“Chaos isn’t a pit,” says Petyr Baelish “Littlefinger” in Game of Thrones. “Chaos is a ladder.” In an economic downturn, pits and ladders can easily be mistaken for each other.
Faced with uncertainty, some companies spread chaos and pain with indiscriminate cuts across the board and dumping assets at rock-bottom prices. Others re-group, refocus, and start climbing.
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The natural human tendency says “wait”. Wait for better data to make decisions. But this doesn’t negate the imperative to act during uncertain times — before the dust settles.
Uncertainty shouldn’t prevent you from acting — quite the contrary. Still, it’s our most frequent reaction to not having enough data: we freeze.
Why do we recoil from uncertainty?
A girl hears a noise in the middle of the night, just as she drifts off to sleep. She gets out of bed to check it out. She dies. Scene.
This is the beginning of many, many horror movies.
You know she’s about to die; the music, the POV — everything sets the scene for you, but not for her.To survive in a horror story, you have to know you’re in one in the first place.
Even if you know all this — you’ve seen at least one horror movie that started this way, I’m sure –, you’re still going to get up in the middle of the night and check that weird noise.
What if it’s an intruder? A broken pipe? An earthquake?
The discomfort of not knowing pushes you out of bed. You need certainty to sleep well (or at all).
This seemingly tiny sense of comfort may push you to danger. Or it may cause you to lose opportunities.
Despite our natural proclivities, the world doesn’t work that way. The world is fickle, unpredictable, complex, challenging, inconsistent, and, yes, full of uncertainty.
In 2023 and beyond, it’s a good idea to get comfortable with uncertainty.
How to get comfortable with uncertainty
If you feel a pang of anxiety because you don’t know what 2023 holds in store from an economic point of view, you’re not alone. We’re all holding our breath.
To resist the natural inclination of doing nothing until you can say for sure the world works a certain way, try to acknowledge the unfamiliarity. Say you’re unsure instead of looking for the comfort of fake familiarity.
Business owners don’t have the luxury of waiting for full data sets before tackling uncertainty. While you wait and analyze, some uncertainties will invariably become present-day reality.
When that happens, your future narrows down. You’re backed into a corner with the evergreen crisis solution: slash prices and fire employees.
This cognitive bias prevents you from noticing the opportunities that don’t align with the expectations that stem from your certainties.
Instead:
Hold on. Don’t hold still
Business-as-usual is not the solution. Neither is a cut here, a nip there, a trim elsewhere. Act, but do it with focus.
Lay out four scenarios
At the time of writing, economists expect a downturn for next year. They could be wrong. But if they’re right, it shouldn’t catch you by surprise.
Before the year’s end, answer these questions:
- Which part(s) of your business are most vulnerable to inflation and/or economic downturn?
- What about a drop in demand — how would that affect you?
- What happens if the supply chain faces further challenges?
Next, prepare your scenarios and responses to them. You’re looking at four hypotheses:
- There is no economic downturn
- There is a mild economic downturn
- There is a moderate economic downturn
- There is a severe economic downturn.
Which levers can you pull in each case?
Some prompts to get you going:
- What costs can you cut without long-term damage? Perhaps you’re using one too many SaaS solutions? You can also freeze business travels and investing in untested marketing trends (more on that later).
- Do you need to delay product launches? In a severe downturn, you may need to do so, especially if your product isn’t aligned with the economic context i.e. it’s not a necessity, it’s just nice-to-have.
- Is it time to restructure your entire business? This is by far the scariest scenario. Plan for it before you need it and think of it like an insurance policy: it’s good to have it but it’s better to never use it.
But you have other actions to take before pulling the last lever (see below).
More on scenario planning here.
Become indispensable to your clients
Faced with uncertainty, people close their wallets. They won’t spend money unless it’s clear that what they’re purchasing will get them the return they need.
Are your products or services indispensable?
Think in terms of basic needs: do they help your clients make more money? Stay/get healthy? Find love?
These are the things that people don’t let go of too easily — even in economic downturns.
For example, I’ve created my digital download as a helpful solution when budgets get cut. For a fraction of what you’d pay a copywriter, you get a full 5-email launch sequence ready to send to your list. It saves you time AND money.
This is the type of product designed for economic uncertainty. Do you have anything like this in your portfolio? If not, you’ve got time to build one.
Invest in keeping your existing clients
The moment the news that the crisis is here hits, panic unfolds. Avoid panic churn by investing in client retention strategies early on. The rule of thumb says that it costs five times more to acquire a new client than to keep an existing one.
Retention is less vulnerable to economic swings than acquisition. Irrespective of how the economy swings, investing in retention is a good idea.
Which are your most at risk for churning client cohorts? Start there!
Borrow an idea from the SaaS world: allow your clients to hit “pause” on their subscription for a couple of months instead of canceling it altogether. Get them to un-pause it by showcasing your newest features.
Shift from paid to earned and owned media
If there ever was a time to put your digital house in order this is it. Invest more in your own website (SEO and content marketing are great places to start) and less in paid ads and social media.
A free tool I’ve had great success with is HARO. Sign up to their newsletters and pitch journalists and media outlets that are looking for contributors with expertise in your field. It’s a great way to win backlinks and media coverage for free.
Cut expenses, but do it wisely
Cutting your marketing budget indiscriminately is a recipe for disaster. Instead of reducing it by say 50%, focus on underperforming campaigns and strategies. These can go and their budget can be re-allocated to tactics that work.
Pro tip: I taught most of the clients I consult with to look at CLV (Customer Lifetime Value) when deciding what to cut and what to keep. Don’t focus on acquisition costs or conversion rates alone. Some tactics may have higher costs, but bring in better, more valuable clients.
That’s it from me today. See you next week!
Here to make you think,
Adriana
P.S.: Know someone who’s interested in dealing with uncertainty? Forward them this email; they’ll thank you for it (and so will I).
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