Photo by Ross Findon on Unsplash

Macro and micro SME implications

Purpose: share insights and ‘open source’ our knowledge. We want to provide our own reality check; fresh perspectives and ideas to consider.

Considerations: these are just our thoughts based on data and insights pooled from multiple resources. We discussed this in our recent webinar, Preparing for the Regrowth: strategies for consumer focussed businesses.

THE NEW NORMAL: ECONOMIC FACTORS

• The health crisis world-wide will make way for an economic crisis.
• The economic impact may take two years before it’s fully felt, it will likely have a long and rolling impact over time.
• This isn’t a banking crisis, they’ve been in great shape — but it doesn’t mean that they won’t make the most of the powerful position. However, they won’t (my guess) want hundreds of thousands of mortgagee sales and an implosion in our housing market (to which they’re heavily invested), so they’ll be forced to play ball — speak early and clearly with them about your position.
• As our GDP gets slimmed down, so do our options and we’re going to need to be incredibly innovative to figure out new ways to create revenue to run our country and keep our people fed and housed.
• The biggest global threat is nationalism, where people become super tribal and xenophobia rises. Many economists are saying that this will be the biggest impact and not one we’ve seen the likes of since post WW2 — that statement itself is pretty troubling given how deep and hard the ’87 and ’07 recessions were.
• The USA is already at over 16% unemployment and there are multiple scenarios in play for New Zealand, but guesstimates are between 12% and 30%. Either way that’s 500k and 1.5 million people without a job. In the UK estimates of 20% with 12.6 million people possibly without income.
• The terminology ‘dead-cat bounce’ which is often used in share market declines, can be used (though somewhat vulgar, I find) to describe what we’ll see post lockdown. The brief resurgence will make way for tougher times shortly after.
• The shift to some kind of universal income is probably going to be necessary, and every government will have to decide how they might pay for that as entire industries are decimated. With borders shut, and tourism destroyed, that large percentage of GDP is no longer available.
• Travel is going to be gone for a long time — whilst there is planetary benefit, it does mean we wipe out tourism. Local tourism is unlikely to fill the void, as discretionary spending takes a major hit. As unemployment rises, taxes increase to try and support the most vulnerable, the usual fall-back tactics to ‘trade out of a recession’ may not be prudent. Making sure enough food is on the table and you can pay your rent / mortgage will be the most critical concerns.
• The knock-on effect into other categories will be substantial, they’ll be less money at every single socio-economic level and what was considered luxurious before will change. How we derive me-time or pleasure is unlikely to come from spending money, as it was freely in the consumer era we’ve just exited.
• The impact on hair and beauty businesses will be immense, where intimacy is an inescapable part of the process. Customers will have changed their comfort levels on who they spend their time with — trust will be essential. Adopting and communicating clear health & safety procedures will be critical to earn that customer trust quickly.

THE NEW AUSTERITY

• Customers will and should prioritise saving over spending. New austerity and prudence should be encouraged. There will be a new corporate social responsibility and that will be about helping people spend less, not more.
• Trust will be built by helping customers make smarter and savvy decisions.
• Discounting will erode trust, where permanent pricing changes will gain support and show that you’re also helping reduce costs. Transparency will be the way to earn trust.
• Sustainable business practices, that can live off less and support a community well but consistently.
• Everybody must have a ‘haircut’ when it comes to pricing and income — from the Prime Minister all the way down. BUT we must not make it harder for our lowest income earners to survive, if costs in some areas continue to increase or remain the same.
• How do you bring your team into your business to make them true partners with you on your business journey? An opportunity to run a slimmer team, but one that’s committed to the same goals and outcomes as you. Building trust starts with great leadership.

THE CURRENCY OF TIME

• Before the global Coronavirus pandemic every single one of us didn’t have enough time; we all felt rushed and pressured as we raced to meet personal and professional commitments.
• Now we have time in abundance, and we believe that we are likely to become much more selective as to what we do with that time, and ‘who’ we spend it with.
• Disrespecting customer time by not putting ease at the forefront (which equates to safety) will be a factor in people making change. Don’t forget that people are 2.5x more likely to change brands or providers in a life-changing situation.
• How do you ensure that your customer’s time is being considered by making processes easier, smarter, safer? No waiting rooms, cashless transactions, no time at reception mucking about or rebooking at the counter (encourage this to still happen but through your online booking) and ensuring clients only see one stylist/therapist, etc.

BUILDING AND HOLDING TRUST

• To avoid either wider spread community transmission or a resurgence (plenty of folk have had Covid twice now), it’s crucial that we keep our bubbles small (no matter where you are in the world) until there is a vaccine.
• Small business owners, in particular, can help be an extension of a bubble and provide safeguards and guarantees to commit to each other’s tight-knit circles. This is why existing customers should be the focus and building a smaller, more sustainable business around that is the smart move. Two-way wellness policies that don’t financially disadvantage either party can help provide confidence (we hope the governments will step up to help with sick pay ongoing to support this).
• Humans are inherently tribal and we do desire human touch, but (my opinion) will be very particular about who does this. We might find we create more routines to keep these bubbles. Creating a journey with your customer so they know what to expect and to rely on will help. In our industry which is hair and beauty services, we’re advocating ‘hair journeys’ — do a Facetime, or some video consult with the customers before they come in, get an understanding as to what they need ongoing and you’ll get a better feel for where they’re at. As changes in their world happen (which is going to be likely for many), then they can keep you informed, as you’re in their circle of locals they’re looking out for too.
• Transparency is key here. Why is the variety in pricing across the salon industry so wide? There’s no reason and the ambiguity erodes trust. If you don’t already, make a point of understanding how to build a pricing model and what it means to employ each person in your business and how many customers they’ll need to be sustainable. We recommend making it easy for customers to understand what it is they’re paying you for — because it has changed. Visiting a salon or spa is no longer about the ‘time out’ or the ‘magazine moment’, now it’s about getting a professional services that we can’t do ourselves. So, what can you teach them to do at home and then what can they do to support this?
• Trust lies at the heart of this relationship. Brands who did not possess equity in this vital component of a relationship pre-Covid, will struggle to reinvent and manufacture it now. Many analysts have made harsh remarks towards businesses that were not stable before Covid, will be the first to go.
• To bring this thought into my experience, I personally believe that these businesses missing that cash isn’t the only key ingredient to success. I have my hand firmly in the air and can tell you that cash has never been an easy to obtain element for our software company. When less than 3% of funding goes to female founders (and even less so to female focused businesses), pre-Covid we couldn’t exactly point at the balance sheet to give anyone comfort about our financial stability. Now, we’re in the strongest position we’ve ever been.
• What we have / had in spades is agility, smarts, insights, a solid team and a lot of truth-telling. We’ve been saying it the way we’ve seen it for a long time now. The relationship between the co-founders (myself and Steve) is based on trust for each other’s belief in our shared vision and to have the ability to pull it off. The wider team are an extension of this and they are pillars that give us confidence to make big calls and back ourselves. Our shareholders know that we move forward, we duck, we dive, we make changes and we unapologetically get back up and say “we can do better, here’s why and what we’re doing”. We don’t defend, we get on with.
• Customer’s love this kind of stuff, because it resonates with them. They see you giving it a go, trying new things, being bold, being brave, including them in the journey and dialogue and it feels refreshing for them.
• The adage has always been ‘good ideas get funding’, but I believe that was written by the demographic that’s always enjoyed such things (aka white, middle aged men). The new era is “earned trust gets rewarded”.

PLANS MOVING FORWARD

• Look at your pricing model, get to know it. Embrace it, share it.
• Create ease wherever you can. Digitise your business — — ask for help if you need to.
• Reduce wastage and pool resources — — better together and can weather longer storms.
• Plan for multiple scenarios — and know what the worst case scenario looks like for yourself and your business. Plan back from there. Summarise this on a 1-pager doc using a template like this here.
• Focus on a new sustainability, not about being the next big thing or major growth. Survival is the key success indicator.
• Embrace the “How to Generation” they’re itching to be involved, to add value and they can teach us oldies new tricks. Learn about the tools they use, like Vox and Tik Tok. Help them be real partners so they feel like they’re building something of value too.
• But, and thankfully, there is a but — — we’re still a vain bunch that wants to look and feel good. Basic human hierarchy of needs are at play; we need attraction, intimacy and how we appear is directly related to our confidence and how we outwardly project our personalities. But we may see a more wholesome, natural and maintainable look is likely to be the trend du jour. Who knows when we might have our freedom taken away again, we’re going to be getting more self-sufficient.

A POSITIVE RECKON

I’ve spoken candidly about the realities of having caught Covid-19 early on in the pandemic for NZ — — I was our 37th case. I returned from London, carrying the disease and self-isolated sufficiently and proactively to contain it. I spent three nights in hospital and the most concerning symptom was anxiety.

Whilst my cough was horrific and I publicly broadcasted it at the time. My rationale — though you could argue my judgement was clouded — was simply that I knew a lot of misinformation was being spread about the chances of someone young and healthy getting sick were low. Showing the reality of the opposite certainly drove that message home.

Right now I believe anxiety is just as contagious, it’s spreading quickly through our societies and people, everyone is deeply worried for the future. The lack of certainty is paralysing people. I have felt that fear, coupled with jet lag, lack of sleep, overworked, in the middle of a huge growth surge for our business, whilst raising capital, having been away from my family on the other side of the world. And THEN coming home to having picked up a deadly disease that no one knew much about. It was a LOT.

What it did for me though, was provide me a lot of time to think. My superpower is in insights, it’s what has got me through over 20 years of being a founder in my own start ups and survived the dot-com boom, a recession and now the impending depression we face globally. I like to consider all angles, points of view, data, and ideas and percolate.

I encourage you to challenge yourself (positively) to see a new way that it could work, or look. To be open to change, a slimmed down, but more sustainable future. To open up to others about how you’re feeling and receive the reward of kinship and kindness that will help you through tough times.

Kia kaha. Together we are stronger.

Jenene & the fantastically supportive wider Flossie team.