Four Responses to Economic Contractions
There are basically four responses people have during economic contractions—and only one that counts.
1. The Cheerleader Response: “I refuse to participate!”
2. The Old-School Response: “Nothing really has changed; let’s just get back to the basics.”
3. The Quitter Response: “There is nothing I can do, I just have to wait it out.”
4. Advance and Conquer: “Every resource you have goes to advance and conquer while others contract and retreat.”
Let me explain, as you move through each of the stages of recovery and as you build or rebuild your business, you will make choices in how you respond. Your response to the economic contraction will be a result of your beliefs and the influences of your environment. You have heard and/ or witnessed each of the four responses by your employers. Let’s look at all four and examine the ones that work and any untruths that may be holding you back.
The Cheerleader Response
The first response—the “cheerleader”—simply refuses to participate. I love this attitude and in fact agree with it on many levels. However, there are two versions of this, one of which is workable and one that is not. The first suggests that you not partake in the thinking, actions, and behaviors of those agreeing with the economic contraction. While I agree that it’s best not to buy into mass negativity, maintaining a totally positive—and therefore somewhat unrealistic—attitude during a time of serious contraction is, at best, a state of temporary denial. It’s like you try (unsuccessfully, in most cases) to convince yourself “not to participate” and that somehow, you will be okay. I consider myself an optimistic person and believe my mental condition is critical to success, but it would be irresponsible and unworkable to suggest that the economy can be made different by mentally “pumping yourself up.” You actually have to do something! It is hard to deny that credit has tightened, lenders are calling in credit lines, companies and individuals are spending less, and people are losing their jobs. I don’t know of a company or an industry that is not experiencing some type of reduction in its revenues. Something very real is happening, and just cheering your way through it and refusing to participate will not change anything.
As I write this, 20 percent of all teenagers in this country are unemployed; so if the product or service that you sell is dependent upon that demographic, it will affect your business. Over 10 percent of the workforce is unemployed. In some locations, that number already exceeds 15 percent and is still climbing. These statistics are frightening in their own right and negatively impact those who can’t find work. Add to that the financial damage caused by fear, anxiety, uncertainty, and lack of confidence, which can be more devastating than the actual facts and figures themselves. Auto sales are off by almost 40 percent, retail sales are hitting lows not seen in 25 years, foreclosures are hitting historical highs, massive amounts of wealth equity have disappeared with the downturn in housing prices, people have seen their 401(k)s cut in half, banks are failing at alarming rates, and credit is being frozen. Positive sayings and optimistic attitudes alone will not get us through this.
I am not trying to alarm you in any way, but operating under the impression that you can simply cheer your way out of this is unrealistic. We’ve received a serious wake-up call; those who respond by taking the right actions will advance, and those who sit by and do nothing will endure a lot of pain.
Let me give you an example. I live in Los Angeles, where—unlike the Gulf Coast, where I grew up—natural disasters are earthquakes, not hurricanes. The major difference between these two events is that earthquakes offer no warning and last only a few seconds (rather than several hours). So let’s say you live in or are visiting Los Angeles, and there’s a major earthquake—an 8.5 on the Richter scale. Regardless of how good a salesperson you are, you will have a difficult time selling anyone—including yourself—on the idea that he or she should just refuse to participate. When you see and feel the ground you’re standing on move for the first time in your life and watch as buildings sway, trust me, you will not be able to cheer this off. During moments of intense episodes like hurricanes and earthquakes, even stock market crashes and economic pullbacks, people become overwhelmed, freaked out, and tend to overreact. Typically, the first reaction to violent changes is to freeze up or retreat and for many, to simply deny the reality of what is happening. People are unprepared and unskilled to face such changes and don’t want to confront the damages and discomfort they will bring.
However, denying the fact that you’re experiencing an earthquake will certainly not change the fact that you should probably do something different to protect yourself and take a specific set of actions in order to ensure your safety and survival. For example, you might have to take a different route than usual to obtain food, water, and fuel since roads, bridges, communications, electricity, and the Internet will all be either jammed or not working. Literally everything you take for granted will be affected and most likely unavailable to you. Earthquakes occur very quickly, often without any kind of advance notice. Those who know how to respond to an earthquake will be able to move forward, while those who don’t know what to do will automatically retreat.
Most people approach changes in the economy in the same way they do earthquakes: They simply don’t prepare for them. This is the case especially after long periods of good times; people become a bit robotic and even lazy. They forget the muscle, discipline, persistence, energy, and creativity it takes to dominate. They don’t know how to act when things suddenly change, so they merely react. Most individuals, managers, and CEOs get used to doing business in stable economies; they therefore don’t know how to respond correctly when things are difficult again.
It’s not uncommon to see people becoming overly “reasonable” about the actions that are necessary to sustain themselves and their companies. And when recessions happen—as they do and always will—many salespeople, managers, entrepreneurs, executives, and CEOs find that they are ill equipped and lack the knowledge to counter those economic contractions. People have all types of very strange responses when they aren’t prepared for events. Many of the actions you take merely mirror the economic contraction whereby you actually react to the contraction with thoughts and actions that further deepen or worsen your situation. Most will handle the economic decline with further cuts, denial, or just outright apathy, while others (as mentioned previously) will refuse to participate. But reactions like these are the opposite of deciding to be first in your market and dominate your competition.
Old School Response
The second response is the classic old-school response to “get back to basics.” This outlook suggests that nothing really has changed; if we would simply return to our “roots,” everything would work out. I was working with a large group from an automotive company when an executive said, “Grant, nothing has really changed; we just have to get back to basics.” I thought to myself, your industry has gone from 16 million new car sales a year to 9 million (the lowest level in 25 years). Every car dealer in America depends solely on advertising to drive traffic, something dealers will no longer be able to justify, and your sales force hasn’t the first clue how to generate its own traffic. On top of that, the banks have pulled your floor plans (dealers borrow money to stock inventory), banks are tightening their lending criteria, and the media are telling people never to spend money again! And your response is to get back to basics when 95 percent of the people who work for you don’t know what is “basic” enough in a major economic shift to make a difference?
While I support the overall concept of returning to the fundamental elements of an industry—and absolutely agree that the basics are vital to success—you can’t depend on block-and-tackle if you’re three touchdowns behind with only three minutes left in the last quarter. In other words, you can’t make advances in business with just the basics. It is going to take some big plays in a very short period of time. The only way to flourish during an economic downturn is to take lots of unreasonable actions in order to dominate. Back to basics may only get you back to where you were—and remember, our goal here is to be first. This is not a time for simplistic sayings but rather for massive actions.
There are a lot of levels of “basic” to get through before you can finally get down to the most fundamental one: That which will get you traction in the changed market. It’s also vital to understand that age, experience, and improvements in technology all influence what each person considers to be basic. If you sold products during the 1970s oil crisis, for instance, and another person had sold only between 1998 and 2008, your definitions of basic would be radically dissimilar. The definition of basic for the person who sells encyclopedias door to door varies greatly from that for the person who sells the hottest, in-demand technological gadget that people cannot seem to get enough of. I built my first company going door to door to businesses all over America, and I did it during a severe recession. People weren’t coming to me to buy my service I had to knock on thousands of cold doors just to get people to even know me. I couldn’t afford advertising or huge marketing programs, and I didn’t have a sales team to do this for me. I was an unknown and unproven commodity. By going door to door I learned skills that no one can ever take from me and that would later define me in business and as a person. I have met hundreds of people that want to be public speakers and I always tell them the same thing. “It’s easy; just learn how to get an audience!” But most people that want to speak to audiences are not willing to do what it takes to get the audience. People claim how good they can speak but what does it matter if there’s no one to listen.
The point I’m trying to make here is that to claim that an organization just needs to get back to basics is like the “wannabe” speaker who cannot get an audience. You must get yourself and the organization focused on creating a future instead of one focused on merely getting back to doing something from the past. You must vow to do whatever it takes to get the audience and go one step further and do whatever your competitors refuse to do and then some—so that you can separate from all the other wannabes.
Things are always changing, and change requires actions beyond what is basic. If you don’t change with the times, you will be left behind. To that end, even the basics change over time. While we certainly shouldn’t disregard the basic principles of success, we do need to cultivate the basics we are using. Consider the fact that the basics during times of expansion are different from those we use during contraction—because you can’t afford to make mistakes. When economies slow down, you cannot miss even one opportunity; you have to kick your activity way up and become much more tenacious about how you approach every interaction.
Think back to a time when you were extremely motivated to succeed and had to perform at a high level. You simply had to get results; therefore, you probably went beyond basic and switched to serious performance mode. To simply go back to the basics during periods of economic turmoil will not change the fact that you have fewer opportunities to work with, people have less money, credit is tight, fear is everywhere, and your clients will have more objections than ever to purchasing your product or service. While you will hear complaints, stalls, and reasons not to buy similar to those you heard when times were better, they will come with a different level of intensity and certainty from those upon whom your business depends.
It is a fact that many—if not most—of the people with whom you work have never sold in very difficult economies. So instructing those people to get back to basics won’t prompt them to do things that are basic enough to get the results you want, much less take market share. And we aren’t interested in going backward in this book. We are going forward.
During periods of economic expansion, business can become so easy that individuals and companies are often lulled into an inflated impression of their own abilities. They become conditioned to a false sense of what it takes to be profitable during extended periods of easy money, free credit, surplus opportunities for their products, and a world operating without financial cares or concerns. Then, all of a sudden, you find yourself enduring the polar opposite situation. Every individual in the workforce who wants to succeed must take a new look at what it really means to get back to basics, develop or relearn new skills, and start executing actions that most of us have not used for years and many more of us didn’t even know were required.
The Quitter Response
The third type of response is expressed by quitters, the people who think there is nothing they can do and will wait out the economic downturn until things return to normal—at which time, they will get back to work again. This group will be crushed both financially and emotionally. They will go through all their cash, only to find out that economic contractions can last much longer than expected—in some cases, 18 months or even longer. These people will find themselves emotionally damaged from being out of the workforce; even when things normalize, they will find it more difficult to get work because they haven’t actively participated for months. The quitters are basically scavengers who depend on “good” economies to provide enough cash to fund their lifestyles. They travel from region to region and work in industries that are doing well but never really advance and conquer for themselves. They are only good at picking low-hanging fruit—or easy business—and are unable or unwilling to dig for gold. They will never truly accumulate wealth because they never developed a work ethic necessary to acquire success. I would never have someone from this group of people work for me; they contaminate the rest of the organization. A quitter probably would not even pick up this book to read it, much less execute the actions in it. And if such people did buy the book, I would have offended them so much by this point that they probably would have thrown it in the trash!
Advance and Conquer
Now, the last school of thought: The advance-and-conquer response, and the one I promote as the only correct response for you to take. I encourage you to first embrace the idea that the market is different and has indeed changed and acknowledge that it will be more challenging (but by no means impossible) to sell your products and services, grow your business, or even keep a job. Know that it will require a completely unique sense of energy, work ethic, mind-set, and actions.
An economic slowdown is obviously an obstacle for both businesses and individuals but I will also show you that it is an opportunity for you. Starting a new company from scratch with just a little bit of money is very similar to going from a great economy to a very difficult one. You don’t have credit, you don’t have money, customers are hard to come by, and no one wants to see you. It’s tough. The difference, however, with a major economic change is that it isn’t just happening to you. Everyone’s finances are affected, confidence is challenged, selling becomes more difficult, credit is tighter, and fewer opportunities exist. You’re apt to be surrounded by negative people, complainers, crybabies, and excuse makers who have bad ideas and unworkable solutions. However—as I’ve stated before—economic contractions can also prove to be opportunities to gain new clients, boost sales, differentiate yourself and your company in the marketplace, and take market share. Therefore, advance and conquer, dominate those negatively impacted and take market from them! Those who are willing to learn new skills—and master and execute them with massive actions—will be rewarded in big ways that you could not accomplish when times were good. You will take control of market share while others surrender it.
I worked in my first sales job during the recession of the early 1980s. Unemployment rates were more than 20 percent and interest rates were 18 percent where I lived and worked. In hindsight, I probably should have moved, but I didn’t have any money to do so. One out of four people could not buy the product I was selling due to the simple fact that they were out of work. I was lucky if seven or eight prospects showed interest in my product in a week. My survival was based on the most basic of actions: Generating opportunities and then learning how to handle all the objections, stalls, and reasons that individuals come up with not to buy. This was my learning ground, and I had nothing else for comparison.
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