Believe it or not, Americans are starting new businesses—hundreds of thousands of them. Even in the midst of a public health crisis, a possible recession, and now social unrest, American entrepreneurs are still taking on the risks of running a small business.
As an entrepreneur, I commend them for their extraordinary risk tolerance. Most will fail. Some will survive. But a select few will thrive, taking the U.S. economy to greater heights.
Innovation is the heart of the free-market and expands with it. As the Archbridge Institute’s Gonzalo Schwarz puts it, “Human ingenuity is our greatest weapon against the coronavirus.”
Indeed, human ingenuity remains our economy’s greatest weapon in good times and bad. Entrepreneurship is a primary driver of economic output, fueling the business expansion and job creation that uplifts Americans across the socioeconomic spectrum.
The entrepreneur’s journey is an arduous one however, now more than ever. Whether they are sole proprietors or the stewards of larger entities, small business owners must ask themselves: What is my value-add? How can I monetize that value-add to the fullest extent possible? Is my value-add sustainable in the short-, medium-, and long-term?
That last question is especially pertinent during these turbulent times. Today’s entrepreneurs are running small businesses in the midst of an unprecedented economic recession and turmoil. According to economists, America’s unemployment rate has surpassed 20 percent—the highest mark since the Great Recession. Tens of millions of Americans are out of work because of the COVID-19 pandemic.
Now, the question becomes: Is my business “recession-proof?”
Starting a small business, let alone running one, can take months to map out, if not years. It costs money, and it takes time—an opportunity cost in itself. Once you go down that road, you want to stay on it.
Because starting a business is mentally, physically, and financially draining, but starting over, even more so.
By “recession-proofing” business models, entrepreneurs can mitigate the risks of running a small business, not to mention the risk of a “black swan” event (i.e. a public health crisis or social unrest) shutting it down. The most innovative, forward-thinking entrepreneurs can develop a business model that can not only survive a “black swan” event but also thrive during it.
So how do you do that? Thinking ahead is the first step. Predicting what the future may look like is another. Even more importantly, entrepreneurs need to assume that the worst-case scenario will happen—that the business will face the most overwhelming odds.
Perhaps, that won’t happen. For example, today’s Millennials probably won’t suffer through another pandemic in their lifetimes. But small business owners need to go about their lives as if a pandemic could spread again or social unrest could bring economic activity to a halt.
I’ll give you an example. As a public relations expert, I handle a wide range of client deliverables, from content creation to media outreach. Planning ahead, I need to ask myself: The way technology is changing the world of strategic communications, do I need to adjust what content I’m creating? Do I need to tweak how I’m communicating with reporters and the like? Or is my current business model sustainable over the next six months, the next year, and the next decade?
I’ll give you an even more concrete example. Primarily due to the COVID-19 pandemic, digital advertising expenditures are down 33 percent for the March-June period. Ad spending on traditional media, such as cable news, has dropped even more (39 percent).
Those advertising experts who specialize in digital and traditional advertising, respectively, need to be introspective. Is this downward trend simply because of the coronavirus, or does it represent a broader trend? Should ad dollars be shifted to digital, traditional, or somewhere else entirely?
Once they’ve analyzed their situation, advertising experts can then construct a business model that endures during and beyond our current crisis. They can then build a “recession-proof” business model that adds value, even during the worst of times.
Again, consider the worst-case scenario.
For instance, your client’s own revenue stream is cut by 50 percent, due to the pandemic. What value can you add that is still worth paying for, even on a slimmer budget?
There may not be any level of value justifying that expenditure. Even if you are adding significant value, there are circumstances beyond even the most self-aware entrepreneur’s control. As the COVID-19 pandemic has shown, not all businesses are “recession-proof.”
Only with self-awareness can entrepreneurs hope to come out stronger on the other side. Only with resilient entrepreneurs can we survive and thrive, whether the U.S. economy is in a recession or not.
As if being an entrepreneur isn’t difficult enough, the current crisis has thrown a new set of risks our way. We have two options: Complain or turn this crisis into an opportunity.