How to Overcome Negative Growth
Written by Marissa B. on May 25th, 2021
Say! Yes Enterprises works hard to educate business owners and investors about valuations.
A business owner who focuses on growth wants to see the business increase month over month, quarter over quarter, and year over year. As anyone who watches metrics knows, increases do not always happen. Sometimes, a business even seems to regress.
This process is negative growth, and it is a concern to both entrepreneurs and investors. What causes negative growth, and when does it become a cause for concern?
What Is Negative Growth?
Negative growth happens when there is a decrease in sales or revenue. To a degree, every business should expect to experience some negative growth.
Fluctuations will happen. One metric decreasing for a few months is not always a sign of negative growth. One bad month does not change the course or value of a business. It is important to consider the whole picture. Some industries are cyclical, so there are slow months and peak months.
Natural cycles of business are not a cause for concern. Negative growth becomes concerning when several parts of a business start to falter. Why does it happen?
What Causes Negative Growth?
The leading cause for negative growth is a lack of focus. Business owners need to master dozens of skills. Many business owners are practicing skills in their business for the first time. Even when a business owner delegates, there is yet another skill to learn—management.
Learning new skills is much like riding a bike. Beginners pedal much slower and sometimes they even fall down. Since business growth trickles down from the entrepreneur leading the organization, sometimes the learning curve of taking on new skills can result in negative growth. This is not a sign of being a terrible entrepreneur. Rather, it is a growing pain.
To counteract negative growth, regain focus. Go back to the foundations of the five pillars of business and SMART goals. By focusing on one issue at a time, positive growth will happen again.
How to Cope With Negative Growth Caused by the Economy
Sometimes negative growth happens because of a larger problem in the industry or in the economy. Warren Buffett says, “only when the tide goes out can you see who was swimming naked.” This quote is apropos to negative growth in business. The economic fallout related to the coronavirus pandemic exemplifies the truth of the quote.
When economic setbacks lead to a downturn in business, companies that have built a foundation of long-term growth can survive. Those that have benefited from trends and never spent time building up the five pillars of business often drown. Within the first months of the pandemic, huge retailed giants that seemed stable falter before much smaller businesses.
The best of business owners cannot control the economy, but they can prepare for it. In times of plenty, build up a savings of nine to twelve months of capital. Many businesses are one or two payroll cycles away from insolvency. Businesses that build up a reserve of emergency funds will have the freedom to make choices for long-term success while counterparts are stuck making sink or swim decisions.
Business owners must lead by example in times of crisis. Regardless of how much money is in the bank account, a business owner must stop and think to make the best decisions. Employees notice economic problems, and they value reliable employment in times of crisis. Employees who can imply by the business owner’s actions that there is a problem may be quick to quit their jobs.
At the start of the coronavirus pandemic, one of SYE founder Christopher Wick’s businesses had the potential to suffer. The B2B business serves hundreds of small businesses, the very ones that took a direct impact from lockdowns. Some in the industry folded in the first few months of the pandemic.
While Wick’s business was not immune to losses, he prepared his business for long-term growth. For years, Wick did the daily work it took to keep his business moving forward. That put him in a position to be able to stop and think before reacting to the crisis.
While there was potential for loss, there was also potential for an influx of business. Less foot traffic meant that more businesses would need digital resources. At a time when other businesses were cutting back, Wick responded to the pandemic by hiring new employees.
This primed his business to handle the influx of growth that did come, but it also did something even more important for morale. Hiring more employees made all existing team members certain that their jobs were safe. It showed the entire team that this particular business was not threatened by adversity. From the top down, the business was still focused on moving forward.
Negative growth is a problem that business owners can prepare for. Negative growth is not always a cause for concern. When negative growth becomes a trend, the same methods that helped the business to grow can be used to regain a pattern of positive growth.
A Final Note
“If you have a month where things were down, you have to ask yourself questions: Was it the market? Did the customers change their behavior? Is it something I changed in my behavior? Was it something that my team changed? Was it one factor that went down, or were there multiples?... As long as you understand why something happened, you can prevent it or redirect the course.”—from SYE Founder Christopher Wick
About Say Yes! Enterprises
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
About Christopher Wick
Investor, 9X Award-Winning Entrepreneur, and 5X Best-Selling Author & Speaker
*Founder/Principal of businesses that have been featured by Huffington Post, ABC, NBC and Wall Street Select*
Christopher Wick is an award-winning entrepreneur who has built, bought and sold various companies relating to social media marketing, e-commerce, real estate, retail and investing.
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Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.