You can always find a reason to start, or not start, a business. Economic stress creates tough environments for business owners, but they also offer opportunities for an organization’s long-term success. The difference between success and failure has little to do with the business climate. It has much more to do with the decisions you make when you’re surrounded by uncertainty.
So you’re going to start a business during these challenging times? Great. You’re going to nail it….maybe.
Times of economic stress can clear the way for long-term success: it’s easier to find good employees, interest rates tend to be better, and investors may be looking for better avenues for their money. But you still need to get it right because, as you probably know, success isn’t guaranteed. The Bureau of Labor Statistics reports that 20% of businesses fail in the first year and 45% fail before their 5th.
I know you don’t want to be a statistic. I know you want to get it right.
Success isn’t guaranteed, but failure isn’t inevitable.
How does failure happen? It’s not like guidance is lacking. Over 10,000 business-related books were published on Amazon in just the last year, and business consulting is a $130 Billion market. You can Google any business-related topic and get enough content to keep you busy for years. There’s so much information you’d think that you could easily pinpoint why some business owners don’t get it right.
But you’d be wrong.
Truth is, there are so many variables involved in making a business work that you can’t judge the success or failure of a business by its outcome. Markets change. Consumer preferences change. A powerful competitor could move in next door.
A pandemic could happen.
But let me ask you this: if your business fails, would you rather it be because the world threw you a curveball, or because you made poor choices?
Why you’ll make mistakes.
We make suboptimal decisions in times of uncertainty, when we don’t have enough information to know all our options or fully understand all the trade-offs. COVID-19 introduced a lot of economic and social uncertainty, but even before the pandemic, things weren’t perfect. Remember, unemployment spiked several times last decade. Wages have plateaued since the early 2010s. States and the federal government cut their spending due to unprecedented budget shortfalls.
Uncertainty is certain.
We make bad decisions under uncertainty because we don’t know enough – about our competition, our customers, or the future. We don’t even know what we don’t know. When we’re uncertain, we’re more likely to use mental short cuts, succumb to biases, or be influenced by our surroundings.
To start a successful business in times of uncertainty, it’s not enough to know the basics of business. You need to know how your human glitches will set you up for making mistakes. So I'm sharing five ways to avoid making bad decisions when you’re getting your business started during an economic downturn.
I'll share the first three bits of advice with you in this post. Stay tuned for the next post to read the rest.
First, downplay the small wins.
We love instant feedback. True in life and true in business. We use it to determine if we’re on the right track, and it feels good to get kudos. We want our customers to tell us how we’re doing. We want data to tell us that lots of people are coming to our site. We want our colleagues to pat us on the back. We want likes on social media. We work hard for these things, and there’s nothing wrong with all this. Unless you let it derail you. Little victories feel so good, but the rush they give prevents us from seeing the long-term rewards we really want.
When a decision we make results in immediate positive feedback, we’re likely to make that decision again – or value that decision as good enough to mimic. The next time we make a choice, we are less likely to evaluate pros and cons in terms of our end game and more likely to chase more positive feedback. After several decisions like this, we could be well on our way to getting off track.
Small wins reward the moment. Healthy businesses care about the long-term.
Bottom line: Business experts will tell you to set up a solid strategy and plan, and then follow it. The decision science advice is to downplay small wins. Enjoy them. But if you enjoy them too much, the flattery can derail you.
Second, care about your wellness.
Your physical, emotional, and mental health can determine how successful your business is. If you don’t care about your personal wellness, you could make decisions that will hurt your business.
You may not realize it, but all the stresses, aches, and pains in your life are adding up and compromising your ability to make important decisions. If you’re sleep-deprived, you’re more inclined to make risky choices without thinking of the potentially negative outcomes. If you have chronic pain, you’re less likely to listen to new information that would require you to change direction. And if you’re stressed – and you’re going to be stressed – you may have trouble retaining information that will keep you nimble.
Bottom line: Business experts would tell you to avoid being impulsive by slowing down, asking questions, empathizing, and exploring other options. The decision science advice is to focus on your health. Prioritize sleep and get enough of it. Eat a healthy diet. Manage your stress levels by taking breaks and doing things you love. If you’re dealing with something emotionally heavy, manage it. You can’t avoid being impulsive sometimes, but if you care for yourself, those times will be much fewer and farther between. And if you can’t take care of yourself, go the extra mile to be extra risk-averse in your decisions.
You deserve the best shot possible.
The uncertainty that is freaking everyone else out is likely freaking you out too. Uncertainty forces us to take mental shortcuts and rely on biases. It nudges us to follow the crowd just to feel more secure. It makes us lose sleep, feel anxious, and become stressed. All of this leads to poor decision-making.
But it doesn't have to be that bad. With better tools, you can make better decisions, and set yourself up for success.
Check out the next post for more tips.