Simplifying your business operations will help you find the fastest path to success.
Disney, 3M, Meta, Lyft
lift
Fixating on the fear of an impending recession makes us reactionary, which is one of the weakest positions we can take as business leaders. Reactionary measures often include knee-jerk assessments about delivering more product, growing market share, and generally exhausting ourselves trying to grow revenue while exhausting our teams, depleting our resources, and shrinking our profit margins.
The biggest mistake we make is thinking we need to do more, offer more, or expand more to increase revenue. That's a reactionary mindset.
Instead, approach the downturn with a positive mindset by simplifying your business. Rather than spreading your budget thin, it's an investment strategy. This approach works regardless of economic conditions, as it focuses on doubling down on investments in key areas where growth will continue and revenue will grow.
Here are three key steps to streamlining your business and making it recession-proof:
Step 1: Start with the end in mind
Starting with the end in mind makes your business recession-proof because you're focusing on the long-term outlook rather than focusing on the present moment (i.e., the possibility of a recession) . A study by McKinsey Global Institute found that companies that focus on long-term goals outperform their peers in revenue growth and job creation despite economic downturns.
Think about what you want to achieve in your business and work backwards from there to create a plan that will help you get there. Starting with a vision ensures that all business decisions align with your goals and allows you to focus your resources and budget on the tasks that matter most.
One way to go about this is to ask yourself some specific questions: What is the end goal of my business? Who is my ideal customer? What kind of service would most appeal to them?
Answering these questions will help you clarify the goals you want to set and focus on the right projects and tasks: Taking a step back and thinking about where you want your business to be in 5 or 10 years’ time will help you create a roadmap to get there.
Once you have a clearer understanding of your vision, you can begin to review your current business operations and identify areas that are not aligned with your goals.
To prepare for a possible downturn, now is the perfect time to rethink your business model, streamline processes, and eliminate services that don't support your long-term goals. By focusing your resources on the most important tasks, you can streamline your operations and feel confident that you're moving in the right direction.
Step 2: Clarify your priorities
Most entrepreneurs know Parkinson's Law. Work only grows with the amount of time you spend on it. The second equally powerful law is often overlooked, but it's actually the secret to simplifying your business.
Parkinson's Law of Triviality states that people tend to spend a disproportionate amount of their time on trivial matters, ignoring important issues.
It's important to prioritize your efforts and focus on the most important tasks and decisions. But how do we know what’s important?
I teach CEOs to use the CLEAR method to assess the importance of their work.
Ask yourself: Is this project or task:
C- CDoes it relate to your mission and core values?
L- and othersDid you sign up for specific goals or quarterly targets?
E- pictureRequired (Does this really help your bottom line?)
a- aAdvantageous (Is this an investment in the future of my business?)
R- RReality-based (Am I chasing shiny objects just because I'm reacting to the market?)
This means avoiding sweating the small stuff and focusing on the big picture and long-term goals of your business. A study by Harvard Business Review found that companies that focus on the most important tasks are more likely to be successful.
We all know that time is money. During a recession, you're likely working with less funding (and a smaller team), so how you spend your time becomes incredibly important. I've experienced this firsthand, having led my own company through the Great Recession.
Prioritizing tasks has allowed me, the visionary, to avoid chasing flashy goals and has allowed my team to be streamlined and efficient. As a company that actually scaled during one of the biggest recessions in recent history, I attribute our growth to constantly checking in and aligning our strategy and goals with larger priorities.
Step 3: Use the Pareto Principle to achieve more with less.
With the threat of a recession looming, the Pareto principle (sometimes incorrectly called the 80/20 rule) can be your most reliable business tool. Focusing more time, energy, and effort on the few things that matter, rather than the many inconsequential things, can be especially beneficial for businesses worried about their economic future.
“The key to successfully weathering a recession is relationships with those top clients,” asserts Tommy Cole, vice president of McFarlin Stanford, a business coaching service focused on the landscaping industry. Cole speaks from experience: When he worked for a large, high-end landscaping company during the 2008-2009 recession, sales plummeted by 75%. Nevertheless, Cole's careful nurturing of his top clients paid off, as they were eager to invest in enhancements and add-ons to take advantage of the recession-related decline in material costs.
What is the Pareto Principle?
Drawing on lessons learned from the Great Recession, Cole advises business owners to remember to prioritize the few things that matter most in every area of their business. “Spend your time on what's most important instead of getting distracted by trivial things. Keep that in mind,” says Tommy Cole. “If you don't, you're doing yourself a disservice.”
Applying the Pareto Principle formula to all areas of your business allows you to focus on a shortlist of activities that will produce the most results and cut out the rest.
Whether you're on the brink of a recession or not, simplifying your business will make you and your business stronger and more resilient. There's no downside to keeping a close eye on your business operations to see what's working and what's not. Knowledge is power and will help you make smarter decisions in the long run.
