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December 2019

How to 'recession proof' a small business

Small businesses already have plenty to worry about. What about surviving a recession?

Thomas Ulbrich, executive director of the University at Buffalo's Center for Entrepreneurial Leadership, said small businesses can "recession-proof" themselves, but it's really more basic than that.

"Instead of trying to predict the next recession, let's just agree to try to run a great business each and every day," Ulbrich said at a recent small business conference in Buffalo. "If you can run a great business, we can live through a recession."

Ulbrich said too many small businesses fail to scale over time, threatening their long-term survival. Here are seven common mistakes he sees small business owners make, and his advice for avoiding them:

• You believed in the "self-employment myth." "If your business depends on you, you don't own a business, you have a job," he said. "And it's the worst job in the world, because you're working for a lunatic: yourself. You can't close it when you want to because you believe there's nobody there to do the work. You can't sell it when you want to, because who wants to buy a job?" (quote from Michael Gerber, author of the E-Myth)

 • You are a control freak and you can't let go. It's hard to keep good employees if a business is controlled by a single person who is "constantly barking orders at people and running at a speed that just doesn't work for those around us," he said. Try delegating responsibility and developing employees. And don't expect them to learn through osmosis.

• Many small businesses have no idea where they're going. All businesses should have a plan, but it doesn't have to be complicated. "Typically the best plans I've seen are one page and they can sit right on your desk, and it needs to become part of the culture of your business," Ulbrich said. He cited Southwest Airlines' "wheels up" mantra: When its planes are flying, the airline is making money. That strategy flows through everything Southwest employees do to help keep things moving, from the pilots who assist passengers with getting into wheelchairs, to cabin crew members who start cleaning the plane as passengers are exiting.

• You don't have the right people. Small businesses can be "loyal to a fault," locked into relying on the original team of employees even as the business grows. "It doesn't mean that those people need to go, but often what got you here is not the skill set that will get you to the next level," Ulbrich said. "Businesses stall because they don't build teams, and they try to use what they have." One solution: Create an organizational flow chart that lists functions instead of employees' names, and identify what specialties are needed. And constantly build a "virtual bench," identifying people who could fill future openings.

• You have no systems in place. Small business owners might think they don't have time to create systems. But if they create systems, they will make things easier on themselves, Ulbrich said. Subway has visual guides behind the counter for its employees to follow to make sandwiches. Airline pilots use checklists to make sure they attend to every safety detail.

• You don't hold people accountable. Owners need to overcome their aversion to having tough conversations with employees, Ulbrich said. Otherwise, they might end up firing employees who had no inkling they were falling short. "It is your responsibility to set your expectations, communicate them clearly and often, constantly coach, and ultimately hold people accountable," he said. "You've got to learn to have critical conversations."

• You fail to innovate. Find a way to stand apart from competitors. "You really have to understand how you're different," Ulbrich said. "Way too many small businesses have no differentiation." Businesses might try to compete as the low-cost option, by being innovative, or by aiming for "customer intimacy," which Ulbrich described as relationship building that goes beyond customer service. He cited Ritz-Carlton hotels as a model. "I have stayed in a Ritz-Carlton before where I had a Buffalo News under the door in a faraway place," maybe Boston, Ulbrich said. "How it got there, I have no clue. But that is customer intimacy."

Ulbrich spoke at "Level Up," a conference organized by M&T Bank and Amazon Web Services to help small businesses grow. The session was aimed at meeting small businesses' needs for training, education and enhancement of skills to scale up their operations, said Eric Feldstein, head of business banking for M&T.

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Matt Glynn– Matt Glynn has been a business reporter with The Buffalo News since 2000. He is a native of Youngstown and lives in Buffalo.