During the Great Recession, small businesses experienced disproportionate job loss. Nationally, small businesses accounted for 45% of employment, but as the economy shed about 5 million jobs from 2008 to 2009, they accounted for 62% of the net job loss.
In contrast, Interise businesses were resilient during the economic downturn, and recovered faster than the private sector as a whole. In 2008 and 2009, during the Great Recession, Interise businesses retained and created jobs at an astounding 21% growth rate while the private sector experienced overwhelming job losses.
So what differentiates #InteriseStrong small businesses? Interise research published in Navigating Uncertainty and Growing Jobs identified these five characteristics as key to small business staying power:
- Use measurable indicators
- Assess strengths
- Plan effectively
- Demonstrate creativity under pressure
- Are adaptable
DIVING DEEPER: FIVE CHARACTERISTICS OF INTERISE STRONG SMALL BUSINESSES
Use Measurable Indicators
Disciplined use of measurable indicators is the foundation of business success, providing a firm owner with the tools to manage costs and track output. Close management of inputs and outcomes during challenging periods helps a firm to decide when to invest in new products and services, when to take business, and when to “walk away”. This lays critical groundwork for greater resiliency.
Likewise, small businesses rely on measurable indicators to effectively manage employees, particularly to delegate management responsibilities and then monitor success in those positions. This can be particularly critical during challenging periods, when a small business might benefit from emergent leadership among staff.
Among resilient firms, a company’s ability to quickly act on the knowledge acquired when assessing its relative strengths is underscored by their ability to make a compelling case for additional resources, or to plan for reduced resources. Without such a plan, firms are simply begging for support.
The strategic use of key resources—capital as well as commodities, products, and labor—allows a small business to expand the types of products or services they offer as well as to build the internal capacities to take on bigger and more complex assignments. Nearly half of the case study firm owners identified capital as critical to firm growth, needing to establish a case for how they will add value if provided access to these resources.
Demonstrate Creativity Under Pressure
Most companies are set up to operate most effectively in a normal business environment. However, during periods of volatility, firms must be agile enough to try new ideas that respond as quickly as emergent market shifts. Creativity under pressure refers to a business owner’s ability to dynamically incorporate aspects of strategy into everyday business decisions. Among resilient firms, creativity under pressure is exemplified by a company’s willingness to push itself outside of its comfort zone and consistently look for business opportunities and internal efficiency measures.
This leadership role is distinct from the inward-facing formal strategic growth planning techniques, and focuses instead on the “entrepreneurial mindset” that allows the owner to quickly pivot and thus beat out the competition. Among the case study firms, nearly half who identified the critical importance of a strategic growth plan have needed to alter their initial plan, either scaling back intended growth or making larger shifts. In other words, these business owners have consistently fine-tuned their business plans in response to market changes.
In stable environments, businesses thrive on standardizing processes for greatest efficiency and efficacy. During periods of economic volatility, however, this task becomes far more connected to having the capacity to creatively respond to emergent situations. For this reason, a resilient business is one that can make an accurate assessment of its position, however difficult.
Next, the company might use this insight to identify new markets, within or adjacent to its core business. A company might also use this knowledge to identify the internal capacities required to take on bigger or more complex assignments so that it might be able to move quickly to act on such knowledge.
Resilient firms continually adjust strategy to respond to market shifts rather than relying on a formula or simply reacting to business changes. This suggests that strategic advantage is not merely a matter of producing or delivering something that differentiates a business from its competitors but also a commitment to constant learning and improvement. Such adaptability requires discipline, and at least some mastery of the four previous capabilities.
Adaptability also relies on second-order skills—the abilities to accurately assess firm strengths and opportunities as well as to plan effectively—that enable an entrepreneur to appropriately respond to signals of change. Finally, resilient firms use these skills in a creative fashion, taking advantage of opportunities in unexpected ways.
Contact us at firstname.lastname@example.org to tell us how your small business puts these practices to use. We want to share your story!