ARE YOU OLD ENOUGH TO REMEMBER THE LAST TIME AUSTRALIA HAD A RECESSION?
That was 25 years ago – when the unemployment rate rose to 10.8 percent, business interest rates were around 20 percent, several financial institutions failed, and some high-flying Entrepreneurs fell into bankruptcy. Some of them ended up in jail as well.
Those of us of a certain age no doubt carry the scars from that time and hopefully learned some lessons. However, there will be younger Entrepreneurs reading this post who have never experienced a recession, or know what it is to run a business when the world turns against you. Yes, we had the Global Financial Crisis, but we Australians managed to escape relatively unscathed from that mess.
But there are also many businesses that survived the recession. Similarly, there are businesses that have emerged from the wreckage of the recent mining boom and bust and are now looking forward to the future.
These are the resilient ones.
“…organisational resilience… the capacity to respond, adapt and transform in response to changes in the business environment” – UQ Business School
SO WHY DO SOME BUSINESSES THRIVE WHILE OTHERS DON’T?
The University of Queensland has recently released the results of a study of Small Business resilience. The study focused on businesses in one specific area of regional Queensland which was dramatically affected by the resources boom and bust. However, I believe that the lessons from the study are equally applicable to any Small Business, in any area, in any industry.
4 CRITICAL SUCCESS FACTORS
The results of the study show that there are 4 success factors that determine whether a business dies, survives or thrives when hit by a major economic upheaval such as a steep downturn.
Highly adaptive businesses are able to react quickly when their market circumstances change. They will re-allocate resources, or even change the resources they use so they retain market share and their position in their industry. These businesses are highly focussed on customer satisfaction. They will do everything they can to ensure that their clients’ expectations are met, every time.
The proactive business owner is constantly on the lookout for opportunities and threats in their environment. They are highly tuned into the health of their industry, understand it thoroughly and know what drives it. They introduce new products or services rapidly in response to changes in demand or an emerging trend. The business owner has a strong commitment to both self-development and development of staff and be willing to change the entire organisational structure when new opportunities arise.
Connectedness, to me, is a subset of Pro-activeness. The proactive business owner will be connected to an active network of suppliers, advisers, customers, peers and strategic partners who will help to keep tabs on what is happening in their industry and community. In addition, these networks will give them access to other market segments or industries.
‘Slack’ is the ability to source additional resources (equipment, skilled staff, finance) to meet additional demand, or to take advantage of opportunities as they present themselves. Accruing these “slack” resources in the good times sets the business up well to cope with anticipated (or unanticipated) shifts.
THE WHOLE PACKAGE
I certainly have no idea if Australia is in for another recession. But it’s not difficult to see how, together, these 4 characteristics of resilient Small and Medium Businesses would help you to survive through rough economic times. There is also an inescapable conclusion.
Any Small Business that wants to survive for the long-term, and not just when trading conditions are smooth sailing, has to put significant effort into building resilience and be prepared for the winds of economic change.