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Recession Resistance

Recession Resistance

A recession comes, and the first thing to get cut is the employees...

Unfortunately, this is how it goes for most of the companies, and they end up paying for later on...

But you can choose to operate differently.

If you have a team that is producing uniquely appreciated value in the marketplace, do everything you can to keep that team together.

Do not cut your team because of a recession

I feel obligated to share this with you because it is crucial to your sustained revenue growth over the next decade.

If you can retain your team's service capability during the "hard times", then you will come out of the recession ready to appreciate and multiply the value of your service.

While you expand your bull-market growth potential, most companies will unknowingly shrink theirs.

Imagine coming out of the recession with momentum, while most companies are busy re-hiring, re-training, and re-building relationships...

To make accurate decisions during difficult times, it's crucial to remind yourself how sustainable growth is created.

Your Team and Their Unique Capability

Exceptional entrepreneurs like you understand this, but unfortunately, this isn't the case for most...

The only reason your clients pay you, is because of the value that your team produces.

If your team delivers less value, you get paid less.

And if your team delivers more value, you get paid more.

It's a simple game with a simple ruleset.

I've been carefully observing the best entrepreneurs in the world and working in small businesses for over a decade now, and I've noticed a single distinction that separates "good" entrepreneurs from "exceptional" entrepreneurs.

All good entrepreneurs are Client-Centric thinkers, but exceptional entrepreneurs master "Team-Centric" thinking, because they know it’s the only way to provide multiplying value to their clients over time.

So why do so many good entrepreneurs get caught in the trap of reducing their team's service capability during recessions?...

In my experience, this results from a lack of clarity about the *people* and the *solutions* that create sustainable growth.

These are 6 questions that will help you create clarity, especially during a recession

  • What’s our "Ideal Solution"?...
  • Who’s our "Ideal Client"?...
  • What transformation is our team uniquely great at facilitating?...
  • Are we spending too much time, money, and energy on "mediocre solutions" that don't lie within our team's unique ability?...
  • Are we spending too much time, money, and energy on "mediocre clients" that are extremely difficult to retain and appreciate?...
  • What can our team do that would produce multiplying value for our best clients?...

Your job as an entrepreneur or growth leader is to strategically:

  1. Reduce,
  2. Increase,
  3. Create,
  4. Eliminate.

While you prioritize team retention, most companies will eliminate significant portions of their team during the recession...

But I know you won't fall into this trap.

You’re special.

You might be thinking:

"Ok Kalim, I agree with you on the team retention principle."

"But what should I reduce or eliminate during a recession?”

This is a very important question and my answer is quite simple.

Reduce or Eliminate Activities and Client Segments that cannot produce and leverage happiness in your business

The Recession Resistance Formula

These 3 strategies will help your company emerge from the recession in a uniquely advantageous position for your bull market run.

STEP #1: Focus on Your Best Clients and Conserve Energy

Be laser focused on your "Ideal Client".

This might mean *firing* the 80% of clients that produce only 20% of your profit.

Or it could mean doing some *outsourcing* and *contingency based partnerships* to service these mediocre segments.

Either way, stop acquiring and servicing these types of clients using your internal resources.

It is really draining to spend lots of time, money, and energy just to create marginal growth, so I recommend having your team refocus their energy on delivering an "Ideal Solution" to your "Ideal Client".

Stop wasting precious human resources on "Mediocre Solutions" for "Mediocre Clients.

It will kill your bull market growth potential.

STEP #2: Create your own "25% Strategy".

If you can create an average increase of 25% in across three growth levers, then you will double your annual recurring revenue.

  • Give your clients a reason to spend more money when they purchase.
  • Give your clients a reason to purchase more frequently.
  • Find new clients.

The key to setting your company up for sustainable growth is to shift your resources into creating more value for your best clients, generating more revenue from them, and ultimately multiplying them.

The purpose of "The 25% Strategy" is to,

  • Conserve your energy,
  • Double your annual recurring revenue,
  • Capture excess profit to reinvest into the business.
  • Provide multiplying value to your best clients.

STEP #3: Temporarily Reduce or Eliminate Shareholder Income

Yah, I know this one isn't fun...

But money is the number one reason why your team will stay with you in the short-term.

And let's keep it real, if you want to produce extraordinary results in the bull market, you need to make extraordinary investments during the recession.

Sacrificing your personal gains during the recession to multiply your bull market profitability is an investment that very few will make.

“Since the pandemic took hold in March, at least 18 large companies have rewarded executives with six- and seven-figure payouts before asking bankruptcy courts to shield them from landlords, suppliers and other creditors while they restructured, the Post review found. They collectively meted out more than $135 million, documents show, while listing $79 billion in debts.”…. “The retention bonuses, which range from $600,000 at the parent company of retailer New York & Co. to the $25 million awarded to executives at Chesapeake Energy, illustrate how the pandemic recession is exacerbating economic inequality in the starkest terms: Those same companies laid off tens of thousands of workers, the majority earning less than $29,000 a year.” [1]

You will be in the 1%.

And that's right where you want to be.

We have a problem with greed in our global culture.

But you can be different.

If you can afford to reduce or even eliminate shareholder pay for a year, then I suggest doing so if it enables you to keep your "Dream Team" together.

Every recession is a golden opportunity to retain your value creation capability while your "competitors" predictably reduce theirs and keep profits for themselves.

The recession is essentially a contest to set up the most profitable bull market run, and it all comes down to one question:

Do I want to retain my team's service capability or do I want to retain more cash for the investors?...

Always choose the service capability over extra cash if you can.

Your team's value creation capability will produce sustainable cash-flow, whereas extra cash might not.

The 5 Team Retention Reinforcers

If you want to maximize the profitability of your bull market run, you will need to keep your "Dream Team" well beyond the recession.

In my experience, these are the top 5 impact points that encourage team members to stay for the long-haul.

  1. Focus On "Unique Ability"
  2. A Pre-existing Relationship
  3. A Massively Unifying Purpose
  4. Servant Leadership
  5. A Team Appreciation System

The above five impactful reinforcers will be discussed briefly in the next part.

About the Authour

Kalim Aull is a Sustainable Growth Evangelist.

Reference:

[1]  https://www.washingtonpost.com/business/2020/10/26/chapter-11-bankruptcy-executive-bonuses/?arc404=true