Thriving in tough economic times

It looks today as if the global economy will put small businesses in serious trouble for perhaps several years. For those cash-starved startups this spells a real challenge, and many will go out of business under these conditions.

Having survived and then thrived economically across multiple stock and global economic downturns, as a small business I have some experience in how this works. So I thought I would give you some tips.

Problems are opportunities

I don't think this one is an old Chinese saying, but there probably is one of this sort out there somewhere, and if there isn't, someone should claim it anyway. Perhaps it's an ancient Indian saying.

When things go bad, the World doesn't stop turning. People have to survive, and just because some people lost their jobs and homes doesn't mean your company won't succeed. If the latest virus kills 5% of the global population - half of it by overwhelming the medical capacity, there are still 95% of the people left. They don't stop eating, drinking, and ****ing (put your own words here).

Initially, there is fear, but then comes adaptation and eventually hope and increased focus and effort on succeeding again. The key to thriving is recognizing opportunity at the beginning, while everyone else is afraid.

Don't take unfair advantage or appear to exploit

There is a temptation to become a fraudster. And some folks are already ripping others off. Angel to Exit sent out an ad "Concerns about Coronavirus? Pitch live online remote!" Exploitation? No!!! We offered pitches in March for free, and a few weeks later we see that lots of venues are going to live online remote for the very reason of limiting the spread of the virus.

But early in itself doesn't always pay off. In our case, when we dropped the price for March to $0, we got fewer people presenting their companies than we get when we charge more. In a previous experiment, we offered presentations for less than half the current normal price and got fewer attendees. I think our next experiment will be a price increase. After all, we are losing money at the current standard rate and higher prices seem to bring in more clients.

The key here, I think, is to remember that your long-term reputation is worth more than your short-term gains. Unless you are Microsoft or Facebook. Both long had (and have) terrible reputations and became, in their times, the largest companies in the world. Yes, I know. Unethical behavior can pay off, and in tough times, eventually you have to go along with the immoral world you live in. But let's try to be less cynical for now...

What we discussed at the CEOs Forum

In this month's CEO's forum, where CEOs of portfolio companies get together to discuss mutual assistance and find moral support, we discussed their current situations, and identified paths forward to thrive in the downturn. While I am writing this partially in advance of that call, I will finish it after the call.

The basic issue is this. Find a path forward! An audience that needs what you provide and can afford to pay enough to make it worth your while. Here are several examples:

A key to understanding these strategies is that, while they have short-term gains financially, they also build market share in markets that were under-served before. As customers realize the savings and improvement in performance, they likely won't want to go back to the way it was before. It is a long-term benefit adopted out of necessity in a time of need.

People act irrationally - get used to it

Investors who were staying in the stock market because it was doing will are likely to not invest in alternatives because they have now lost so much. It seems like you can't win - which is to say - people act irrationally. An excuse in one direction becomes a different excuse in the other direction. What they are really saying is that they are not yet convinced. And rational argument is unlikely to convince most of them.

There is an old saying in the stock industry. It goes something like this: "When the market goes up, invest. When the market goes down, invest more!" The ides is that when the price goes down, it will eventually go back up, and that means you will make even more on the investment at the bottom. And because it always goes up if you wait long enough, it's always good to invest - over the long term!

But each stock in each company will eventually be worth nothing when the company fails. Are the best bets the old established firms more than 100 years old? Likely they lasted because of fundamentals and the ability to adapt to the times. But they rarely grow explosively, so by jumping from stock to stock you can make more. Until they collapse and you jump into the abyss.

In tough times, go with the necessities - toilet paper - canned low cost goods - dog food... yes, people will feed their dogs the good stuff even as they feed themselves worse and worse. Run away from the expensive options, like coffee for $5 per cup in a shared tight packed location. Drive through - good! Sit in - bad. More social distancing. Concerts and big events - no! That newest release available over the Internet - yes! All of these are rational and will likely work, and yet...

People are irrational. Get used to it. Find ways to help them feel better and give them hope - it works better than fear - and they will like you and stay with you over time.

Cutting expenses or investing in the path out

Part of the irrational response is pulling back from everything instead of pulling back from the things likely to fail and pushing forward with the things likely to succeed. One of the biggest mistakes comes from cutting back on marketing and sales. Another one is stopping your innovation and adaptation.

Don't get me wrong. Learning how to live thin is very important in tough times. Cutting expenses to the bone - putting things into stasis until they are ready to pop - re-evaluating how much you pay for what - doing cost cutting measures - all good things to do - all the time. Learning how to survive instead of going out of business is very important. And yet if you cut too much, you may take yourself out of business.

Why not cut sales and marketing? This should be obvious. If you need more money coming in, you need more sales and marketing to achieve it. Generally, in this arena, you spend money to make money. I hate to say it, but while improved quality may get you a competitive edge, unless keeping your customers depends on it, it damages cash flow when you need to preserve and possibly expand your runway. But the same doesn't apply to finding new ways to succeed.

Why not cut innovation? Because you will need new ways to succeed as the old ways fall apart. Remember that fear ultimately turns toward hope for the survivors. It's not just about surviving the immediate challenges, which you have to survive in order to thrive. It's also about being the beacon of hope - lighting the way forward. By innovating in the right ways, you provide the path our for your customers and the customers of your competitors that failed to recognize the opportunity.

Luck favors the prepared

If you were near the edge and the bad times hit, you are more likely to fall over it. But if you use the available resources to find a way out, you can still survive the immediate challenges and thrive going forward.

Nobody has the best idea all the time. And nobody always makes the right decision on when to cut what and when to bet on what. But as a general rule, the one trick pony is less likely to survive change. Work with others whose talents mix with yours, and find options, preferably options you can operate in parallel so you don't have to put all your eggs in one basket.

Diversity is your friend. Today, you may have only one thing going. But in the near future, you may have many alternatives that can take advantage of your strengths and overcome your weaknesses. And of course we can help you do this. That's why I wrote this free article this month.

A call to action

I think it's the time to invest in your future.

This month, we joined forces with Pitch Global. We have been working together for more than a year now, and I finally convinced them to let Angel to Exit run an online version of their live pitch sessions.

If you want us to help you find a path forward, we are ready to work with you.

We offer FREE resources! Use them!!

Want to do a presentation and see if we can help you further?

Go To Angel

We can help your company adapt to changing times. But you have to act to get that help.

In summary

If it looks bad today, it may be worse tomorrow, but there is a brighter future ahead. Adapt, diversify, stay ethical, invest wisely, and stay healthy.

Copyright(c) Fred Cohen, 2020 - All Rights Reserved