“It is important to realise that 80% of the success of a business is the psychology of the leader”.

A Bain & Company study has found that twice as many businesses went from middle of the pack to industry leaders during a recession than during stable economic times. Further, companies such as Dell, Apple, Disney, Fortune, GE, CNN, IBM, Vodafone, Fed Ex etc all started in really bad times. This study highlights that instead of feeling bad or down about the economy, small businesses should instead be embracing this as an opportunity to excel.

Digging further into their findings we identified three stages of a downturn that each drew two very different reactions from businesses. The three stages of a downturn identified were:

1. Storm clouds brewing – The first signs of trouble.
2. Battling the elements – Sales slump as things take a turn for the worse.
3. Clear skies on the horizon – Customers come back.

What separates the companies that strengthen through a downturn is how they react to each stage.

First, the losers. According to Bain’s study, companies that respond to each stage intuitively struggle through slow-downs and come out the other side at the back of the pack.

The intuitive response to each stage is as follows.

1. They express confidence that their industry or sector is safe from the coming turmoil – don’t want to alarm employees, the market or themselves. They diversify the business to hedge their bets.
2. They start slashing costs, reducing staff numbers, service quality and cut all growth spending.
3. They’re forced to buy their way back into the good books of customers and employees as business picks up again.

Winners, on the other hand, react counter-intuitively. This approach sees them strengthen their core business through the downturn and opportunistically expand. They react like this.

1. They objectively analyse what’s coming and share contingency plans with their team. They reinforce the core business and play to their strengths. They plan and act.
2. Instead of slashing staff and cutting quality, they partner with employees and customers because they’re all in this together. They also look to bolster their core business with bargain acquisitions. The opportunities are out there.
3. They make a smooth transition into higher levels of growth as customers return. There’s no need to frantically ramp up to meet a rising market because the capacity is already there.

It’s by no means an easy process to weather the storm of a downturn, but by facing it head on and focusing on what you do best your business will be in a much better position to ride it out. Remember these are studied results from real market research.

So if you can, maintain momentum, a long-term view and go against the grain – history says it will see you at the front of the pack when the dust settles.

As Napoleon Hill put it: “Opportunity often comes in disguise in the form of misfortune or temporary defeat”

Awesome advice and something we should all be considering in our businesses. One of the key criteria for businesses that push through tougher time is that they ensure they ‘add value’. More value than their competitors. This will help you dominate an industry.

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