7 deadly sins of business in an economic winter
The economy has always operated in a cyclical fashion. There are bear markets and bull markets. About every eight to ten years, there is an economic downturn, which lasts about one to three years. In between, the market returns to normal.
These booms and busts affect unemployment rates, the price of goods and even housing and credit. So it’s no surprise that when they happen, they feel like a big deal to everyone involved – even those who consider they own, or work at, a recession-proof businesses.
Economic winter is always tough, but those who are aware of the deadly sins of business are especially well-positioned to make it through. Even in good times, about one in five businesses fail within the first year, and only one-quarter make it past 15 years. In an economic downturn, the numbers get even worse: The Federal Reserve estimates that about 200,000 businesses permanently exited in 2020 – about one-quarter to one-third above normal.
How can you explain all the wildly successful businesses that either started or that pivoted and grew in an economic winter? Apple, Microsoft, FedEx, Starbucks and more all thrived during a recession. Entrepreneur Jenny Fleiss started Rent the Runway, now valued at $1 billion, during the 2008 recession.
The truth is that economic downturns aren’t a reason your business will fail. They’re just an excuse. If you learn how to avoid common business mistakes and stay agile and innovative no matter what, you can succeed in any economy. Start by unlocking these seven deadly sins of business and learning how to fix them – before you join that 75% of failed businesses.
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Deadly sin #1: Waiting to innovate
The financial crunch that is often caused when a recession hits at best causes hesitation – and at worst causes outright panic. Yet the number-one mistake a business can make is putting innovation on pause. Anticipation is power, and constant and strategic innovation isn’t just something you do every once in a while. It’s a part of innovation culture.
It means building trust in the workplace, so that everyone feels comfortable bringing even the “craziest” ideas to the table. It means bringing in outside opinions and being willing to make changes. 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 the only two things that matters in business – marketing is the other. So why is marketing the first thing many businesses pull back on when a recession hits? The answer, as it is for so many other things in life, is fear. There are two ways marketing becomes one of the deadly sins of business: quantitative, or reducing resources, and qualitative, or failing to adjust your message to the moment. Both are crucial to survive economic winter. Just ask Nike, which successfully navigated the 2020 recession not by reducing its marketing, but by pivoting its messaging to powerfully address how social distancing affected not only sports, but our entire lives.
Deadly sin #3: Playing defense instead of offense
Recession breeds uncertainty, and while we need a little uncertainty in our lives, too much of it leads to fear – and fear can easily cause us to move backwards instead of forging ahead. Even the most recession-proof businesses become goalies protecting what we have instead of visionaries that see the next big move. That’s why when you’re dealing with uncertainty, innovation becomes more important than ever. You must focus on growth, build your understanding of sales mastery systems and create momentum while others are sitting on their hands.
Deadly sin #4: Ceasing to invest in your entrepreneurial toolbox
As Tony says, “Success in life is 80% psychology and 20% mechanics.” If you’re not able to turn obstacles into opportunities and build the inner strength necessary to bounce back from the inevitable failures you will experience, all the knowledge in the world will not matter. Economic winter is the perfect time to focus on optimizing yourself and your business. Use Success Coaching to shift your own 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 have always come and gone. And every time, some people and businesses allow uncertainty and fear of failure to get the better of them. It makes sense – our two-million-year-old brains are programmed to protect us from what could go wrong, not to see the bigger picture of what could go right. Yet this is one of the worst deadly sins of business. So how can you mitigate it? Make sure you have the legal and financial knowledge you need to make logical, informed decisions so that you don’t let fear, uncertainty and emotional reactions derail you.
Deadly sin #6: Focusing on survival instead of scaling and exit strategy
Fear and uncertainty can cause business owners to go into “survival mode.” We’re tempted to hoard our resources, hibernate for the winter and hope that we come out on the other side. We stop innovating and marketing, and that means we stop growing. But as Tony often says, “If you’re not growing, you’re dying.”
In order to continue scaling your business in any economic climate, you need an effective business map. A business map allows you to pivot and change directions without taking your eye off your endgame: your exit strategy. You can put one in place at any time, so get started today.
Deadly sin #7: Not anticipating your clients’ needs in the new economy
As an entrepreneur, you not only have plenty of great ideas, you also know how to make them a reality. You develop the prototypes and get the patents. You network and build up your client base. You know that your product or service is the next best thing, if only others would see it. And you are unwittingly committing one of the biggest deadly sins of business: falling in love with your product instead of your customers. True entrepreneurs know that they need to put customers first, finding a way to add more value than anyone else and adapting to their changing needs – no matter what.
Growing or even starting a business during a recession isn’t impossible. To avoid business mistakes, you must look beyond yourself and consider what you are really adding to the market. Are you providing more value than anyone else? Is your product differentiated? Are you engaging in constant and strategic innovation? When you master Tony’s 7 Forces of Business Mastery, you’ll become one of the most recession-proof businesses, no matter what industry you’re in.
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Learn firsthand tools and strategies from Tony Robbins at Business Mastery Virtual, January 12-16, 2022.