“we risk being deafened by the negativity all around us here in London”
Part of a message I received from a friend in London as I am in Baja at Modern Elder Academy. Later that morning, as I sat on the terrace with the Pacific in the background, I had a call with a friend and client, an entrepreneur and business owner who is facing challenges with their UK business, one that is in a sector that very much depends on consumer confidence and so consumer spending.
Today some thoughts on resilience for businesses and their leaders.
Brexit fears and Business
The overall atmosphere in London and the UK is indeed very much down and negative.
I feel able to have a sense of additional perspective from a distance of over 9000km this week, so a few thoughts.
First, it is midwinter. February is probably the toughest month of the year for people in Britain anyway, with winter weather at the worst allied to still short days and low levels of sunlight.
Second, Brexit energy. Yes, it feels like there is virtually no political leadership as everyone in that sphere seem to be “fiddling while Rome burns”.
These elements together have really created negative energy in the country, with consequential radical drops in people spending money, whether on eating out, shopping, travel, even relieving the tension by the British tradition of going to a pub. In London, one almost never spoken addition to that is that, driven by Brexit fears, the property market has not just slowed to a crawl, but sees prices dropping quite precipitously if any seller wants to actually make a sale.
When consumers stop spending, the economy grinds to a halt, with nasty consequences for businesses and their owners.
So, prophet of doom stuff from me today, yes?
Perhaps, but really not. Yes, I am an optimist by nature, but I am also one who is deeply grounded in pragmatic reality. I am a Chartered Accountant by training, after all, and one who, over a thirty-year career, has overseen many businesses through recessionary cycles, not all of which have succeeded or made it through.
Grounded optimism, then.
What are my thoughts, then, for business owners facing down a “Brexit economy”, whether the UK reality or others around the world where it feels the “sky is falling”?
Cayman 2011 – “You are still here”
I am taken back to late 2011, where I stood at the front of a room full of business owners in Cayman to run a full day workshop. Before starting the day, we had them talk to each other and share their experiences of the past two years since the Global Financial Crisis had hit. Oh, and in Cayman, we knew that: “when the USA catches a cold, we get pneumonia” such is the economic sway the US economy has there. Businesses had been hit very, very hard.
When those business owners shared their experiences with each other, the collective sense was that it had been really hard, with a significant portion of the room sharing that they had barely made it through and found themselves significantly smaller, with pain such as laying off loyal staff, taking on more debt etc.
Some had really felt that they had been clinging on by their fingernails, some still felt they had one foot over the edge of the cliff.
After the group shared what that experience had been, I found myself saying to them:
“Congratulations. You are still here”
I reminded them of Hurricane Ivan a few years prior, in 2004, a natural disaster that caused unprecedented devastation to Cayman empirically, Ivan was, in terms of capital loss per capita, the biggest such economic disaster in history. From that event, many businesses folded, but many also were resilient enough to come through it, with those that did being able to take many opportunities, as entrepreneurs, as the green shoots (literally and figuratively) of growth helped Cayman grow back.
Those who were in the room that day in late 2011 were still there when so many others were not. This thought landed with the business owners, many of whom then left at the end of that day looking forward with optimism more than looking back to how hard it had been.
“Think longer term than the next guy”
Now, a positive thought. One of the fascinating things about Brexit and the UK is that underlying UK economy remains strong, with the longer term underpinnings of what drives a strong economy remaining as powerful pillars there.
To paraphrase Benjamin Graham and his best-known student, Warren Buffett:
“the easiest way to make money is to think longer term than the next guy”
So, putting this all together, if you are a business owner facing Brexit or something like it outside the UK, look up, take the perspective of the longer term, then look at yourself and your business and see what you can do to ensure you outlast the coming economic downturn and are ready to take advantage of the opportunities once things turn back upwards.
AS Warren Buffett also says:
“Be fearful when others are greedy and greedy when others are fearful”
Fortune always favours the brave entrepreneur when times are tough and others won’t take the risk.
So, what do you need to do now in order that you are in a position to be greedy when others are fearful?
Proactive Resilience
My term for this is Proactive Resilience.
This is needed now both for individuals and their businesses, as to be ready to capitalise on opportunities during and after the Brexit era both the individual and the business must be both resilient and ready to take opportunities.
First, for the individual. When you know times are and will be hard in business for some time to come, how ready are you as a human being to not only survive but thrive? For my thoughts on this, search on this site for the term “Proactive Resilience” and you will find several posts with ideas, one of which is here.
Second, for the business. First, pragmatically, take a long and hard look at your business model in three areas.
Profitability
First, is it profitable and cashflow positive now and will it remain so in a down economy? The more you can structure it to be so, the better your chance of being around in a few years.
Resilience
Second, how resilient is your business model? In any shifting economy opportunities will come and go. Once thriving areas may suddenly suffer while new areas may emerge. How much does your business depend on one or two core areas or products? How ready are you to pivot and innovate as new (and profitable, remember, you need profit and cash) opportunities emerge?
Strength
Third, businesses never go out of business for lack of profit, they do so through lack of cash. What does your Balance Sheet look like? How strong is it, how much debt do you have and how is it structured. In short, how able are you to outlast a recession.
Profitability. Resilience. Strength
I hope this post reaches some business owners who then act on it for themselves and their businesses.
I’d love even more to be in a room full of business owners in late 2021 where they can tell the room what they did in 2019 to ensure they are still there and ready to thrive in the upturn.