There are about 20 million small businesses right now in this country, depending on who you ask. I'm going to bet that a great majority will survive the Great Recession of 2008-2009. I'm hoping my business will be one of them. And I'm also betting that when this recession turns into recovery, the remaining many will be stronger than ever before. Because Charles will definitely be in charge. And I don't mean Scott Baio. I'm talking about the other Charles.
We're all about to witness natural selection in real life this year—the kind of selection process that will impress even Simon Cowell. And the business owners who emerge from this Great Recession will emerge stronger for three big reasons.
The first is happening right before our eyes. It's companies such as Wal-Mart (WMT), McDonald's (MCD), Best Buy (BBY), and Honda (HMC) becoming healthier at the hands of Linens 'n Things, Applebees, Circuit City, and General Motors (GM). Watch for more natural selection to occur as the 2009 economy turns from recession into recovery. Watch how the companies still standing will be standing stronger. The big names will make the news, but many smaller companies, like mine, will (I hope) see the same benefits.
Because, like the competitors of Lehman Brothers, Bear Stearns, and electronics chain Tweeter, the landscape is opening up. There was just too much stuff. Too many companies. Too many stores. And now that the market is adjusting to this reality, the weak are falling. Want to see this happening in real time? Just drive by your local strip mall.
The excesses of our economy are right now cleaning themselves out. And many savvy small businesses are benefiting from this cleansing. Our competitors, newly on the scene, poorly prepared but able to hide these inadequacies during the boom times, are now facing their fatal shortcomings as the downturn deepens, leaving the stronger survivors with the opportunity of more and better work at fairer prices to boot. Like all those unnecessary coffee shops, restaurant chains, and clothing stores at the strip mall, some of our competitors shouldn't have been there in the first place. Good riddance. The ghost of Darwin is chasing these weaker companies into oblivion.
Already I can see it in my neighborhood. There used to be seven places to get your nails done within two miles of my house. Now there are four. And the customers from the other places will gravitate to the survivors. And the survivors will get stronger.
And yet there's another reason that shows more evidence of the Darwinian process at work, which will strengthen business owners like me once this recession turns around. It's a new and healthy disbelief in the establishment.
Recently we've been seeing big-time CEOs of big-time auto companies take first class jets and stay in fancy hotels while asking for bailouts without a financial plan. And we've seen more such CEOs of big-time financial institutions with no explanation why their billion-dollar companies vanished into thin air over a weekend. The surviving business owners who emerge from this recession will find out those big-time guys pretending they're smart and important really don't know any more than we do. Because of this, the recession is making these small business survivors more wary, guarded, cautious, conservative, confident, and stronger. Darwin would agree. Maybe we know more than we think. We're here. They're not.
The final reason we'll be stronger when this recession is over has to do with fundamentals. There's a newfound wariness in selling too much into one industry or relying on just one customer. There's a recent understanding of the importance of putting a few bucks away to ride out the ups and downs. There's a new appreciation for those accountants and consultants who warned us against building up too much overhead. There's a respect for the guy who didn't upgrade his computer systems just because some propeller head told him it would "be cool to do it." We're seeing those auto dealers and parts suppliers crumble as their industry is shaken. We're watching those companies—with too much payroll, too many facilities, too high rents, too much useless yet expensive technology—go down.
Because, when things turn south, business owners that have lived through this downturn will have learned to be flexible. They will have learned how important it is to be able to cut prices or add more value to their offerings because that's what customers are going to want most of all. Wal-Mart and McDonald's and all the other low-cost/high-value companies understand this. Let's hope we'll never forget this lesson. Darwin would not want it any other way.