How to survive as a business in a recession

When Michael Alexis‘s business lost almost $3 million overnight in March 2020, he knew he had to act quickly. And that speed is what allowed his team to successfully pivot in a matter of days, from museum tours to virtual team building. Now—in the face of a potential recession—Michael and other business leaders are urging small businesses to act with the same urgency as they did in the early days of the pandemic.

Michael joined Zapier CEO Wade Foster; Dan Nelson, owner of The Ruby Tap wine bar and Head of Product and Design at Tock; and Jenny Bloom, former CFO at Zapier and Mailchimp, to offer insights from past experiences and help businesses prepare for what’s to come. Here’s what they shared.

1. Act before you have to

Michael’s advice: “Make it exist, then make it better.”

As they started to pivot from in-person museum tours to virtual team building, Michael’s team relied on speed. They sold new products—like their virtual s’mores sets—before the products even existed. “They were just a website, a little bit of text, and an incredibly capable sales team.” This kind of painted door test gave them the confidence to bring the product to life, and now it’s one of their most popular events. 

Dan agreed that this early action is crucial. “I have no idea what the future is,” Dan said. “But we’d rather not regret waiting. We’d rather not regret not acting.” When the pandemic hit the restaurant industry hard, Dan and his team immediately set up a system using Zapier and Stripe to enable curbside pickup. “We knew if we waited any longer to react, we might not be here.”

Acting quickly isn’t just about your product or service—it’s also about your financials. Michael encouraged people to act early when it comes to things like cutting costs too: “If there are difficult decisions that you know you have to make, make them now.”

2. Remember that change is constant

All of the panelists agreed that your mindset is your strongest asset in allowing you to act quickly.

“To be a great business leader, you have to admit that change is inevitable and that chaos is constant,” Dan said. This is true “whether it’s something as crazy as a pandemic or—for our wine bars—the city shutting down our street for two weeks. We know we’re always going to have to be on our toes to react, and that there’s no such thing as stability or status quo.”

Lots of folks waited too long when the pandemic hit: either they thought it was just a blip on the radar, or they were worried about disrupting their existing plans that they had confidence in. Because they didn’t accept, or even embrace, the change, they weren’t able to act quickly enough.

As Michael put it, “economic uncertainty is maybe even more opaque than COVID,” so as we head toward a recession, business leaders need to accept that things will change—even if we don’t know exactly how.

3. Scrutinize your expenses

Michael attributes much of his team’s ability to survive the pandemic downturn to the fact that they immediately looked at their bottom line. One of the first things they did was make a list of ways they could cut costs.

Jenny, who was CFO of Mailchimp during the Great Recession and CFO of Zapier during the pandemic, suggests having at least two years of runway.

“Before, it was grow at all costs. Now, it’s grow smartly,” she said.

That means scrutinizing your budget and your hiring, and doing a lot of scenario planning. Jenny said she tells her clients to really envision the best- and worst-case scenarios. “If you have a plan in place now, then you can be ready if these things get a lot worse.”

As Wade pointed out, different companies are in different positions right now. That means, he said, you need a “ruthless honesty” to be sure you’re acting wisely.

4. Get creative

In order to act quickly, you need to have something to act on. And that’s where creativity comes in. 

The day that social distancing measures were instituted, Michael and his team started brainstorming every possible thing they could do to survive. Some ideas were terrible, but by using Google Trends and other data sources, they landed on a jackpot idea that allowed them to never have a month in the red—not even in the first month of the pandemic.

As you try to foster that creativity, Dan encourages you to go outside of your comfort zone. Sometimes that means a new business idea, but other times, it’s simply trying a new tool or even using an existing tool for a new purpose. Dan and Michael both turned to automation with Zapier to help them build out processes to thrive during the pandemic. 

“Think of these moments as opportunities to reinvent, reposition, or redefine yourself,” Dan said. “Think of them as optimistic ways to stand apart—and not just a crisis or fire that’s worth surviving … If you’re in it to survive, you’re in it to lose.”

Jenny agreed. She talked about being at Mailchimp during the Great Recession. At the time, Constant Contact was one of their largest competitors, and they were running ads on TV and radio, which Mailchimp couldn’t afford. 

“A bunch of us got in a room and were just brainstorming, trying to figure out: how do we compete with them? And someone’s like, ‘Well, there’s this new thing called podcasts.'”

Anyone who listened to Serial knows how that ended—it was one of the most successful growth strategies Mailchimp has ever had. All because they thought outside the box.

5. Be transparent

As a business leader, your entire team is looking to you for guidance during economic uncertainty. The best way you can give them that guidance: transparency. Here’s what Dan said:

“I think it’s tempting doing any sort of crisis or fire to present this fake facade that everything’s fine and to be overly positive, knowing that people need that. But people are smart enough to know that there’s a truth behind what you’re saying. And so we’re just incredibly transparent and honest.

I think what people want to see more than that fake facade is that you’ve got somebody in charge who can lead through these changes or moments. And so we’re honest, but incredibly confident. And when you present that confidence, I think that people then start to just trust that whatever we have to do, we’ve got somebody in charge who’s capable.”

Michael agrees. He did layoffs very early in the pandemic, and while there was no good way to deliver the news, he focused on transparency: “This is what’s happening, this is why. This is what we’re certain of, this is what we’re not certain of. This is the impact on you.” 

Wade, Jenny, and the rest of the leadership team at Zapier created a five-step plan early in the pandemic, and sent it to the entire company. They presented financial updates every week, and they focused on daily communications with teammates. They wanted it to be very clear they were doing everything possible not to have layoffs. 

Of course, the benefits of transparency aren’t only for the employees—they help the business too. “If you’re super transparent about the situation, [your team] can probably help,” Wade said. The more smart people you have on the job, the more likely you are to find ways to get through.

Eventually, the economic uncertainty will settle. Being ready for change also means you need to be ready to acknowledge when things start changing for the better. “This too shall pass,” Wade reminded us. “It applies in both good times and bad times.”