The Pressures of Low or Negative Margins and Employee Turnover will Create a Downward Spiral for Many Small Businesses
Small Business Failure
The combination of inflation, poor first-line leadership, and expensive mistakes spell trouble for low-margin small businesses. I think we will see small businesses fail at historically high rates in 2022.
Inflation of 4 percent or higher will persist due to supply chain challenges and demands for higher wages. The Biden administration’s Build Back Better initiative, if it passes, will heighten inflation even as it invests in (hopefully) high-payoff programs. Inflationary pressures are going to reduce margins. In some cases, small businesses could find themselves completing projects and selling products at a loss.
The so-called great resignation will continue because COVID has reduced people’s tolerance for poor leadership, toxic work environments, and poor work conditions. Some people are leaving their jobs to upgrade their skills and enter new lines of work. Most seem to be switching jobs within their current industries.
The best talent will find their way to companies that have good leadership, healthy cultures, and quality work environments. Provided that these companies can innovate successfully to outpace inflation and higher costs, they will thrive in an upward spiral of better talent, higher quality products and services, and greater continuity.
The pressures of low or negative margins and employee turnover will create a downward spiral for many small businesses. CEOs will work longer hours and get consumed in problem-solving, which heightens the risks of expensive mistakes. They’ll lack the bandwidth to innovate, so the margins will continue shrinking until the business is no longer sustainable.
You cannot do much about inflation (except raise their prices), but you can take these steps:
1. Fire managers who are driving employees away,
2. Invest in leader development so that you attract and retain great talent,
3. Reduce the likelihood of expensive mistakes by having trusted advisers who will help you avoid falling in love with your own plans and getting high from your own fumes, and
4. Innovate to create higher-margin products and services.
Programs that Accelerate Success
CEO Mastermind group is for Milwaukee-area small business leaders and consultants who want to accelerate their growth in 2022. We meet monthly for lunch, and you get unlimited access to me. I’m limiting the group to 8. Six places are remaining.
FOCUSED is my 8-week mastery program for small business leaders and consultants to put the action plans in place to make 2022 their best year ever. The next program begins in late January; there are only eight spaces available. Click here for more information and to apply.
Innovation Mindset is a new 8-week program for consultants and small business leaders that I intend to launch in January, based on interest. This program gives you the tools to address (and help your clients address) the challenges facing small businesses in 2022 so that you can create an upward spiral that propels your business to new heights. Please reply to this email if you are interested.
The Trusted Adviser Program is my most intensive 1-on-1 program. Within 90 days, you’ll gain habits that create breakthrough success. You get personalized coaching and support, strict accountability, and commonsense action steps that get results. Get the details here.
The next Antietam & Gettysburg exclusive event takes place March 15-18. This program is for seven leaders and consultants who want to turbocharge 2022 with innovations. We use critical points on the battlefield to discuss decision-making, gaining buy-in, improving agency and initiative, and how to avoid getting high off the smell of your own gunpowder. We finish with an innovation workshop where you will develop action steps to gain decisive competitive advantages. There are four spaces left.
LEADERSHIP: THE WARRIOR’S ART, second edition, is on the streets. We expect leaders to anticipate and shape the future so that your team can succeed. To do so, you need imagination grounded in a practical perspective. That’s what you get with this book, which is why it’s been in print for over 20 years.
Zero-Sum Victory: What We’re Getting Wrong About War is my latest book about strategic decision-making. I use the disasters in Vietnam, Afghanistan, and Iraq to give you the tools and mental models to avoid the traps and own goals that have created quagmires for the United States. You’ll gain ways to improve agency, bridge silos, pivot smartly, avoid breathing your own exhaust, and many other outcomes.