The Recession and Small Business

Warning, rant coming and this post will piss a lot of people off. But if you listen and take action, it might just transform your business.

I just heard a well known speaker say "The recession is a joke, the recession is a mindset."

What a load of BS!

It is just this kind of thinking that got us to the place we are today. The implication is that if you just ignore it, it will go away. But it won't. It does sound nice if you are selling a product that will temporarily help you feel better but that too is what got us here.

The economy is a story and one that we tell to each other over and over and to that extent it becomes even more real because we've all seen a friend or family member lose a job (my brother lost his job after 16 years with the same company). But the only way to create a different story is to take actions that change what we are seeing around us, that means running better businesses, creating more profit so we can afford to hire more employees, and thinking differently than we have in the past about where are next dollars are coming from . . . the government isn't going to bail out your business so you can forget about that.

Many small business owners, particularly those in micro-businesses where they are their only employee buy into this kind of mindset. They believe that if they just ignore what is happening around them, put on a happy face and say that what is going on around them isn't real, then it won't impact them.

Small business works because the people in them work. They work because people create products or services that serve a real purpose, that makes someone's life better in a tangible way or that facilitates business.

Looking at our current economic condition and saying it isn't real is as negligent as the large corporations and government that got us here. It is our responsibility to think strategically and long term to create solutions that withstand future economic downturns. Listening to people spit out platitudes like "The recession is a joke, the recession is a mindset" and taking that advice will do one thing and one thing only. Make the person spitting it out secure and you less so.

I'm a big fan of mindset and an even bigger fan of positive thinking . . . but correct positive thinking. Correct positive thinking is looking at what is real and occurring around you right now, building a strategy to navigate the condition and then ruthlessly implementing it with every expectation that it will work unless evidence proves otherwise. This is a time for resilience and backbone not touch-feely "positivity and hope" is my strategy.

Small businesses right now need to be looking at things like:

• Do I have adequate cash flow currently and (realistically) projected to support my business for the coming 18 months?
• Which of my current customers are likely to fail or not be able to meet their obligations to me and how will I handle them differently based on those projections?
• Am I aggressively building a cash reserve for the business and for myself personally?
• Is my customer acquisition strategy effective for the market?
• Do I have adequate credit to withstand a medium to significant change in income?
• What can I do to deepen my relationship with my existing clients and how can we work together to make each other's business stronger?
• What do I need to understand about the economy and how it might impact my business that I don't understand now. What would inflation for example do to my business? What would even tighter credit markets do? What risk will I have to assume to get credit I need?
• What strategy changes do I need to make to navigate these times?
• What economic indicators should I pay attention to in order to know when to make the next changes in my business?
• What cost cutting or bottom line revenue generating activities can I take internally to maximize profits?
• Who should I really be studying and listening to in order to maximize my opportunity and grow my business in this economy?
• If 20% of your sales staff is responsible for 80-90% of your income, should you still support your lowest performing salesperson? Same for manufacturing staff, same for admin staff etc.
• What am I doing to make my brand stronger and extend it into appropriate new markets?
• Do my advertising and marketing efforts have a strong ROI?
• Am I understanding and embracing new technologies that will allow me to extend my message to the place where the audience is? 
• What can I do to get more competitive and more visible?
• What is the most important story I can tell in this economy?
• What can I do to improve my customer service and make it memorable?
• How can I create an unforgettable experience for my clients?
• Create process maps and document systems that can be replicated and learned.
• Practice Fearsome Focus and the 45/15 process I describe in The Power of an Hour.

The stronger you build your business now the faster and stronger it will grow coming out of the recession. This is a time for vigilance and tough decisions so that you come back faster, harder and better . . . and most importantly that you survive.

This is a time for small businesses to return to the basics of good business. I'm not suggesting you shouldn't go to events or seminars to learn, this is a better and more important time for learning than ever. You simply need to resist the idea that learning from  vacuous talking heads will make your business better.

If you want to practice a positive thinking mindset, then get up every day and think about finding one way you can increase your sales or one way you can reduce your costs and implement it. If you want to practice positive thinking, acknowledge what is happening around you and look deeply into it to find advantage or opportunity that you can turn to your favor.

And, I want to point you to this post of Seth Godin's about things that are too good to be true, it is very good.

I know some people will say that Seth might be talking about me too and I'll accept that if you see my business building systems as get rich quick schemes rather than teaching core business skills as I believe they do. In fact, if that is the conclusion you come to I'll applaud it because at least you are taking the time to think and draw your own conclusion and not just letting hyperbole infect your mind.

Finally, if you are a consumer, and we all are. Support small businesses when you can and when it makes sense. Go to a local restaurant instead of a chain when you eat out one more time than you normally would. Shop at a Farmer's Market for your vegetables, choose a local small business to do your taxes this year. I'm not saying avoid spending at chains or big corporations, simply make a slightly different choice when you can. The more you support people like you the more they can support you. Spend money that you can afford to spend after you've built your reserve. More of us who can afford to spend spending a little more freely will help us move out of the recession faster.

I'd love your thoughts in the comments and if you agree with this, digg this and pass it on to your friends so that we can work together to create the fastest possible change for you, for me and for all of our businesses.

End of rant, back to your regularly scheduled programming.

I asked that question on Twitter yesterday and got some interesting responses and some very concerned email and direct messages. Let me start by saying this: I'm fine, my ego is intact, I'm not on the brink, and I'm not having an existential crisis,]. I really do appreciate the thoughts and concerns though, it is touching. So here's the deal. Yesterday I was thinking about relevancy. What makes me relevant? Am I relevant to my readers, to my clients, to listeners in my audience. I could have asked the question Why am I relevant but I thought asking Why do I matter would get to a deeper answer and the public responses were very interesting.

Comments

[Normal Joe]

Good stuff Dave...I hear so many saying the recession isn't real, it's in your mind...true entrepreneurs don't have to worry about it...blah..blah! I've only seen a few people, such as yourself, tell what's real...yes the recession is real, yes you can survive...but you MUST put the right systems in place, make the right decisions, and get your head out of the clouds.

Thanks Dave.

[Lisa Young]

Bravo, Dave!

It is true that you can set yourself up for failure by creating a failure oriented mindset - that is, believing that you're doomed to fail just because the economy sucks.

But you are essentially sticking your head in the sand - leaving your butt ripe for kickin' - if you put all your eggs in the "mindset" basket.

And I teach on mindset, so this is critical.
You can't just think positive thoughts, or wish something away. YOU MUST TAKE ACTION, PLAN AND PREPARE for success.

To do otherwise is what got us in this mess in the first place.

So yeah, you can do something about the recession by looking forward, and even by creating a positive oriented mindset - but mindset alone doesn't change what's REALLY happening in the world around us.

dang, I feel a blog post coming on...

-Lisa

[Maria Reyes-McDavis Internet Marketing]

Boy did someone need to say this! Awesome post! I completely agree, whether the so-called experts want to admit it or not, there is a whole hell of a lot more to business than just mindset. Great stuff!

[Marc Warnke]

I'm on board with you 100%. It is our responsibility as business owners and consumers to keep the economy alive.

It is now that business owners need to be honing in their business skills because it is the survival of the fittest out there. However, that doesn't mean that you have to step on the backs of others to stay strong. I am a firm believer in creating give/give situations. If you do well by someone, you will be rewarded in return.

Keep on ranting. People need to hear this stuff.

[Paul]

Nice Dave. Similar discussion my wife and I were having late last night and this morning. I appreciate your take on things, and keeping it all in the proper perspective. Your suggestions are well placed and pointed.

No rant needed, just better information than the rest.

Paul

[Terri Zwierzynski]

Dave -- you are absolutely right on. So many great points, particularly about "vacuous talking heads" and supporting fellow small business owners! In fact I can't imagine who would be pissed off by your article or why...

I look at the recession as an opportunity, particularly for microbusiness owners, because we can change direction and move much faster than bigger businesses, and hence adapt more quickly. I refuse to get sucked down into fear-thinking, but I'm trying to be realistic at the same time. It's ok to think positively, as long as you are looking at how the current situation can be used to your advantage.

I'm struck by how many of the business questions you suggest should be practiced ALL the time...not just during hard economic times! If you apply this kind of rigorous thinking to your business during good times, it will make it that much easier to weather the bad times.

Good reality check!
Terri Z

[Rob Northrup]

Dave
This is an awesome post. Your comments about cash flow really hit home.

It really is all about Accurate Thinking as Napoleon HIll called it...

In our business we looked at salaries, retirement funding, and ways that we could control our monthly expenses without cutting into the muscle of sales and marketing. By taking action a few months ago, we were able to give ourselves about 5 months of extra breathing room through the end of 2009 and this way if things are better than worst case, we will be in even better shape.

Your advice to look at who might not pay you is also good advice and people might want to be extra vigilant with terms...

Rob
PS: I digged this...

[Paulette Ensign]

I'm with you 100%, Dave. Ignoring does nothing. Letting fear take over does less than nothing. Taking appropriate action is what it's all about. Thanks for saying this. As others mentioned, someone had to!

Paulette

[Edward Philipp]

Bravo Dave,

Leadership comes in many forms and you exhibit many of those forms.

Wishful thinking and denial are not the way to overcome the current challenges. Finding solutions to your own business issues can perhaps take you beyond the them.

I appreciate your speaking up as a pragmatic voice of leadership. Everyone who is real should too, when they imagine putting into effect your suggestions for their business. It can even make you smile as you take the steps to make it reality.

Warmest Regards,
Edward Philipp

CoFounder of http://www.TeleSeminarNation.com
where you can post to the calendar to promote your event.

[Kim Snyder]

I'm totally on board with everything you have said. I don't understand how what you are offering would piss anyone off, but you know it will.
Small businesses need to help each other out because no matter how many major big businesses there are, its the small businesses that make a true difference.
One must be have the right mindset, get their heads out of the sand and work at helping each other out. WE won't be getting any help from the Government (I don't think corporations should either but that's just me)
Letting fear rule your life is just going to help make your fears become real. Positive thinking with action will be what saves us. Specially those of us who offer products that are now thought of luxury items.
Amazing Post Dave ~ Keep them up!

[Joyce]

Yay! Thank you for the common sense. One of the best things I have seen coming out of this economy is lay-a-way coming back to Sears.
Why? Back in the olden days when I was growing up, that was the method most parents used to acquire goods for the household. Pay on it every week, and get it out when it's paid out. That was before credit cards became a consumer item and brainwashed folks into thinking their "available credit balance" meant they could spend that amount-to heck with budgets.
Piggy Banks are making a comeback too.

[Kalinda Rose Stevenson]

You are right on, Dave. Thanks for the post.

Perhaps the dominant claim of any sort of new age thinking is that each of us is personally and wholly responsible for whatever happens to us.

This is the basic claim behind proponents of the law of attraction, most notably marketed by “The Secret.”

There is some wisdom behind the idea. We can take responsibly for the power of our thoughts, and be intentional about how we think.

But the huge limitation in this claim is that it ignores context and it ignores the fact that we are all affected by larger social, economic, and political forces.

Recently, I have read too many comments by too many internet gurus claiming that the only thing wrong with the economy is a limiting mindset. We are told to ignore the dire media reports, because they are simply creating fear.

One of the most important ideas I have ever learned comes from Robert Fritz, whose book, The Path Of Least Resistance, identifies the elements of the creative process. He says that the fundamental reason most people do not create what they desire to create is because they miss the critical first step—accurate assessment of current reality.

An accurate assessment of current reality cannot ignore that our economic system is in trouble around the world because of the fundamental money story behind our economic growth. We have built our wealth on the shaky foundation of leverage, which is just a fancy way of saying that we have created money out of thin air by borrowing and borrowing and borrowing some more. Each level of borrowing has increased the paper value of money but has done little to create real value.

We are all living in a house of cards, and anyone who claims that it is all in your mind is missing the point. Our global economic system is one big, tangled ball of yarn, fueled by massive debt, rather than real value. Currencies around the world are fiat currencies, which means that money is worth what it is declared to be worth.

So, the gurus are right that belief is at the heart of the matter, because the value of money is determined by a shared belief in value. This is why a credit crisis is a belief crisis. But the gurus are making it much too simple by declaring that individuals are somehow immune from what happens in the larger economic context, if we only think positively.

As business owners, the real challenge is to recognize that we are at the beginning of a global economic paradigm change, which is not yet cleared defined. What is clear is that the days of borrow, borrow, borrow, are coming to an end. It seems that the only way to build a solid foundation for business is to go back to the quaint notion of getting paid for creating real value in the marketplace, while operating our business on the old-fashioned fundamentals, which Dave has outlined so effectively.

[Luann Allen]

Well said, Dave. I am a business coach who has explained to my clients that you can build your business under certain conditions (if I believe that specific client can) but that it is also the right time to be cautious and conservative.

You said all of it wonderfully well!

[Mollie]

You hit the nail on the, Dave (not surprisingly!). Your advice today is exactly the type that makes our book, The 12 Factors of Business Success, such a success manual these days - straight talk, researched base, common-sense.

Last Wed I was taping a "Recession Proof Your Life" teleseminar that I was asked to be part of as a business success expert. The hostess introduced the topic by calling the recession an illusion. Illusion?! I quickly led into my first tip: Do a Reality Check.

People (especially small business owners) need to take an honest look in the mirror and assess their risk exposure. Bad debt? Investment portfolio need adjusting? Tightening budgets in your area of expertise? Facts and numbers are not illusions.

Get real and if you are at risk, take action. Get the needed help from experts. Take smart, appropriate action to protect yourself and then you can position yourself to create opportunities.

Yes, there is much room for (realistic!) optimism and keeping a positive focus to fuel through the challenges. But the only way you're going to get running full speed is to start with your feet on the ground. Well, I guess there are exceptions ... because there seems to be a lot of guillible people out there ready to throw their dwindling money at fairy dust.

Mollie
BestLifeDesign.com

[Amy Boyack]

Dave,
I agree with what you said. There are many people that say that the recession helps them to have a great business advantage and that they need to just stop thinking of how bad it is and be positive. I think your approach is better. Work harder and get out of it. Well said.

[Blaise]

Hey Dave,

As usual, you illuminate the confused shadows of dull thinking and tell it how it is. I'm happy that someone in the "self-improvement" world has a head on his shoulders.

I think that if everyone keeps a positive expectant attitude in their actions with your recommendations in mind, then we'll pull out of this recession sooner and stronger than we were before.

Thank you again Dave,

Blaise Ryan

[@CoachDeb]

@DaveLakhani someone famous said from stage once: "polarized people R buyers" (smart dude) Brava 4 pissin peeps off with this post!

It's the ACTION people take that will tansform the "economy" although, my buddy in San Diego has a very interesting take on the "myth" of a good vs. bad "economy". You can Follow him @CoachChrisH http://twitter.com/coachchrish I think you'll enjoy discussing this issue with him.

Chris says, "The concept is this, There is no "the economy" it is all of us collectively. The root is literally Household Management..."

Re: Recession being a "mindset" --- I dunno about that... but having a fear based mindset based on watching the news will certainly have a physical result based on the things people do or don't do with their financial status (like all the fear-based decisions to cash in their 401K after it hit bottom, and not reinvest it in order to not get hit w/ huge tax fine.)

There's also a self-fulfilling prophecy I've seen happen in the real estate market. How much news is made BY the news?

Any way... Great post! We MUST take action and DO something if we want the current state of affairs with our "economy" instead of just "hoping" it'll go away or burying our head under the sand. :(

@CoachDeb
RPMsuccess.com

[Kirby]

Dave, Well said. I am a business owner. And the thoughts you have shared is the views that have alowed me to be in business for 30 years. What is happening around us is important to take note of. But not as important as what we do with it. And how we move forward. This reccesion is real, but what product or service will provide our customers with the most value and allow us to make money should be the focus now. To create cash flow now is very important. That will help the economy come back faster and stronger. I applaud you for stating this.

[Seth Tate]

I appreciate the "rant" Dave, and I want to thank you for every question that you've helped me ask myself. I agree with your method, man. Also, your plea for reality-based thinking is on point.

[Mari Smith]

Way to go, Dave. Bold move and truly needing to be said. It's all too easy for successful peeps to sit pretty and not have true understanding for those seriously impacted by the current economy. I love your suggested action steps. Everything counts.

@marismith

[Annie Heckenberger]

Great entry, glad I caught the URL on a retweet! I'm a long time supporter of small or "indie" businesses and that's part of why I love being in Philadelphia. Our city has a thriving entrepreneur/independent business scene across many sectors - from food, to retail to tech. It's awesome. I will admit, I am also thankful for the many jobs that large corps create throughout the country. I think we need both to stay afloat, but I champion the indies;)

[Joan Schramm]

Wow, am I glad to hear someone say this. Your analysis is spot on.

A few months ago, I was on a teleseminar with a well-known "attraction" guru. He was holding forth at length about how there is no scarcity, the economy is just fine, people aren't really suffering, and anyone who thinks differently just doesn't have the right mindset and is doomed to failure. The other marketing guru who was interviewing him agreed wholehearedly and, for good measure, added the comment, "I KNOW! I mean, people aren't huddling over fires in vacant lots or anything." And this was someone who, up to this point, I had a lot of respect and admiration for. I thought the comments were insensitive and head-in-the-sand stupid -- but, hey, I probably don't have the right mindset.

Here's my take on the Law of Attraction. Cultivate the right attitude, take a realistic assessment of everything, point yourself towards success, and then work your a** off (smartly) until you get there.

Acting out of fear and negativity will not result in success. Acting out of confidence, while adding value and integrity to our business model, will always attract more people and increase the avenues for success.

Thanks for putting this out there -- it needed to be said.

[David Sandusky]

People who would be pissed off by this post hang with people who would as well. Run, and change who you hang with folks. While many are feeling better about themselves during bad news stories (security in numbers), some are learning/changing/doing. It is hard so love what you do!

[How2HQ]

Dave, I'm convinced that at least half the people out there don't want to know. They want to keep pedaling and hoping that their comfort level won't be disrupted.

Too late for that, I'm afraid.
This is a wise post. I hope it'll change some mindsets because the domino effect has begun. Not gloom and doom here; just facts.

My husband was told last week that he has one month to close down the west coast branch of the company he works for. Jobs are scarce. It's reality, and his is one of many, many dominoes that are tipping against the next.

[Joshua Aragon]

Dave,

You're right on with your comments. I think some people, even the 'gurus' miss the whole point when they tell people to pretend its not there. Two people can experience the same thing and have a different take on it. The key is what you do with it. Some will see it as a negative and shut down their creativity and mental faculties, others will see it as an opportunity and take inspired action.

Pretending that your situation isn't there won't make it go away. Acknowledge and accept that it's there, it's real to you, and you're scared, happy, sad, or whatever emotion you are experiencing with it and then take action in spite of what you perceive or fear.

You have control over nothing else other than what you do, however what you choose to do can impact the external circumstances around you.

Those who take action and don't just sit and wait for it to get better on it's own will inspire the rest to follow their lead. Step up, take action and don't look back!

[Lisa Almeida]

Jeez, sounds like good old fashioned common sense to me.

Your bullet points could be a cut-and-paste manifesto for how to run a healthy business - regardless of whether the economy is in a state of ebb or flow.

Up with personal responsibilty, down with entitlement...can I get an Amen?

[Felicia Slattery]

Hey Dave,
Yes, yes, you're right and well-spoken as ever. But my favorite part? Is when you advocate buying local & supporting small businesses whenever possible.

That is one big action that what will get our economy back on track & keep all our businesses humming. If we support each other by buying products and services from small businesses, that helps everyone of us.

[David]

On point!

Sure, I smile when I hear both "doom and gloom" as well as "all is well". I don't care. I'm responsible for myself, and then help those who are responsible, but unfortunate. That's it.

Too many intelligent people I know believe that their jobs will always be there.

BE SELF-RELIENT and help others be so.

[debt relief]

Wow! Right on man. May I suggest to try to get this post published. More small business owners need to hear this, because the government certainly isn;t going to hear it. Thanks much!

[Chuck Bartok]

Wonderful presentation Dave,
I love your emphasis on THINKING

Businesses can survive the bumps if the Business Owner will use the God Given talent possessed by all, but Rarely used.

We have moved steadily forward for almost 50 years, with few set backs form THINKING and application of innovative Thoughts.

Thank you

[JeanBentley]

Stumbled on to your link on Twitter! Enjoyed your post, lots of great information.

[Michele Price]

I am curious when did one equate mindset with not taking action? That is not what I see from anyone who talks about this subject, including one of your favorite authors Seth Godin.

Those of us who recognize the importance of mindset, like Napoleon Hill never said ANYTHING about burying one's head in the sand.

Funny twenty years ago people thought anything with mindset was crazy talk, now there is scientific measurements to back up Quantum Physics. We are patient. Even brilliant minds like Einstein recognized energy and the importance it plays in our lives and businesses.

Maybe the head in the sand is not mine!

[Mike]

I'm confused-- why would you think this post would piss people off? It seems like basic common sense to me. I couldn't find anything remotely controversial about it.

[Bill Bliss]

Nice post. One thing I'd like to add in the "things to look at" section is the question of who is going to take over if something happens to you or to one of your key employees. This question and long term thinking like it seems to get ignored in small businesses, yet it should not be. What happens to the employees and their families of the 10 or more employee small business if the owner gets hit by a bus or has some other serious, unplanned event?

[Bill Bliss]

Nice post. One thing I'd like to add in the "things to look at" section is the question of who is going to take over if something happens to you or to one of your key employees. This question and long term thinking like it seems to get ignored in small businesses, yet it should not be. What happens to the employees and their families of the 10 or more employee small business if the owner gets hit by a bus or has some other serious, unplanned event?

[Dan]

Great article.

If you would like a tool to manage your small business activities and Projects, you can use this web aplication:

http://www.Gtdagenda.com

You can use it to manage and prioritize your Goals (for business but also in other areas of your life), Projects and Tasks. It has a Checklists section, for the routines and repetitive activities that any business has to do. Also, it features a Schedules section and a Calendar, for scheduling you time and activities.

Some features from GTD are also present, like Contexts and Next Actions.

And it's available on the mobile phone too, so you can access it from anywhere.

[Jonathan Gunson]

Dave

You, Sir Richard Branson and Seth Godin are on exactly the same page re RECESSION and small business.

Here's Sir Richard's point of view, a one minute long interview by Seth Godin http://tinyurl.com/6n9d4g (Video #2)

That makes four of us who think this way. Looks like the momentum is building. :-)

Jonathan Gunson

[sylvia]

thank you for the excellent post.
where I live the small town paper often has letters bemoaning the lack of Walmarts (they've so far been forbidden) while at once complaining about the lack of jobs and opportunities in the economy. My only assessment is that they are so lazy and coddled with excessive credit that they've lost the connection between American made goods and American economic prosperity. It is like a hypnotic brainwashing, a denial of the obvious. But fortunately, as the promise of Capitalism affords, the most competent and well planned shall seize a market and enjoy the plunder of success.

[LEADSExplorer]

The current derpession has all the features of the long depression that started in 1873: mortgages, bankrupt banks, cheap products from US into Europe.
It lasted 20 years.
Currently there is mortgages, bankrupt banks, cheap products from China into the entire world.

The current depression is real and will have bring big changes.
The FED can't lower interest rates below 0% - thus not much more tricks to play out.

However people will keep on spending on food and clothes, but much less.
No more holidays abroad? No more iPods/MP3 players? No more gadgets?

[Jeff Paul Scam]

I just want to say that in our business we looked at salaries, retirement funding, and ways that we could control our monthly expenses without cutting into the muscle of sales and marketing.

[generic viagra]

it's hard to understand this recession.

[Reservations call center]

This is a wise post indeed. I hope it'll change some mindsets because the domino effect has begun. Not gloom and doom here; just facts.

Ben Cliff

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