We're just over two years out from the last economic downturn, and we're facing another potential recession. We gathered some business leaders together to offer their predictions on what's to come for small businesses.
It won't be easy
Jenny Bloom was the CFO of Mailchimp during the Great Recession and the CFO of Zapier during the economic fallout of the pandemic. Now she works as a financial advisor for small businesses, and she's not sugarcoating things.
"It's going to be a tough ride," she says.
Surviving the pandemic downturn was one thing, she notes, but inflation is bad now. Raw materials are more expensive, talent is more expensive. As Jenny put it, "COVID wasn't like that." Her advice? Endlessly scrutinize your finances, and be prudent with your spending. She advises her clients to be sure that they have at least two years of runway, and that means making tough decisions.
Contract work will grow
The Great Resignation led lots of folks to leave the workforce in 2021, and Jenny predicts that a lot of them will come back now as contractors. Make no mistake: that will be a good thing for businesses. Hiring has been hard for quite a while now, and with rising inflation and higher salary requirements, it's only going to get harder. So relying on contractors to fill gaps will be crucial until businesses are sure they have the funds to hire full-time.
And this isn't limited to small projects. Jenny suggests contracting out leadership positions: hiring fractional leaders, like a part-time CFO, can help you through this upcoming financial uncertainty.
Standing out will be even more important
Businesses got enormously creative during the pandemic, figuring out all sorts of ways to survive during social distancing measures. But that instinct to survive isn't enough anymore—now businesses will have to really stand out.
Dan Nelson, owner of The Ruby Tap wine bar and Head of Product and Design at Tock, encourages business leaders to think outside the box. With rising wages and prices across the board, he says, you need to differentiate yourself.
"If all wages have gone up across the restaurant industry, then why would somebody work at The Ruby Tap versus the place down the street? And if inflation is still making an impact on consumers … they probably have less money to spend. So why The Ruby Tap? ... We know we can't just raise prices and increase wages—we have to make The Ruby Tap something exciting for people to come to."
At The Ruby Tap, that means hosting special events and creating other incentives for folks, so "when somebody says, 'I'm ready to go out, I'm excited,' we are one of those places."
We're better prepared this time
Everyone can agree there's a long road ahead, but Michael Alexis, CEO of teambuilding.com, has a little ray of optimism for us. He points to the naming conventions of economic events over the years.
The financial crisis in 1873 was called The Panic.
The financial crisis in 1929 was called The Great Depression.
The financial crisis in 2008 was called The Great Recession.
"I don't know what this economic event will be called," Michael says, "but it's a trend toward being less scary." Why? Because it's more familiar. The more we experience it, the better we are at handling it.
And Michael is confident that there's a silver lining in there somewhere: "All the small business owners out there are smart and entrepreneurial and will find solutions and ride it out. Not just in a way that sustains their businesses, but maybe in a way that really accelerates them."
We can't be sure what's going to happen in the months and years ahead, but these business owners all agree that with the right mindset and preparation, small businesses can continue to thrive.