As a business owner, you can’t ignore ongoing news about stock market volatility, rising interest rates, and runaway inflation. You can feel the general jitteriness about where the global economy might head soon. Your customers may have even started to batten down the hatches for a potential economic storm. If you haven’t already, you need to consider how you’ll prepare your business for an economic downturn.
The 10-Year Business Cycle
Business guru Sam Cupp (who mentored our founder, Gino Wickman) taught the 10-year business cycle. The concept outlines how every decade small businesses average six good years, two great years, and two terrible years. Those terrible years can put you out of business. The strength of your business in those years can help you survive, though.
Find out how strong your business is today using the free Organizational Checkup™. You’ll receive immediate results to help you strengthen your business regardless of where you are in your business cycle.
Four Tips to Weather Rainy Days
Usually, you can’t see those two terrible business years coming – just like no one could’ve predicted a pandemic. At EOS Worldwide, we want you to be well prepared for the bad times.
But how do you best prepare for an economic downturn? Better yet, how can you take advantage of opportunities to grab more market share while your competition scrambles to keep the lights on?
The tips below can help you weather any potential storm:
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Save Six Months of Cash Flow (Both Personally and Professionally)
Saving six months of cash will cover fixed expenses. Having that safety net can also save you from making rash decisions when faced with challenges. If you don’t have this today, work hard to bank as much as you can each month to get there. Your future self will thank you. In addition, businesses should prepare to take a 30%–50% hit on revenue regardless of the business cycle or economic conditions.
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Carefully Reassess Your Business Vision and Goals
Take a hard look at your business plan. At EOS®, we use a tool called the Vision/Traction Organizer™ (V/TO™). Think deeply about each section. Can you still achieve your goals? Do your profit margin and measurables feel achievable? Is your marketing strategy still relevant? Have you kept your focus on your most profitable customers and does your niche still apply? In a time of crisis, slow down with your team and take a critical eye to your plan with the ultimate goal of saving your business. You need to spend the necessary time to do that.
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Use the Reverse Accountability Chart
No one likes to think about this, but you need to ask yourself the tough questions. The Reverse Accountability Chart provides a snapshot of how your business might look in 6–12 months with a 30% reduction in revenue. What structure would you need and who would you need to keep on your team? This helps in preparation for a potential downturn. When asked who needs to stay, usually leaders can also quickly identify who they would need to let go. Bonus question: If you can easily identify the wrong people for seats, why are they still with you now? You should always strive for the right people in the right seats no matter your place in the business cycle.
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Focus on The Meeting Pulse™
During times of stress, you can easily feel justified in letting go of standing meetings. Make sure you meet weekly, quarterly, and annually with your leadership team, at a minimum. During weekly meetings, you make sure numbers stay on track and your employees and customers are happy. You solve problems and move the business forward during these vital sessions. Also, if you find yourself in crisis, plan to meet more frequently if you need to. For example, during the height of the pandemic, when situations changed rapidly, some business leaders met twice a day. That way they could discuss potential solutions to problems and, just as importantly, ways to take advantage of new opportunities. During quarterly and annual planning sessions, make sure you’re all on the same page and focused on the right things. The Meeting Pulse will make sure you stay on track with your vision and goals in good times and bad.
One bonus tip: When selecting an operating system for your company, make sure you choose a simple one. Because during times of crisis, if you have a complex system, you won’t stick to it under pressure. Being prepared for the bad times never hurt anyone. If you prepare for the worst, you’ll be ready to grow and achieve your visions.
Learn how EOS can help prepare your business to weather any storm.
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