There’s no doubt that a ton of business owners have concerns with the current business environment – and their concerns are valid. We can’t control the timeline of this thing, but we can definitely control the outcome.
Over the last couple weeks, I’ve been chatting live on Instagram with some of the best in business. The goal is to make sure we stay informed, stay positive and continue to help each other as much as possible.
During difficult times it’s really important to lean on friends, family and mentors, especially as a business owner or entrepreneur.
So, I leaned on one of my friends and mentors, Bruce Croxon, to ask a few questions. Bruce created Lavalife (world’s first online dating site: 1987) and sold it in 2004 for $176 million. He’s a former Dragon on Dragon’s Den (Canada’s version of Shark Tank). He’s the Co-Host of The Disruptor on BNN Bloomberg and the Co-founder of Round 13 Capital (they fund growth stage digital companies in Canada).
Here’s an excerpt from our Instagram Live fireside chat.
How are you and your family doing?
It’s been an adjustment just like it has for everybody, I’m sure. I mean from a business perspective it’s been one of the most intense periods of my career. All our investments have one thing in common and that is that no business knows exactly when we’re going to come out of this, what the future holds and how long this period is going to last, and beyond that they’ve all got individual challenges. So, for me it’s been a very busy period and as for my family we’re staying put. Everybody’s healthy and it’s definitely also a time to reflect on the blessings we have as busy as we are, you know? Keeping everybody safe has got to be the first objective. I think patience is the order of the day.
What is the most common reaction that most small business owners are falling victim to right now?
Well, I think the first reaction was one of shock. I mean, this came upon us pretty quickly, I would say, and I think there was a growing realization as we got into the pandemic that it was going to be a little bit more serious than a heightened flu. So, I think there was some shock as to what the implications could be and I think it dawned on businesses relatively slowly. I mean, you think four or five weeks of slowness is a short period of time but it was interesting to watch it, it was like a wave coming at us. And then the realization as people had to start laying people off and really contemplate a different way of doing things. So, I think the first reaction was surprised shocked. But I’ve got to say, and I guess it’s no surprise, because a lot of small business owners are entrepreneurs and a lot of the companies in our portfolio (obviously they’re all entrepreneurs) were pleasantly resilient and this doesn’t surprise me at all. They know they had to lick their wounds for the first week but now there were decisions that needed to be made and they needed to be realistic. People are doing what they need to do and they’re doing it with empathy. They’re looking after each other. I think the government’s doing their best and they’re well-intentioned. There’s this collaboration of people coming together to get us through, but it’s definitely being led by the people who have created the businesses in the first place and it’s that same spirit that got them off the ground to do it on their own. That, I think, is going to save the day and see us come through the other side.
What do you think small business owners should be really worried about right now?
Well, I think that every small business owner has one thing in common and that is that they really don’t know when business will be returned to whatever version of normal, they’re imagining, so we’re all in the same boat. But I think the temptation to believe that once we get back outside and are allowed to get together, it’s going to result in an immediate return to the way that business performed before is false hope. Now, it depends a bit on the category, but I think that over optimism on recovery is a mistake. I think we should be planning that buying habits and the propensity to enter contracts and make agreements is going to take longer than you might be tempted to believe. Once we say, “okay we’re back at it”, I think there’s going to be a lag. I think some businesses and people have been hurt financially, not in an insignificant way, but all you think about in a recession is people’s buying decisions and how hard or easy it is going to be to get corporations and customers to part with their money. I think you should plan on it being a little tougher than our natural optimism as entrepreneurs might tell us. We may be tempted to think that it’s going to come moving back because we’ve seen what the stock market did, but I don’t believe for a small business that it’s going to be the same magnitude of recovery.
The objective for all of us is to live to fight another day. If you had a good business going, there’s not a ton of reasons why it shouldn’t be a good business coming out the other end. We just don’t know what the other end is, so we just need to live to fight another day.
I’ve been through more than one period of profound change and it’s usually to do with an economic crisis, and there’s always bold predictions on how people’s lives are going change based on how we’re living right now. You’ve probably heard that people are going to continue to work from home because it’s been productive for them or they’ve saved on the travel. I just think every time I’ve thought there’s going to be massive change as a result of some hardship we’re going through, it is always falling short of the change that people have predicted. We’re social creatures, and people are not going to stay working in their 700 sq ft condo in downtown Toronto not seeing other people. It’s just not going to happen. I may take fewer flights because I’m getting comfortable, but by large the degree of change never lives up to the hype that you hear at the height of the turmoil.
What should small business owners be optimistic about right now?
It goes back to what I said before, if you had something that was working before there’s not a whole pile of reasons why it wouldn’t continue to work coming out of this. I think it’s just a question of time. So, if you were doing the right thing before and you had the right people around you, I would be optimistic. I think there’s a collective will to get back at things as quickly as possible while keeping us safe, and that will and optimism is a really hard thing to keep down; and that’s a very important theme – just the importance of relationships and people.
What do non-essential businesses do with their people? How can they avoid layoffs or should they avoid layoffs?
The unfortunate truth and reality is that a number of non-essential businesses, which some I have investments in, have actually had to lay people off. Thankfully, we do live in a country where there is a safety net for that and we have planned for this. People may not be able to hold a job for their entire career, so we do have a safety net. Businesses have to do what they have to do, in terms of what I said before, to stay alive and live to fight another day. And if they do, those people are going to have somewhere to come back to. I do believe that cycles will happen. I will remind everybody that business is about cycles. So, when things are going extremely well and you can’t imagine anything ever going bad don’t hang on to that feeling too hard because it’s inevitable that it is going to change. We can’t be fantastic forever, but likewise, when we’re at the bottom of a trough and there’s no way out, there’s going to be some business closures through this. But, if you have the type of service to hang in and believe there will be the same kind of demand or some form of demand on the other side, this too will pass. It’s called a cycle for a reason. In the meantime, you have to you have to do what you need to do. I think the only reason to be hanging on to people when there’s no business is if you fundamentally feel that the progress you can make on your business during this downtime is going to benefit you coming out the other end in an outsized way. That’s called an investment. It’s what I do every day, try and figure out whether to invest or whether it’s worth to put an investment into something today in the hopes that money can be used to leverage something better or a return in the future. I think every small business has to ask themselves if investing in their people by keeping them on with wage subsidy from the government is worth it, given what they’re going to get coming out the other end. Because if not, it’s really your obligation as a small business to save your cash, not just for yourself and the survivability of your business, but for the people that you’re going want to bring back on as business starts to rebuild.
Do you think COVID 19 is really nudging small business owners to take a digital transformation strategy more seriously and if so, what sort of innovations do you see coming out of this?
It obviously depends on the business, but if you’re a brick and mortar retailer and you weren’t convinced that a good chunk of your audience was heading to online, it would have been tough to ignore. I guess there’s some areas where ecommerce hasn’t cut into their business. As of now, there’s absolutely no doubt if you didn’t know as a consumer what Amazon was or what the Prime membership is, you sure do now. There are people who are ordering online that have never ordered online before, and they’re not comfortable. Another example I’ll give you is our big six banking institutions. They have come under tremendous pressure as they get flooded with requests and information, and processing. You’d be amazed at how much of their technology is still not yet in the cloud, it’s still on premises, and they’re choking. Part of the reason that small business is going to have a delay in the well-intentioned government programs is that we don’t have efficient distribution, so if there is any mystery as to why we shouldn’t, from the smallest business to the largest institutions keeping servers under desks, this is heightening that for sure. Not only from a cost perspective as a small business, but also from an efficiency perspective and all of the online tools that you’re missing out on by hoarding your information either in a filing cabinet or in a server under your desk. Yes, if you have some time now and you’re not as busy with customers and you do think you’ll survive to fight another day, take this opportunity to explore a digital approach both for your internal optimization and in terms of what your customer base is inevitably moving towards in their buying habits. The way they’re living their lives – we’ve always known digital is inevitable and we’ve been on the path, so one good thing for me as a digital investor, speaking selfishly for a moment, is that this is going to accelerate digital transformation because we’ve just had so much more practice.
How does it end for small businesses?
I think for certain categories; it’s going to be different and it’s going to be tougher. One of our local restaurants close to the office closed this week and he said, “It’s not worth it. I can’t survive, so I’m going move on and try something different.” I think there’s a lot of small businesses that fit into that category. I would urge all of those people to make realistic decisions and remember the entrepreneurial spirit that got you into that enterprise in the first place, that urged you to take a risk and that got you to employ people and put smiles on customers faces, that same spirit is still there within you, so do it again. For the ones that are struggling – know that there’s some confidence that there’s an end to this. Keep talking to your friends and mentors and family. Do whatever it takes to hang in there with compassion. Everybody’s going through a hard time, and just think about what you could be doing during this time to make sure that you’re better prepared for when the door is open again, and they will open again. The change is not going to be as profound as the “doomsdayers” say, so hang in there, buckle down, keep grinding, and think about what you can be doing to make a better experience coming out the other end.
Don’t isolate yourself, and one of the big benefits of the digital transformation (which has been going on for many years) is that there’s no secrets out there. The world is full of people who are anxious to share what they know; questions can be answered and there’s more information available than ever before. There’s really no excuse for being in the dark, not knowing or not having the data on what other people are going through – and all of that being used in the right way.