with SMEs who were ready to listen.
“Small business owners need to put optimism aside and be realistic about the potential size and length of this downturn,” Shiffman told The Pulse.
“In order to see this through to the other side, small business owners need to take steps today as if they were doing so after finding out it was too late.
“No one knows the extent of what’s to come.”
According to Shiffman, listening to the advice of “your future self” and taking as realistic of an approach as possible will drastically increase a business’ chances of survival.
Reflecting on his own experiences from the GFC, Shiffman admitted that if he would have known then what he does now, half the decisions that were made then about collecting cash and cutting costs would be made differently.
“Aggressive steps need to be taken on all fronts in order to beat this thing.
“Costs need to be cut, and staff will need to go. It’s unfortunate, it’s difficult, but it must be done.
“Careers can always live on, but companies can and will wind up if the right decisions aren’t made.”
Shiffman also noted that in the current circumstances, a small business’ only real asset is cash, and accessing it needs to be the business’ number one priority.
“Don’t run out of cash. Approach your investors and be open to lower company valuations if it means receiving an instant cash injection. Find a way to put cash into your business’s bank account.”
Shiffman also recommended that small businesses don’t hold back on cutting all non-essential costs.
“If it feels like you’re overdoing the cost cutting, that’s a sign that you’re probably doing the right thing.”
Kim McGuinness, the second business owner I spoke to, owned an organisation called Network Central between 1999 and 2015, before selling the organisation and moving on to other ventures.
Network Central offers mentorship, training and guidance for businesswomen, and McGuinness said that during the 2008 GFC, the organisation ran a record number of workshops and seminars on topics like leadership and personal growth – with the intention of helping its members see past the immediate challenges and focus on preparing for life afterwards.
“The ongoing interest that we received for these sessions showed us that people thrived when they were reminded of the bigger picture and life beyond the crisis.” McGuiness relayed.
McGuiness believes that notwithstanding the importance of taking a realistic approach to dealing with these challenges, applying the same mentality now will help businesses navigate their way through this current crisis.
“Right now, small business owners need to rise to the occasion and innovate to ensure that their businesses tackle these challenges effectively.
“But this can’t be done when they focus on doom and gloom and make it all about survival.
“A business owner who works on themselves now to become the leader they want to be in the future, will have the tools to thrive during and despite these challenging times.”
McGuinness also encouraged small business owners to use the threat of another financial crisis as an opportunity to be there for their customers.
“Look for the opportunities to show how devoted you are to your customers.
“Irrespective of what industry you’re in, now is the time to come up with innovative ideas that focus on how your business can help others. Go back to the basics and trial new strategies.
“If you focus on ‘serve’, instead of ‘self’, you will be remembered by your customers as the business that was there for them when they most needed it. This will strengthen your reputation and build tremendous customer loyalty.”
The final message that McGuinness shared was the importance of maintaining and building your professional networks during these troublesome times.
“A small business owner cannot afford to become disconnected during a time like this,” she said.
According to McGuinness, small business owners with strong networks will be the ones who are presented with ongoing opportunities.
“The people in your network are the ones who will be there to propel you forward when things do ultimately calm down, so doing whatever you can to grow those networks now is invaluable.”
All told, there’s no denying that the road up ahead may be filled with unforeseen challenges and difficult decisions.
But with a careful balance of pragmatism and strategy, small business owners have the power to ride the wave, grow, and ultimately come out on top.
This article is not intended as financial advice. Before making critical decisions in your business, MYOB recommends consulting with an accredited business advisor with experience in your industry.