Business Advice
How to Grow Your Business in a Recession: Lessons From 8 Downturns
How to grow your business in a recession comes down to adapting faster than your competitors, getting more done with less instead of only cutting, and keeping your team focused on the two or three things that actually make money. Dave Liniger, co-founder of RE/MAX, says the company went through eight recessions in 50 years and made money in every one except one. That’s the playbook I wanted to pull apart.
If you don’t know RE/MAX, you’ve almost certainly seen the sign. Dave and his wife Gail started it in 1973, and it has grown to more than 140,000 agents in over 110 countries, according to his official site. He started with one agent, no money and no partners. When I asked him to sum up his life in one word, he said adventure. The biggest adventure, he said, was taking an idea with nothing behind it and ending up in a hundred-and-some countries.
So I asked him straight: when the leads slow down, do you cut costs, double down on sales or get more resourceful? Here’s what he told me.
Eight recessions, one losing year
Dave put it plainly. Over that 50-year run he lived through nine U.S. presidencies, “a couple were geniuses, a couple were out and out crooks and a couple were pretty stupid,” and his summary of the business side was simple. “We went through eight recessions and we made money in every recession except for one.”
Most people treat a recession like weather. Dave treats it like a test you can study for.
And it wasn’t overnight. In the early days he made a lot of management mistakes. “It was my fault. I was very naive.” They stuck with it, and within five years RE/MAX was the number one real estate company in Colorado.
Why adaptability beats strength in a downturn
For years RE/MAX said it won because of the quality of its agents. Dave now says it was really their adaptability. The agents who lasted were the ones who took on a changing industry and a changing economy instead of staying in the same old groove.
He framed it with the famous line about survival: it isn’t the strongest of the species that survives, it’s the most adaptable. Dinosaurs were strong. Mosquitoes are still here. Quick note for the record, though. That wording isn’t actually Darwin’s. The Darwin Correspondence Project traces it to a 1963 paraphrase by management professor Leon Megginson. The idea still holds up in business, and Dave’s conclusion is the part that matters: “Embracing change and not being afraid of change is a cornerstone of anybody’s big, big success.”
My take? In a slow market you’ve got to be able to think quick on your feet and have the courage to take risks when other people are holding back. Most people throw the towel in way too early.
Don’t just cut costs. Use the theory of more
Dave read The Magic of Thinking Big by David Schwartz and copied one paragraph onto a plaque in his office. He calls it the theory of more. Progressive farmers look for more bushels per acre, more eggs per hen, more pounds per cow. Manufacturers try to make more widgets with less waste.
When most people hear the word recession, the first thing they do is cut costs, lay people off and get the budget under control. Dave doesn’t say that’s always wrong. Businesses get fat in good times. But he calls it a knee-jerk reaction. “You should be looking at your balance sheet all the time.”
Then he flips it. If the market’s bad, it’s bad for everybody. So what can you do to take advantage of it, and how can you take market share from the people who aren’t making good changes? That’s the question. How do you get more done with less?
Before you touch anything, know your runway. Know how many months of cash you actually have, then decide what to trim and where to push. A good mentor of mine once said there’s the economy, and then there’s your economy. The headlines don’t get to decide how you think.
Leaders sell hope, especially when the news is bad
I asked Dave which leadership principle mattered most. His answer: all great leaders sell hope. They inspire people to believe there’s a better way.
In his case he was selling real estate agents the dream of a better compensation model. In the early 1970s the standard deal was a 50% commission split, and nine out of ten people who got a license didn’t have it two years later. RE/MAX let agents share office costs and keep most of their commission. The industry hated it. It worked anyway.
And he didn’t sell it from a corner office. Dave was the company’s number one trainer for over 40 years and traveled at least 200 days a year. “I was the chief cheerleader of the company more so than a CEO.” When people are nervous, that’s the job.
Shrink your business down to two or three things
Dave says there’s no such thing as total balance. The real skill is setting priorities, and that means focusing on two or three simple things.
At a Darren Hardy seminar, Hardy asked the room to describe what they do in one sentence. Dave and his CEO put their hands up at the same time and said it together: we sell franchises, we recruit and retain sales associates, and we collect the money. That’s it. You can get lost in a hundred services, but if those three things stop, the company stops.
His warning about shiny objects is even more useful in a downturn. Everyone chases the newest app. Dave says focus on the service you give your clients. Give outstanding service and clients send you customers, so you don’t have to go out and prospect. If you struggle to stay focused when every tool and trend is screaming for your attention, start there.
The team you start with is never the team you end with
Early on, you’re the chief cook, bottle washer and janitor. But Dave says the minute you’re profitable, you need to hire talent that’s better than you.
Then he admitted a mistake. For 38 years in real estate he bragged that no officer had ever voluntarily left the company. He was proud of it. Now he says he was wrong. Many of those people didn’t keep up as the company grew, and he let them tag along too long. In a recession, carrying people who’ve stopped growing is expensive.
Raise your circle and watch your own behavior
Dave quoted the Jim Rohn idea that you become the average of the five people you spend the most time with. You pick up their work habits, their attitudes and their drive. His golf example: you play better when you’re with serious golfers. You play up to your competition.
I believe your association determines your destination. You start acting like the people around you without even knowing it.
The same thing runs the other way inside your company. Dave calls it boss watching. “If you are the boss or you’re the supervisor, no one ever stops looking at you.” Be kind and professional and you build that culture. “If you’re a jerk, jerks will join your company.” When a downturn hits, your team copies whatever you do with the pressure.
Improve 100 things by 1%
Dave’s book The Perfect 10 is named after gymnastics and diving, where a perfect score almost never happens. His answer for small business owners is kaizen: improve 100 things 1% at a time, not one thing 100%. “Don’t seek perfection, seek continual improvement.”
His advice is to ask yourself every day how you can do this a little bit better and a little bit less costly. Stack enough small wins and a lean year starts to look like progress. I summed it up to him like this: you can have it all, just not all at once. He agreed.
Turn fear into normal, then go again
Dave started racing NASCAR in his 50s after Bill Marriott invited him to a two-day driving school. By the end of the first day he was beating the professional drivers’ times. Soon he was testing at Daytona at over 200 miles an hour, terrified for one lap. By the second lap he knew he just had to keep his foot in it. Within a year the fastest tracks felt like a freeway. “I never lost a single race. I just ran out of laps.”
That reminded me of working in the deserts of Western Australia before I started my business. I was catching snakes and lizards with the environmental team, and snake handling scared the pants off me at first. My teacher told me your knowledge has to reach the level of your fear. The fear doesn’t vanish. Your knowledge just goes beyond it. Recessions work the same way. Know your numbers and your customers, and the headlines rattle you less.
Grit when everything stops
The hardest part of our conversation was the day Dave said he’ll remember forever. He went into the hospital thinking he had a herniated disc. An hour later he was in toxic shock, on a ventilator, and his organs were shutting down. His official site describes it as a staph infection along his spine that left him paralyzed. He told me eight doctors recommended hospice. His family and best friend said give him a chance.
He came out of a coma three months later as a quadriplegic. Told he’d never walk again, he gave himself 15 or 20 minutes of a pity party, cried, got angry and said, “Screw you, I’m gonna walk out of this place.” He begged his therapists never to let him give up. He went home in a wheelchair, worked for another year, and finally hit 10,000 steps a day.
At a RE/MAX convention he asked the whole room to stand up, then told them he’d give every dollar he had to do what they’d just done. That’s what real wealth is. You think you’re having a bad quarter? You’re still breathing, and if you’ve got your health you can do anything.
How to grow your business in a recession: a quick checklist
- Check your balance sheet now, not when sales drop.
- Cut real fat, then ask where you can get more done with less.
- Sell your team hope, and show up as the chief cheerleader.
- Write your business in one sentence and protect those two or three things.
- Put service ahead of the newest tool so referrals keep coming in.
- Hire people better than you and stop carrying people who’ve stopped growing.
- Find one thing to improve by 1% every day.
I hope you’re taking notes on this, and more importantly, putting it into action. Knowing this stuff won’t save your business. Applying it might.
FAQ
How do you grow your business in a recession?
Adapt faster than competitors, watch your balance sheet constantly, and get more done with less instead of only cutting. Dave Liniger says RE/MAX made money in seven of eight recessions by focusing on its core and taking share from slower rivals.
Should you cut costs during a recession?
Cut genuine waste, but don’t treat layoffs as the only move. Liniger calls automatic cost-cutting a knee-jerk reaction. Watch your costs all the time, then use the downturn to improve efficiency and win customers from competitors who aren’t adapting.
What is the theory of more?
It’s an idea from David Schwartz’s The Magic of Thinking Big: progressive farmers and manufacturers keep finding ways to produce more with less. Liniger kept it on a plaque in his office and applies it to growing a business when markets get tight.
Did Darwin say the most adaptable species survives?
No. The Darwin Correspondence Project traces that wording to a 1963 paraphrase by management professor Leon Megginson. The business lesson still stands: companies that adapt to change tend to outlast those that stay in the same groove.
What is the official definition of a recession?
Two consecutive quarters of falling GDP is a popular rule of thumb. In the U.S., the NBER’s Business Cycle Dating Committee officially dates recessions using a broader look at a significant decline in economic activity.