How to level up in a downturn

Entrepreneurs have been enduring a period of turbulent economic weather. Although recession fears have eased, the UK economy grew by just 0.1 percent in the first quarter of the year. High inflation is squeezing household income, while changing risk appetites are dampening venture capital volumes.

In strained circumstances, being a smaller business – with smaller reserves to draw on – can be a challenge. But it can also offer an advantage that larger players lack: the ability to adapt rapidly to market conditions. “Entrepreneurial small businesses can leverage their size and capitalise on their ability to pivot quickly in a situation or capture new trends,” says Peter McIntyre, Head of Business Banking at HSBC UK.

Indeed, some small and mid-sized companies are not just surviving but thriving in the downmarket, and a group of them have been highlighted by the WIRED Future Trailblazers initiative, created in partnership with HSBC UK.

So how do they do it? There’s no single, one-size-fits-all answer. But all the leaders that WIRED spoke to agree that doubling down on the basics is essential. That means concentrating on the fundamentals of the business and what has made it successful up to now, and planning for the long term rather than being panicked into knee-jerk decisions.

“It’s important to try and continue to be agile, but not at the cost of your core area of differentiation,” says Michael Bristow, CEO and Co-Founder of CrowdProperty, a specialist property development lending platform. “Focus brings strategic power, and strategic power drives value.”

But what other advice do these successful leaders have for SMEs? Here are four strategies to consider…

When times are tight, it’s natural to consider cutting back. But there’s an economic argument for being more ambitious and going for growth rather than reining in investment.

“Our approach has been to scale up rather than stay small,” says Joanna Kingston-Davies, COO of the MAPD Group, a business bringing together local law firms wishing to make a positive difference. That impulse sounds counterintuitive when funds may be limited and the inclination is to batten down the hatches, but Kingston-Davies argues that greater scale brings proportionately lower business costs, because buying power is increased. So: if opportunities for further growth arise, don’t dismiss them out of hand – seizing them could make sound financial sense.

For those able to invest, the advice from our experts is to focus funds on the core business and not get panicked into spending money on quick wins or fads. The latter is a particular risk with new technology. “Beware of sales people, they can be quite dangerous,” she says with a laugh. “They have all the patter about developing this or that new technology, which is likely to cost a small fortune. Unless it’s something that’s crucial to what we need to deliver, we’re not going to go down that route.”

And if growth opportunities don’t present themselves? Kingston-Davies suggests taking a leaf from how MAPD’s group of firms negotiates key supplier contracts collectively. She says there’s nothing to stop other independent small businesses coming together in a similar loose network to boost buying power through scale.

Attracting and retaining talent is currently one of the biggest challenges for all businesses. Although economic downturns usually result in a larger talent pool, demographic trends are working in the opposite direction as the available workforce continues to shrink.

Smaller companies can easily lose out to bigger fish in a straight fight over remuneration, but they can offer a range of other attractions. One is job flexibility, in terms of both hours and location, and another is a strong culture, together with authentic, clearly demonstrated values. This is particularly relevant for appealing to members of Generation Z, who will make up more than a quarter of the workforce by 2025.

“We’ve always been very vocal about our values and made it very clear what we believe in, and I think other organisations are now starting to realise how important it is for recruitment,” says David Grimes, Founder of Sorted, an online delivery software platform. He believes that creating a positive corporate culture comes down to employees understanding and buying into those values, as well as clearly seeing how their own role contributes to the bigger picture. “Everybody needs to understand their ‘why’,” he adds.

“Culture and mission are really important,” agrees Bristow. “People now want to be working towards a bigger picture, and we’re doing a lot of work around our culture at the moment to make sure we get it right.”

Another way that smaller businesses can compete for talent is via the recruitment process itself. This can particularly help if you’re targeting Generation Z. One of the businesses in the MAPD Group recently asked job candidates to apply in whatever way they chose, rather than just sending a standard CV and covering letter, to explain their “why” and what makes them tick. “Someone sent us a TikTok of their walk from their front door to ours, and others sent YouTube videos or audio messages,” says Kingston-Davies. “A lot of younger people can be put off by the standard recruitment process. We’re looking at new ways of recruiting based on personality and what someone can bring to a team.”

Now that most businesses exist online, data is easy to accumulate. But having all that data and turning it into useful business intelligence are two different things. A downturn is the perfect time to take a second look at your data mountain and think about new ways to maximise its value.

He suggests adopting a robust customer relationship management (CRM) system bringing all business functions together on a single platform.

While CRM software was once targeted exclusively at enterprise-scale companies, there is now a large selection of systems available that have been specifically designed for use by small businesses, such as HubSpot, Monday and Freshsales. These have slimmed-down features and a low learning curve.

Businesses that don’t want to go down that path may still wish to consider data visualisation tools, as they can bring a helpful new perspective. Solutions such as Tableau, Microsoft Power BI and Grafana offer less technical users easy ways to model, analyse, share and understand the data that their company collects.

Business leaders will be familiar with the obsessive need to keep the company on course, particularly when the headwinds are strong. It seems obvious to suggest that a healthy work-life balance is the best way to ensure you’re able to perform at your peak. But putting that into practice is hard.

“There’s a lot at stake,” says Bristow. “The future of my family is fundamentally intertwined with the success of this business, and that can drive workaholic behaviour. I admit I don’t always get the balance right.” He says it’s crucial to be intentional about carving time out from work. On weekends, he tries to leave his phone in the bedroom for some enforced separation. He also ringfences the latter part of Friday afternoons to watch his son play football, which also creates separation between the working week and weekend.

It’s also important to resist sacrificing exercise. Kingston-Davies was advised by a triathlete friend to block out time for this in her diary. “She told me you have to ‘make an appointment with yourself’,” she recalls. “For business owners, that’s really important, because we all get into a pattern of needing to be productive the whole time.”

Of course, it’s not just about physical wellbeing. Recognising stress triggers is the first step towards developing psychological coping strategies – and it’s important to remember that seeking help with mental health is not a sign of weakness.

Moreover, to the extent that you have a choice in the matter, try to ensure that what you’re doing aligns with what you find fulfilling. “A lot of your energy comes from your love of the business,” says Grimes. “You can’t continue to grow unless you one hundred percent believe in what you’re doing and the problem you’re solving.”

Find out more about the partnership between HSBC UK and WIRED Consulting.