on April 22, 2020
Many people have been asking for my opinion and advice on how to deal with this challenging business environment during podcast interviews, conversations, sessions, emails, etc. With the variety of people asking and the answers scattered around in bits and pieces, I’m putting my answer in one place and in the right context.
To be clear, this is a response to the question of how a business owner and their leadership team manages their company in a crisis, NOT my opinion on how to solve the COVID-19 issue.
Please understand this is just my two cents, and one of many opinions. Take it with a grain of salt, and decide for yourself.
I’d like to start with a great quote from Warren Buffett:
“When the tide goes out, it reveals who has been swimming naked.”
The tide has obviously gone out, and we are finding out who wasn’t prepared for a downturn.
First, it’s important to understand the history and the big picture. My business mentor, Sam Cupp, taught me almost 30 years ago the concept of the 10-year business cycle. He said that in a 10-year business cycle, you will have two great years, six good years, and two terrible years that will potentially put you out of business. Many of us are obviously experiencing the two terrible years right now. This insight has held true for the three decades since he said it.
The point is that you should never be surprised by a downturn, and you must always be prepared for a hit to revenue. Always have six months of cash/dry powder saved up and be prepared for a 30, 40, even 50 percent hit to your revenue. It’s predictable.
I know it’s easy for me to say that now, and you might be saying, “No $hit, Sherlock” as you are sitting there in pain. But you must remember and know it’s coming again in the next 10 years and then 10 years after that. If you are surprised by the next one, shame on you. Whether it’s a recession, virus, 9/11, war, or who knows what, it’s coming. This is the third major crisis I and my clients have had to deal with in the last three decades. I lost it all in the first one. I’m speaking from experience. And I know your pain.
I’ve been teaching this lesson for 20 years, and the ones who listened are fine right now. They were prepared. If you listen, you’ll be fine on the next one. Now, let’s help you get out of this one.
You need to shift your thinking in three ways.
1) The first vital mental shift is to know that you are in survival mode now, and you must save your company first and foremost. That has to be your number one goal and priority. Among the biggest mistakes, business owners and leaders make in tough times are trying to hang onto everything, not letting go of the past, and getting way too emotional. Every decision has to be for the greater good. Your business has a purpose and a vision that must lead your decisions. This isn’t easy, but it’s vital. The survival of your business must be put first because, if there’s no company at the end of all of this, then there is no place for your people to come back to work, and your company’s ultimate purpose will not be achieved.
2) Second, you must shift your brain waves. I’m not a scientist, so I’m not going to teach you how the human brain works. But, simply put, you have to shift from your brain’s primal fear-based fight-or-flight mode (the amygdala) to critical thinking and solution mode (the frontal lobe). You must get out of being scared and move forward into solution mode.
The way to do that is to start by taking yourself to the worst-case scenario. Confirm that you can survive it. Put a plan in place that even if your company is going to lose 80 percent of its revenues this year, you can still survive. Once your crisis plan is in place, share it with your team and execute, move forward, and get to work.
It’s interesting with this crisis, in that half of the business owners I interact with are on the good side of this and thriving and kicking a$$, while the other half are getting their a$$es kicked. Unlike ‘08/’09 when most felt it.
For the ones getting their a$$es kicked right now, most just need to get back to the basics and follow EOS® to the letter, more now than ever. That means you have to be obsessive about business fundamentals—know what you want, have a clear vision and plan, prioritize well, meet often, measure and hold yourselves accountable, lean in, solve problems fast, and work harder than ever. You’ve got to be better than ever. That’s what EOS and Traction will help you do.
For others getting their a$$es kicked, it’s not about getting back to the basics. It’s about having to completely reinvent yourself. Because the need for what you do, or the way you do it, has completely evaporated. You must now look at what you are genetically encoded to do as a company and pursue opportunities in that sweet spot. I have one client in Michigan, TDIC, who sews robot covers for the automotive industry and all of the plants are shut down. Within a week, they were sewing and selling PPE (Personal Protective Equipment) for hospitals. Get out, talk to people, get closer to your customers/clients, and the market than ever, and understand the needs and evolve to those wants and needs.
3) The third mental shift is a challenge for many right now because times have been good for the last 10 years. Most entrepreneurs that started their business out of the great recession in ‘08 and ’09 don’t know what a downturn feels like. They only know good times and must now shift to survival mode, which is unfamiliar to them. To shift, use a discipline we teach called “reverse accountability chart.”
If you are going to lose revenue, be it 10, 20, or 50 percent, you must now apply a Reverse Accountability Chart. This is your new normal. It might mean layoffs and huge expense cuts. You have to set your ego aside. If you were once a $10 million company and now you are about to go back to $5 million, simply go back to the structure and expenses that worked at $5 million (you’ve done this once before and you can do it again). And you are probably going to be doing some things you used to do and once delegated to someone.
Next is to get as close to your customers and clients as possible. Know them better than they know themselves. Make sure you know their every need and that you are providing tremendous value. Make yourself irreplaceable. Even if it’s simply being a therapist. This will help your company evolve, move, adjust, and react quickly to market needs and changes.
In addition to all of the above, it is vital to manage your energy in these uncertain times. Make sure you are talking to a lot of people in all aspects of your life. Be a beacon of light. Help them, listen to them. This will actually and ironically lift you and your energy up. It will also give you great ideas and insights. Don’t be sitting around watching the news and sucking your thumb. This will deplete your energy and you will slowly start dying.
If you are sitting around complaining because you don’t agree with the decisions our world leaders are making right now, here’s the reality: These are the cards you’ve been dealt. As an entrepreneur, that’s what we do: capitalize on the current state. Whether this is a Democrat/Republican thing or a science world/business world thing, who knows. You have to just move forward and play these cards. Focus on what is within your control. If you were born in 1720, 1820, or 1920, you’d be playing those cards as an entrepreneur. If you really feel you can change something, then, by all means, go do it. But if not, complaining about it to friends, family, and co-workers isn’t going to save your company.
Be at your absolute best. You owe it to your people. People are looking for a strong leader in these times, and that needs to be you. You must keep yourself up. To do this, you must stay realistic—not optimistic, not pessimistic, but realistic.
I recommend reading chapter 4 of Good to Great, “Confront the Brutal Facts,” and surrounding yourself with strong leaders, books, and resources as helpful ways to stay positive.
With all of that said and done, my mentor Dan Sullivan shared a quote from a Fortune 500 CEO: “Market share is gained during tough times.” Although it might be difficult to think of gaining market share during these crazy and scary times, if you do all of the above, you will gain market share when we come out of this. Your clients and customers will be more appreciative and become loyal fans for life. People remember who helped them in the tough times more than in good times.