Coming Back From Covid: Time To Rewrite That Five-Year Plan
“Everyone is looking at the next five years differently than they were before.”
More than a year after the pandemic began, what is the economic outlook for small business? Jack Stack, father of The Great Game of Business and founder, president and CEO of SRC Holdings Corporation, has been a grounding voice for many small business leaders throughout this pandemic and the recession that followed. Stack has been in the business world awhile, and he’s seen his business through recessions before. He refers to times like these as ‘black swans’ — an economic wrecking ball that no one saw coming.
At the start of the pandemic, Stack encouraged leaders to fight the urge to keep their cards close to their chest and instead be transparent with their teams, involving everyone in the success of the company. Now, as we start to turn the corner of this pandemic and there’s a light at the end of the tunnel, Stack is sharing his insights on the economic outlook for small businesses over the next 12 months and beyond.
What trends should leaders be aware of and how can they prepare for the challenges and opportunities ahead? From our recent virtual fireside chat with Jack Stack, Here are three key insights from Stack that small business leaders should know in order to survive the recession and thrive in the upturn.
How to Position Your Small Business for Success
The pandemic dealt a significant blow to the economy, but there’s reason to be optimistic. There are still economic challenges ahead, but the best thing leaders can do is to prepare for them: talk to your organization and take defensive measures against some of the obstacles we may see in the next year; like inflation, limited resources, and supply chain issues. For example, if you believe inflation is on the way, prepare for it.
“Quote at a higher labor cost or overhead rate and less of your margins will erode,” says Stack. “Understand that it may cost more to do business in the short term, so prepare for that.”
Despite some of the challenges we may see over the next year, Stack believes tremendous opportunity lay ahead. Tough times bring about innovation, and it’s in the down times when you can make the most gains. For those who have the resources to, now is the time to take advantage of relatively cheap prices and make some economic moves.
“Right now, we have tremendous opportunity to rewrite a five-year plan,” says Stack. “Create a blank slate. Look at your cost structures, debt structures, and supply chain structures. What moves can you make to take advantage of the opportunities that a recession presents?”
Start by picking your targets. Focus on your higher margin product lines and protect them as much as you possibly can — the higher the margins, the easier it is to sustain any bumps. There’s also tremendous opportunity in real estate. Within his own organization, SRC Holdings, Stack has made real estate part of their portfolio. It’s a defensive strategy and it’s particularly smart to have during recessions.
Overall, the outlook is hopeful. Though nobody has a crystal ball, Stack predicts the upturn isn’t far off. “By 2023, things will be ironed out and we’ll have a good run in 2024 and 2025.”
The Most Dynamic Workforce Will Dominate the Market in the Next Five Years
There’s a war for talent, and many small business leaders are already feeling it. The labor shortage is real and Stack’s organization is no exception — SRC Holdings has 106 job openings right now and it’s been a challenge to find the right people to fill them. That’s why Stack advises leaders against layoffs.
“Layoffs are a short-term play — understand that hanging onto your team members through this is a long-term investment and there will be a return,” says Stack. “Our goal is to have the most dynamic workforce right now so that we can dominate the next five years.”
If you lay your people off now, you run the risk of missing opportunities when things start to come back — and they will come back. It takes time to build up your workforce after layoffs, and companies who held onto their talent are better positioned to get through the door first.
“I think there will be an absolutely incredible demand out there, but we will all be trying to go through the door at the same time,” says Stack.
Financial Transparency in the Best and Worst of Times
Open-book management is all about educating your team on your company’s financials and rallying them around common goals. When things are going well, it’s easy to imagine how inspiring and motivating financial transparency can be. But how can leaders remain positive during down times when the numbers aren’t improving? Stack encourages leaders to talk about it, don’t hide from it.
“Many leaders feel they can’t be transparent until they have all the answers or until things get better — it’s just the opposite,” he says. “People tend to perform better when they’re coming from behind.”
Stack recommends laying out the situation and sharing what you know and what you don’t, as well as focusing on how things will change when the upturn comes. Don’t focus so much on how bad things are today — they will change, and it’s important to talk about the opportunities and challenges of economic recovery. Task your team with looking for opportunities for cost reductions and ideas for improving relationships with your current customers. People will have real pride in the contributions they were able to make during tough times.
This pandemic has been feast or famine for small businesses, but no organization escaped unscathed. Times like these underscore the essential role of small businesses in this country, and the ability for purpose-driven organizations to persevere and thrive through hardships. Stack’s optimistic outlook for the future of small business is unwavering.
“I think business will be the most influential source of change in this country. Business leaders will be our salvation,” says Stack. “Business and transparency is the stabilizing factor of our society.”