“Worst since 2008.”
It’s a phrase we’ve seen a lot of in recent weeks, as COVID-19 continues to claim lives and shutter vast swaths of the economy. We’ve seen the volatile share market, the unemployment claims, and the double-digit GDP drop projections. Some anticipate a crisis “deeper and more severe” than the Great Recession. The situation we’re in now is fundamentally different: It’s the result of an external factor, not financial vulnerabilities — and our ability to “reopen” thousands of businesses hinges on controlling a virus. But most crises share certain commonalities and universal lessons.
The global Hustle survey heard from businesses all over the world, in a wide range of industries: A cattle rancher in California, a boat builder in New Zealand, a crab shack owner in New Jersey, a hedge fund manager in New York, a family physician in Tennessee. Some companies had 2 employees; others had more than 100.
The businesses weathered the Great Recession by adhering to one of two overarching approaches:
Promotion focus: They made primarily offensive moves that provided upside benefits.
Prevention focus: They made primarily defensive moves to avoid losses and minimize downside risks.
Businesses leaned slightly toward offensive (e.g., expansion) over defensive (aggressive cost-cutting) strategies. Breaking this down on a more granular level, there was no magical, universal path to survival. What worked for a gardening store in Iowa wasn’t necessarily the best bet for a travel agency in Florida. Successful business owners employed a variety of strategies to make ends meet, from entering into strategic partnerships to significantly downsizing staff.
When small business owners faced dramatic downward shifts in revenue, they had to get creative and, in some cases, make extremely difficult decisions:
Rhys Williamson’s fiberglass boat business saw sales decline from $3m to $150k/year; he survived by pivoting to specialized repair work.
Robert Radcliff’s consulting firm business took a tumble from $1.8m to $550k/year; he had to lay off his entire staff to make ends meet.
Dida Clifton’s virtual bookkeeping company lost 50% of its business; she survived by forging strategic partnerships.
David Stringer’s SaaS for auto accessories business lost 37% of its revenue; he stayed afloat by diversifying his client pool.
Small businesses survived the Great Recession in various financial states. Some thrived, and saw revenue go up; others hung on for dear life. One unifier between these stories and those that are sure to come out of COVID-19 is that crises put a strain on everyone — even those who find success.
Andrew Russell, of the Scotland-based body and fragrance company, Arran, told us he lost 42 pounds in 3 months. We heard from other business owners who lost their spouses, their homes, and their friends due to the financial pressures of the Great Recession. Around 1.8m SMEs went bust between December 2008 and December 2010.
Advice to entrepreneurs in crisis:
“We’re all very nervous and don’t know what will happen. It’s a good time to ask your clients, employees, and associates 3 questions: 1) What can we do to make things feel better? 2) How can we plan on surviving this as a group? And, 3) What are we going to do differently once this is over?”
“Make the painful list of every expense you have and get the red pen out. And when you push through and make those changes, don't fall out of that mindset. Keep yourself poised for an uncertain future.”
“During a crisis, a lot of things are out of your control. Focus solely on what you can control. The objective during a crisis isn’t just to survive; it’s to come out stronger.
“The biggest thing we learned is how important it is to run a very lean operation. Do not over-hire or get yourself locked into expensive recurring costs. Resist the urge to overspend during the good times.”