Learn the 7 deadly sins of business
Historically, the economy is cyclical, with regular peaks, troughs, and fluctuations – or, as they call it on Wall Street, bear and bull markets. An economic downturn strikes every eight to ten years and plagues the country for an average of one to three years, but the market returns to normal in between.
These booms and busts affect unemployment rates, goods prices, housing, financing, and credit, so it’s no surprise that economic downturns have a lasting impace including those convinced that the company they own or work for is a recession-proof business.
An economic winter is always challenging, but those who educate themselves on the deadly sins of business are in a great position to make it through unscathed. In good times, one in five businesses fails within the first year, with only one-quarter surviving over 15 years. Unfortunately, the numbers get even worse in an economic downturn – The Federal Reserve estimates that about 200,000 businesses permanently folded in 2020, which is 25 to 30 percent above the average failure rate.
Now, all the signs suggest that another recession is on the horizon. Overall layoff rates remain constant, but the market is on shaky ground after recent announcements by digital giants like Meta, Netflix and Zillow. It’s too soon to say how many more businesses will close, but the mere fear of recession often causes business owners to commit the deadly sins of business. Rather than shutting down, they need to know how to prepare for economic winter.
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The real reason businesses fail
How can you explain all the wildly successful businesses that either started, pivoted, or grew in an economic winter? For example, during the 2008 recession, entrepreneur Jenny Fleiss started Rent the Runway, now valued at $1 billion. Likewise, business behemoths like Apple, Microsoft, FedEx, and Starbucks also thrived during a recession.
It may be hard to comprehend, but the idea that businesses fail because of an economic downturn is an easy excuse. Business is 80% psychology and only 20% skill. That’s why the real reason businesses fail is the psychology of their leaders,. Even when you can’t control the economy, you can still control your own mindset and make good decisions.
The seven deadly sins of business
It’s possible to succeed in any economy when you stay agile, continuously innovate, and learn to avoid common business mistakes. So avoid these seven deadly economic sins, learn how to fix them, and stop your business from folding like 75% of businesses.
Deadly sin #1: Waiting to innovate
When a recession hits, the financial crunch causes reactions ranging from hesitation to outright panic. However, the number one mistake a business can make is putting innovation on pause. Anticipation is power, and constant, strategic innovation isn’t just something you do every once in a while – it’s a part of innovation culture.
Fostering this culture means being open to changes, welcoming outside opinions, and building workplace trust, so employees feel comfortable submitting innovative ideas. As legendary entrepreneur Peter Drucker says, “If you want something new, you have to stop doing something old.”
Deadly sin #2: Deprioritizing marketing
Innovation is one of only two things that matter in business. Marketing is the other, yet this is the first thing many companies cut when a recession hits. Why is that? Like so many things in life, the answer is fear. There are two ways marketing becomes one of the deadly sins of business: quantitative (reducing resources) and qualitative (failing to adjust your message to the moment)
Both are crucial to surviving economic winter. Just ask Nike, who – instead of reducing its marketing budget – successfully navigated the 2020 recession by pivoting its messaging to powerfully address how social distancing affected sports and our lives.
Deadly sin #3: Playing defense instead of offense
Recession breeds uncertainty, and while we need a little uncertainty in our lives, too much leads to fear, which can beat us down and push us into moving backward instead of forging ahead. Even the most recession-proof businesses fall into the trap of protecting what they have instead of looking for their next big move.
When you’re dealing with uncertainty, innovation becomes more important than ever. While others sit on their hands, you should focus on growth, build your understanding of sales mastery systems and create momentum.
Deadly sin #4: Ceasing to invest in your entrepreneurial toolbox
All the knowledge in the world is useless if you can’t turn obstacles into opportunities and build the inner strength to bounce back from inevitable failures. Economic winter is the perfect time to optimize yourself and your business. Use Success Coaching to shift your mindset and Business Results Coaching to transform the mindset of your team. With the right psychology, you can avoid business mistakes before they even happen.
Deadly sin #5: Allowing fear and uncertainty to limit your decisions
Economic recessions are a regular and repeating part of life and come with a fear of uncertainty that impacts people and their businesses. It makes sense. Our two-million-year-old brains are programmed to protect us from what may go wrong while ignoring the bigger picture of what may go right. This is one of the worst deadly sins of business, so make sure you have the legal and financial knowledge to make logical, informed decisions. Don’t be derailed by fear, uncertainty, and emotional reactions.
Deadly sin #6: Focusing on survival instead of scaling and exit strategy
Fear and uncertainty can cause business owners to go into “survival mode,” which inevitably leads to the commission of the seven deadly economic sins. We’re tempted to hoard our resources, hibernate for the winter, and hope we come out on the other side. We also stop innovating and marketing – in other words, we stop growing, and as Tony often says, “If you’re not growing, you’re dying.”
You need a practical and effective business map to scale your business in any economic climate. This allows you to pivot and change direction without taking your eye off the prize: your exit strategy. You can put a business map in place anytime, so get started today.
Deadly sin #7: Not anticipating client needs in the new economy
As an entrepreneur, you have plenty of great ideas and know how to make them a reality. You develop prototypes, get the patents, network, and build your client base. You know that your product or service is the next best thing – if only others could see it. Unwittingly, you’ve already committed one of the biggest deadly sins of business: falling in love with your product instead of your customers.
True entrepreneurs know customers must come first. Growing or even starting a business during a recession means leveraging the one thing you have that no one else does: Your X factor. When you understand this, you can add more value than anyone else and adapt to customers’ changing needs, no matter what.
You’ll find plenty of opportunities in a recession when you look beyond yourself and stop approaching your business from a place of fear. When you master Tony’s 7 Forces of Business Mastery, you can avoid the deadly sins of business, differentiate your product, innovate, and add value in new ways that no one else has even thought of.
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