The recession is scaring the bejesus out businesses of every stripe, but owners of small and midsize businesses have been to the brink of failure before -- many times -- and know how to survive.
The recession is scaring the bejesus out businesses of every stripe, but owners of small and midsize businesses have been to the brink of failure before -- many times -- and know how to survive.These economic times. The recession. The financial crisis. The Wall Street meltdown. Whatever you call it, the economy has been by far the dominant concern since last year and for some businesses far longer. The recession has cost business owners sleep. It has cost people their jobs. It has cost people their houses. It has put business out of business.
At this low point in the business cycle (and that likely understates the gravity of the situation), some wallowing or lamenting is warranted. However, there's reason to believe that business owners in the small and midmarket are doing anything but that. A study released by the Economist Intelligence Unit and timed with National Small Business Week found that 83% of small business leaders are optimistic about their company's long-term ability to rebound when the economy improves. That's more than 4 out of 5 -- that's Trident dentist and rigged election territory.
So from where does this wellspring of confidence and optimism come? Experience, that's where. Owners of small and midsize businesses have been around the block before, they've seen behind the curtain, and they know what it takes to survive.
Earlier this week I spoke with Justin Kitch, formerly the founder and CEO of Homestead and now chief growth officer for Intuit's Small Business Group (Intuit acquired Homestead in 2007), about the outlook for small businesses. Kitch was fresh from a number of Intuit Town Hall sessions, where he'd spent time with a range of small business owners and learned how they were dealing with the recession.
He pointed to how resilient small and midsize businesses are and cited data (aforementioned and otherwise) about SMB optimism as a preface to saying, "Small businesses are the most optimistic people and the most pessimistic people wrapped into one. They plan for complete disaster every day and they've already lived through it. While the recession hurts their business activity, it doesn't hurt their business... they've faced their own mini-recessions over and over again and this macro recession only hurts them because it's yet another reason that demand is low."
If you've managed to build something from scratch with nothing but your smarts and effort, you've already been to the brink more times than you can count. It's hard work and most can't stomach it -- that's why so many seek jobs in large corporations. The harsh realities of worrying if any money will come in this month, and, when it looks bleak, how to pay your suppliers, how to pay your employees, how to keep the lights on, much less keep your mortgage current, steel business owners against wallowing in anything approaching self-pity.
Though small business owners aren't exactly screaming "bring it on" to the recession, at least according to Kitch they are standing their ground. In his admittedly non-statistically validated sample from the Inuit Town Hall sessions, he learned that 90% of business owners were expanding their marketing spending -- a response he characterized as recognizing you "can't diet your way out of a growth problem." In one session Kitch attended, not a single business owner had plans to lay off any staff.
And as to the lessons he took from the sessions, he cited the need to focus on growing key assets such as human capital, physical space, product development, partnerships, and distribution networks. In his view, the current economic conditions offer a unique opportunity to negotiate opportunities at favorable terms -- often bypassing cash with goods in kind and equity -- that can allow small and midsize businesses to exploit the recession.
Of course, those are exactly the kinds of cagey maneuvers that business owners have been making for years. That's what experienced businesses leaders do and it's why this recession will end, but their businesses will not.
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