#81 How to Build Influence Without Being Famous (The Trust-Based Growth Strategy)

#81 How to Build Influence Without Being Famous (The Trust-Based Growth Strategy)
Welcome to the Smart Entrepreneurs Show, the podcast where we share smart ideas, strategies, and lessons to help entrepreneurs build better businesses. When the economy slows down, many people become fearful. Businesses cut costs, consumers spend less, and uncertainty fills the market.

But here's something interesting. Some of the world's most successful companies were actually started during economic recessions. While many people see problems, entrepreneurs often see opportunities.

In today's episode, we'll discuss how to build and grow a business during an economic recession, why challenging times can create unique opportunities, and how smart entrepreneurs adapt when markets become difficult. Let's get started. Yeah, and it really is such a massive and honest kind of a counterintuitive topic to explore, because to really understand how to build something in that environment, we first have to, you know, ground ourselves in what is actually happening beneath the surface during these downturns.

Right, because it's not just a headline on the news. Exactly. I mean, a recession is a fundamental structural shift in the velocity of money.

So, consumer confidence drops, right? And because people are scared, they hoard their cash. Which makes total sense. You want to protect your savings.

Of course you do. But because consumers aren't buying, corporate revenues naturally start to fall. And then, to protect their margins, those large corporations, they freeze hiring, they cancel expansions, they aggressively cut their budgets.

It's a whole chain reaction. It really is. It creates this vicious feedback loop of caution.

And look, it sounds entirely negative, and for a lot of established companies it really is. But if you look at the historical data, it's unambiguous. Recessions act as this profound economic crucible.

A crucible. I like that word for it. Yeah, because yes, they create these severe, unforgiving challenges.

But those very constraints, the lack of easy money, are exactly what force the kind of structural innovation that actually builds empires. Okay, let's untack this. Because, you know, going from the global market is terrified and cash is freezing completely to, hey, this is the perfect time to start a company.

That requires a pretty massive mental leap for a lot of people listening. Oh, absolutely. It sounds crazy on the surface.

Right. So, I really need to understand the mechanism here. Why do these brutal, restrictive conditions act as a catalyst for strong businesses? Why aren't they just a graveyard for everyone across the board? Well, it really comes down to this concept of the forcing function of scarcity.

The forcing function of scarcity. Yeah. So, let's look at the exact opposite scenario first.

A booming economy. When the market is doing great, capital is incredibly loose. Investors are just, you know, throwing money around at anything with a pitch deck.

And consumers have really high discretionary income. They have money to burn. Exactly.

And in that environment, businesses can survive and they can even grow while being fundamentally, deeply inefficient. You know, you can have a totally bloated workforce, a product that is just like, okay, and terrible customer service. But nobody notices because everyone's making money.

Right. Because there is just so much money sloshing around the system. You stay afloat.

The sheer abundance of capital completely masks your operational weaknesses. It's almost like cooking, right? Like in a booming economy, you have this fully stocked, beautiful kitchen. You can afford to just throw random, really expensive ingredients together and sort of just hope it works out.

That's a great way to think about it. But then in a recession, you only have like three ingredients left in the fridge. You are forced to focus on the absolute fundamentals and actually learn how to cook well if you want to eat.

Yes. What's fascinating here is that scarcity essentially acts as a massive filter for the entire market. It just sucks out all the noise.

It gets rid of the fluff. Exactly. It immediately removes the weak ideas, the vanity projects and those bloated businesses that were just coasting on all that loose capital we talked about.

Because they just don't know how to survive in the desert. Precisely. And when those inefficient businesses fail, they leave behind market share.

So if you are an entrepreneur who has built a fundamentally sound, highly efficient operation that provides genuine value, you don't just survive the recession. You take their spot. You end up capturing all the territory left behind by the companies that couldn't adapt to the new reality.

Okay. So that makes perfect sense on a macro level. The noise gets cleared out, the strong survive.

But let's look a bit closer at that value piece. Because if we are in this economic desert and scarcity is forcing us to focus on what truly matters, we have to precisely define what matters to a consumer who is actively hoarding their money. Right.

What do they actually care about? Yeah, exactly. What are the essential problems we need to be solving? Well, during a downturn, discretionary spending, you know, the nice-to-haves, that drops to near zero almost instantly. Therefore, a resilient business has to focus entirely on the must-haves.

And what do those look like practically? Based on the research, there are four specific categories of solutions that actually capture capital during a recession. Number one is saving people money. Number two is saving people time.

Number three is dramatically increasing operational efficiency. And number four is solving urgent, immediate crises. So save money, save time, increase efficiency, solve emergencies.

Exactly. If your business does not clearly, and I mean quantifiably, do one of those four things, you are going to really struggle to get anyone to open their wallet. See, I have to push back here a little bit, though.

Let's really think about this practically. You're telling me the best way to make money during a recession is to focus on saving people money. I know.

It sounds a bit counterintuitive. Right. Because isn't it significantly harder to convince a CFO or even just an everyday consumer to part with their cash when their primary overriding goal is to not spend money? It feels like trying to sell a canteen to someone who is dying of thirst, but they absolutely refuse to open their wallet because they're terrified.

That is a very logical hesitation, but it misses a fundamental shift in how buyers actually categorize their capital during a recession. OK, how so? You have to understand that you are completely bypassing their innovation or expansion budget because, like you said, that budget is frozen. Nobody is spending there.

Instead, you have to target their cost reduction budget. Interesting. So you're tapping into the money they set aside specifically to fix their leaks.

Exactly. Mechanically, here is how it works. You transition your product from being viewed as an expense to being viewed as an investment with an immediate, mathematically provable return.

OK, walk me through what that actually looks like in the real world. Sure. Let's say you're selling a B2B software solution in a booming economy.

A VP might buy your software just because it has cool new features and it makes their team feel, you know, innovative and cutting edge. Right. The nice to have we talked about.

Exactly. But in a recession, that VP's budget is totally gone. The CFO is scrutinizing every single line item.

So if that company is currently spending, say, $10,000 a month on three different bloated old software tools and you come in with a unified solution. That does the exact same thing. Right.

It solves the exact same problem, but it only costs $2,000 a month. The CFO doesn't look at you as a $2,000 expense. They look at you as an $8,000 yield.

Ah, I see. You aren't asking them for a piece of their shrinking pie. You are actively offering them a mechanism to stop the pie from shrinking in the first place.

Precisely. You become the hero in that scenario. And this applies equally to consumer markets, by the way.

Oh, really? How does it work for regular consumers? Well, if you can provide a service that saves an individual significant time, say, an affordable meal prep service for a dual income family. They're working longer hours right now because they're terrified of layoffs. Right.

Yeah. Everyone is stressed and overworked. So that time you save them is a massive stress reducer.

It's an essential relief. The key mechanism is that the problem you solve must be essential. It must be urgent.

And the return on investment has to be immediately obvious to them. Okay. But, and here's where I get stuck in the mechanics of this.

If I am coming in and offering a solution for $2,000 to replace a system they were paying $10,000 for, my own profit margins must be inherently tighter. In theory, yes. Right.

Because I'm saving them money, which means I am literally targeting them less. So how do I actually operate structurally to deliver that massive value to them without just going bankrupt myself? You do it through the mechanics of lean operations. And honestly, this is where new entrepreneurs have a massive, massive structural advantage over established companies.

How so? Large corporations have immense overhead. They have giant office leases, massive human resources departments, really complex supply chains, and all this legacy technical debt. Their bottom line is just incredibly heavy.

A new lean business has absolutely none of that. Here's where it gets really interesting, I think. Because when you combine a lightweight lean operational structure with a shifting, difficult economy, you get what we can call the ultimate entrepreneurial advantage.

Absolutely. Kind of like, think of it like a biological system. Large corporations are like a massive biological body that's suddenly fighting a systemic fever.

When the economy shifts, they are sluggish. They have to hold board meetings, do risk assessments, consult the shareholders. They have to implement massive organizational changes just to figure out what's wrong.

Right. Meanwhile, the small lean entrepreneurs are like these highly specialized, agile antibodies. They recognize the specific new pathogen, the new problem in the market, and they just bind to it and neutralize it immediately while the corporate giant is still, you know, running a temperature and trying to get out of bed.

That immune system analogy perfectly captures the dynamic. The lean entrepreneur doesn't have the burden of a massive infrastructure, so they can adapt to the new reality instantly. And really, this brings us to the new frontiers that the research highlights.

The market's opening up. Exactly. Economic disruptions don't just destroy old markets, they actively force the creation of entirely new ones.

And lean businesses are perfectly positioned to capture them. Right. So the sources we're looking at mention things like remote work services, online education, AI-powered solutions, and freelance services.

But let's get specific about the how here. How does a lean entrepreneur actually leverage these frontiers to out-compete the established players? Let's use artificial intelligence as the perfect modern example of this exact mechanism. Historically, if you wanted to start a marketing agency, you needed a copywriter, a graphic designer, a data analyst, an account manager.

That's a huge payroll. Right. It requires hundreds of thousands of dollars in payroll just to legally open your doors.

But today, a solo founder who has truly mastered AI tools can generate the strategic output of a 10-person team for roughly $100 a month in software subscriptions. Which just fundamentally changes the economic physics of the business. Exactly.

The large legacy agency absolutely cannot drop their prices to match that solo AI founder. If they did, they would go instantly bankrupt because their massive overhead requires them to charge high prices. So the lean entrepreneur steps into that vacuum.

They step in, they offer the exact same or sometimes even better quality to the client for half the price, and they still maintain a 90% profit margin because their operational costs are near zero. They are playing a completely different game. That is wild.

And I imagine the same logic applies to the freelance services you mentioned. 100%. During a recession, corporations freeze full-time hiring because, you know, salaries and health benefits are a fixed long-term liability.

But those corporations still have urgent projects that desperately need to get done. Right. The work doesn't stop just because the hiring stopped.

Exactly. So they redirect that capital toward flexible, project-based freelancers. It's lower risk for them.

So the antibody entrepreneur, fast, lean, highly specialized binds to the immediate problem that the corporate giant is just too paralyzed to handle internally. You've got it. But I have to imagine that agility alone doesn't guarantee you are going to survive a multi-year economic winter.

I mean, you can be a fast-moving antibody all you want, but eventually you need a resilient system. How do these entrepreneurs build a foundation that won't just collapse if the uncertainty drags on for years? That represents a really critical transition. It's moving from merely surviving a disruption to actually building a lasting defensive moat around your business.

And according to the data, this requires two fundamental pillars, trust and diversification. Okay. Let's examine trust first.

How does trust change during a recession? If we relate it to our earlier point about spending, during a booming economy, the risk of making a bad purchase is relatively low. If a customer buys a product that doesn't work perfectly, it's an annoyance. They just buy a different one next week.

Because they have the disposable income. Right. But during a recession, when cash is incredibly tight, buying a product that fails is a critical disaster for them.

Because they literally don't have the budget to buy a replacement. They have exactly one shot to get it right. Exactly.

Therefore, trust becomes your absolute most valuable currency, completely surpassing even price in many cases. Customers overwhelmingly migrate to businesses that communicate transparently, set highly realistic expectations, and just deliver undeniable value without any hidden fees. They want certainty.

Yes. And if you provide that level of reliable excellence when times are really hard and the customer is stressed out of their mind, you forge a deep psychological bond. A loyal customer base built during a recession is incredibly sticky.

They will rarely leave you when the economy recovers, because you proved your worth when it actually mattered. That makes profound sense. You were the life vest when the ship was sinking, not just the bartender when it was smooth sailing.

That's a perfect way to put it. Okay. So what about the second pillar, diversification? Well, relying on a single source of income during extreme market volatility is a massive vulnerability.

If that one major client leaves or that one product line suddenly drops in demand, your entire business just collapses overnight. Right. There's no safety net.

Exactly. So successful entrepreneurs mitigate this risk by diversifying their income streams. Our sources suggest a model where you run a core service business, but you supplement it, maybe with digital products, a membership program, or specialized consulting.

It creates this resilient web of stability. Okay, wait, stop right there. I really have to challenge this point.

Go ahead. Doesn't diversifying your income streams like that completely contradict the advice we just spent the last 10 minutes discussing? We literally just established that the secret to surviving is staying incredibly lean, focusing intensely on one core problem, and operating like a highly specialized antibody. I see where you're going with this.

Right. How on earth can a one-person shop stay lean if they were suddenly trying to juggle a freelance service business, a whole digital product line, and a consulting gig all at the exact same time? The opportunity cost alone would be paralyzing. I feel like you'd burn out in a month.

That is a very fair point. And if we connect this to the bigger picture, it is a crucial distinction we need to make. What you were describing, trying to run three entirely different businesses at once, that is horizontal diversification.

Horizontal diversification. Yes, and that is incredibly dangerous. It violates every single lean principle we've discussed today.

True structural diversification in this context is vertical. It is entirely about capturing what we call the exhaust of your primary engine. The exhaust.

What do you mean by that? Literally. So every service business naturally generates exhaust as a byproduct of doing the work. This is knowledge, templates, workflows, proprietary processes.

In a booming economy, you might just ignore that exhaust. It just goes out into the air. But in a recession, you package it.

Give me an example of packaging the exhaust. Let's say you are a freelance graphic designer. Your core engine, the main thing you do, is custom design work for clients.

Horizontal diversification would be trying to, I don't know, open an e-commerce store selling graphic t-shirts. Which takes a ton of new time, new capital, new focus. Exactly.

It's a distraction. Vertical diversification, on the other hand, is taking the specific design templates you already created for your daily workflow, packaging them into a neat digital download, and selling them online for $50. Ah.

So you aren't building a completely new machine. You are literally just monetizing the byproducts of the machine you already run perfectly. Exactly.

Or, another example, you take the deep knowledge you have about running a freelance business, and you offer just one hour of high-level consulting a week to junior designers who are struggling. Because you already have that knowledge in your head. Right.

You aren't learning a new skill. You aren't taking on any major new overhead. You still have one core focus, but suddenly, you have built three different pipelines for money to flow into your bank account.

That is brilliant. It completely resolves the opportunity cost problem because the production time for those secondary streams is nearly zero. Exactly.

It keeps you lean while making you safe. Wow. So we've got the operational strategy totally mapped out here.

You solve essential pain-relieving problems. You stay structurally lean to maintain those margins. You use your agility to capture new frontiers like AI.

You build deep, reliable trust. And you vertically diversify your income streams. That's the playbook.

But having a flawless mechanical strategy on paper is completely useless if the entrepreneur themselves falls apart psychologically. Let's talk about the mindset for a minute. Navigating a recession day in and day out has to be a psychological minefield.

Oh, it absolutely is. It's exhausting. You can have the most perfectly lean business model in the world, but your internal mindset is often the decisive factor in whether you make it or break it.

What does that mindset actually look like? The psychological profile of a truly resilient entrepreneur requires a highly specific balance. They must remain positive, but they have to be grounded in brutal reality. No toxic positivity.

Exactly. They do not put their head in the sand. They openly acknowledge that the market is terrible and people are struggling.

But instead of dwelling on the anxiety of that reality, they ruthlessly focus their energy on what they can actually control the solution. They commit to continuous learning. And they just adapt daily.

And what happens mechanically when they fail to maintain that balance? The source material we reviewed lists some very specific fatal mistakes that kill businesses during these periods. Yeah, and what's interesting is the most common traps are almost entirely driven by emotional mismanagement rather than just bad business ideas. What kind of traps? The sources highlight several big ones.

Making panic-driven decisions based on reading way too much daily news. Overspending early on before you've actually validated that customers want your product. Completely ignoring negative customer feedback because your ego is overly attached to your original plan.

Oh, that's a big one. Huge. And ultimately, staring so hard at the fear of failure that you miss the massive opportunity standing right in front of you.

You know, I'm looking at that list and there's a massive fascinating contradiction in the advice here. How so? Well, we are warned that waiting too long to start is a fatal flaw born of paralysis. But in the exact same breath, we are warned that making panic-driven decisions is equally fatal.

So if I'm listening to this right now, how do I actually find that Goldilocks zone? How do I act fast without acting reckless? It's a great question and it really raises an important point about the structural difference between speed and hurry. Speed versus hurry. Okay.

Making a panic-driven decision, that's hurrying. It is purely reactive. It's driven entirely by fear.

It looks like changing your entire pricing model overnight just because you saw a competitor do it. Right. But waiting too long, that's paralysis.

It's driven by this impossible desire for zero risk, which doesn't exist. So the Goldilocks zone is achieved through a specific mechanism, data-driven microtesting. Break that down for me.

What is a microtest in practice? It means you do not make massive blind leaps, but you also don't sit around waiting for permission to act. You take the absolute smallest possible calculated step to gather real-world data. Give me an example.

Let's say you want to launch a brand new service. A panic decision is spending $20,000 building the software before talking to a single customer. Because you're rushing.

Right. Paralysis is spending six months writing a 60-page business plan. The microtest is building a simple free landing page describing the service and seeing if 50 people will click a pre-order button.

Oh, wow. Just a button to test the waters? Exactly. If they click, you have actual data that the demand is real and then you build it.

If no one clicks, well, you lost a weekend, not your life savings, and you can instantly pivot. You move rapidly, but every single movement is anchored in market feedback, not internal anxiety. That is incredible advice.

So what does this all mean? We have covered some serious ground today. It means that economic recessions are undeniably brutal. There is absolutely no sugarcoating the pain they cause in the market.

But they're also the ultimate proving ground for business fundamentals. They really are. When capital is loose, bad businesses look good.

But a recession demands absolute excellence. By focusing on solving real, urgent problems like saving other companies, money managing your operations with intense lean discipline, and acting as the agile antibody that capitalizes on new frontiers, you aren't just trying to survive the winter. You're actively building a fundamentally superior, highly efficient machine that is mathematically primed to dominate the market when the economy inevitably saws out.

That's exactly it. And looking at that reality really leaves us with a rather profound paradox to consider as we wrap up today. What's that? Well, if an economic recession acts as this brilliant, clarifying stress test, a desert environment that literally forces a business to become highly efficient, deeply trusted, and truly valuable to its customers, is starting a business during a booming economy actually the more dangerous path? Oh, wow.

Does the abundance of a good economy simply mask fatal underlying weaknesses that will eventually bring the company down the second the weather changes? Oh, that is a fantastic question to chew on. Is the easy road actually the deadliest trap? Because it just lulls you into a false sense of security. If you enjoyed this episode of The Smart Entrepreneur Show, make sure to follow the podcast so you don't miss future episodes.

And feel free to share your thoughts or experiences in the comments. We'd love to hear how you are adapting and innovating in your own work. Until next time.