3 Ways Small Businesses Can Survive the $150B Tariff Shock with Ashish Kothari

Over the last three or four days, we've seen close to $9.6 trillion in value lost in the stock market. Retirement portfolios are heavily impacted. The S and p is down 13%. Mid caps are down 15%. It's a time of unprecedented turbulence. If we have to survive and thrive, we have to do it from a place of confidence, calmness within and become more adaptable and resilient.

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Hi dear friends. Welcome to a special episode of the Happiness Squad podcast. Over the last three or four days, we've seen close to $9.6 trillion in value lost in the stock market. Retirement portfolios are heavily impacted. The S and p is down 13%. Mid caps are down 15%. It's a time of unprecedented turbulence in external markets like we've never seen before. The new tariffs and the tariff war that we are in the midst of are in particular putting an unprecedented pressure on small medium businesses. And so this podcast is specifically for all the owners, executives, leaders in small to medium businesses. Now let me highlight why this segment is so important. We are a $29 trillion economy. 50% of that is driven through small medium businesses. Almost 40, 50% of employment is through these small medium businesses. Most of the new job creation is through these small medium businesses. So if you think about that, close to $15 trillion in economic value is created by these businesses. Now even if you assume that 10% of that economic value has some level of implication due to imports, you're looking at about 1.5 trillion in economic value that is impacted. And minimum 10% import tariffs means these businesses have 150 billion plus headwinds coming towards them. This is unprecedented in the history and is a time that can put most healthy businesses into a lot of stress. Now, most of these businesses don't make a lot of money. Many of them are smaller. They don't have the resources to both run the business and really be strategic about this. They struggle with both attracting, retaining and develop talent. And so we decided that we were gonna record this podcast and towards the end I'm gonna highlight a set of actions that we are taking for any small or medium business owner to help you navigate this storm. There are three key things that are gonna be required if we have to weather this storm and come out of this unscathed. If, based on these three skills is going to determine how good we are at these three skills, I fundamentally believe is going to determine how much of this $150 billion headwind are we able to offset. But more importantly, what's the price we might pay personally to be able to offset this headwind? Now look, if we do this right, we might be able to actually make the most out of it. You might have heard, never let a crisis go to waste. And so that is always the silver lining into this. But regardless, we need to be able to navigate this storm. And so I'm going to highlight three key things that any small medium business owner can start to do right now. Now, I don't know if you're a sailor, but when it becomes cloudy and dark and storms, what is the first thing that we need to do? We need to find calm within. Today, I will be surprised if any individual running a small medium business or operating in it is not feeling a series of emotions. Fear, anxiety, panic, anger, frustration, stress. All of these will be present because both your business profitability and your personal retirement accounts are eroding rapidly. More importantly, the level of volatility is making it just incredibly hard for you to manage your business. What do I tell my customers? What do I tell my suppliers? Many of you might even have products that are on the water, are gonna hit the dock at lower price points than what you'll be able to sell. So here's the three skills. The first one is adaptability and resilience. If we have to survive and thrive, we have to do it from a place of calmness within and become more adaptable and resilient. I'm going to highlight a set of things you can do that. Number two, we really need to double down on leveraging data towards truly assessing the impact. Facts are going to matter here. Data is going to matter here. So many small medium businesses because of their long term relationships and businesses relationships is what drives a business. But you're going to need the data now more than ever, my friends. And so a data driven approach, that data and analytics capability is going to be critical. And then the third is negotiation excellence. You're going to need to really sharpen the saw when it comes to how you negotiate with your customers and suppliers. So in this podcast, I'm going to cover all three of those things that you can think about and we'll Also talk about how we are gearing up at Happiness Squad to support you in this moment of dire need. First, let's talk about adaptability and resilience. Now this was a topic that I was researching quite extensively when I was at McKinsey and the good news is if there was any bright light of COVID in the midst of COVID we knew that we were going to have a high level of stress. We were going to have work that was going to go to look fundamentally different. A post Covid world was going to be different and we knew adaptability and resilience were going to be key to win. And so we invested significant amount of time and resources to look into how leaders can build adaptability and resilience. When we face our biggest struggles, we fall into our default modes. Those default modes are not designed for this world. They don't serve us. And hence being able to consciously adapt to be able to be resilient, making stress our ally is critical. You can't fix the problem out there without cultivating calm in here. So how can you do that? Number one, just learn to notice. When you are in a triggered state, it might come across as tightness. You might start speaking very quickly. You might feel tired, exhausted, you might feel a pit in your stomach. Our body always highlights the other sneet of triggered is all of these emotions I mentioned, angry, frustrated, impatient, stressed. You might feel like you need to blame. You're alone. All of these are symptoms from an emotional point of view that will highlight that you're triggered. When you notice that, recognize that you are facing what Daniel Goldman called the amygdala hijack. In this moment, your limbic reptilian brain is on fire. Our ability to think clearly goes down by 20 to 30%. So in a moment when we need clarity, we are not equipped to do that. Now the good news is we have a pressure release valve. When that pressure builds and will, that brings a level of fogginess and lack in clarity in thinking. And that pressure release valve is our breath. So breathe. Close your eyes and bring attention to your breath. We breathe from the moment we are born to the moment we die. It's the first and last act of a human being. But most of our breaths we take are unconscious. By consciously focusing and making your breath an object, you have the ability, dear friends, to activate your parasympathetic rest digest recovery system from your sympathetic. Your sympathetic system runs on adrenaline and cortisol. It prepares you to take action. But that action it prepared us to take was all around Physical threats, not emotional and psychological threats. So breathe. Here's an approach that I find really, really helpful. It's a particular type of meditation that is created by our friends at potential project. It's called abcd. So A is anatomy, sitting up straight, maybe closing our eyes, planting our breath. That's anatomy. B is breath. So now focus on your breath. Breathing in, breathing out. Consciously take a breath in and take a breath out. Count with each breath in and each breath out. That's the C and see if you can go to 10. Breathing in and breathing out. And D stands for distraction. If your mind wanders, starts thinking about the problem you need to fix again, just bring it back to the breath. Give yourself, dear friends, the gift of 10 breaths and notice what it cultivates for you, both mentally, physically and emotionally. So I think that's a really important move. We have to figure out a way to calm our circuits which you'll be on fire right now from that place. I invite you to connect back to your purpose individually and as an organization. As for your business, think about why you started the business. Think about what service do you provide to the customers and how it makes their life better. Friends, regardless of where you are, regardless of how down the business might be or how at risk it feels for the future, remember that when you started, you didn't have any of that. The uncertainty to your business was higher than what you face right now. The why that made you start still exists. Reconnect to that why and help your employees. Remind them of that why. Why you exist. Remind your customers of that why and how. That why and the benefits you provide make a difference. Nietzsche said this best. Those who have a why can survive anyhow. So that's the second move towards adaptability and resilience, connecting to a higher purpose. 3. Learn to consciously shift into resilient mindsets. Anesh then said this best. We see the world as we are, not as the world is. In these moments of stress and volatility, we tend to fall into what are called anti learning mindsets. We start feeling like a victim, we might start feeling scarcity, we don't have enough. You might feel there is no path forward fixed, there is nothing you can do. You might feel as a leader, you are the expert, you should know the answers. You might feel very reactive, wanting to take actions to control the situation. None of these mindsets are going to help you. And yet these are the ones that our brain resorts to. These are the default mindsets we fall into when we face an obstacle, when we face a threat. If you did the first step and the second step, which is you calmed your body and your emotions and found your stillness, you connected to your purpose. You can then start to ask five different questions from the place of what are called Learning Mindsets. We'll put the link to this particular article that I published together with several of my authors in this podcast Show Notes so you can get the podcast so you can get the article. But those five mindsets are mindsets which are instead of scarcity, abundance, what do you have that you didn't have before? What can you leverage today? Instead of feeling like a victim, what's the smallest action you can do right now? Agency. Instead of fixed growth. What can I learn from this? How can I grow from this? How? How can I make this crisis be an opportunity for me? Creative? What's the bigger why? What's the bigger purpose I'm aligned in and how can I move towards that versus trying to control or protect? And finally you can start to think about rather than feeling like an expert who knows the answer, curiosity. How can I engage with my team and be curious about other solutions that exist? So our ability to shift into resilient mindsets is a critical, critical move that adaptable leaders are able to do. Fourth, if you are panicking right now, think about your employees. They are panicking even more. Regardless of where you are, you probably have more resources, access to knowledge and agency than they do. So it's really important to ever more than now, cultivate psychological safety with that team. Connect with them individually, be vulnerable. They don't need you to be the perfect leader who's got everything, but assure them of your purpose, what you're doing and how together you're going to navigate this. Trust me my friends, they know when something is off and they are with you. They will connect with you. As small medium businesses, that is one of your biggest strengths. Your people are connected to you. They're not part of a thousand three thousand person organization where it's just a place to make money for most people, even though that's not true, they think they're just there. People don't care about them. But you can show you care. Enjoying this podcast. If so, you will be excited to know that Happiness Squad is launching a free online community on the International Day of Happiness March 22. This is an opportunity for listeners like you to integrate the learnings we discuss on this podcast as well as the nine Hardwired for Happiness practices into your daily life to rediscover your well being, balance, purpose and Connection. Every month we will connect together as a community and it's a great opportunity for for you to meet other like minded individuals on their own journey from fear to freedom. Learn and clarify questions you might have from our flourishing experts and pick up one to two micro practices to lean into that month. Check out the details on our website or drop us an email to learn more. Finally, this is a time you might might feel you need to work around the clock. You need to be on back to back meetings. You need to be calling customers, calling suppliers. You need to be moving the organization. You can't pour from an empty cup. You have to continue investing in your well being, physically, mentally, spiritually. There's a range of practices that are in that article that you can access. So, so that's the first part. That's the first thing you need to do is cultivate your adaptability and resilience. Now we have a program called Rewire that allows you to do just that. We are actually going to be launching series. We're going to be meeting every day for an hour. We'll be launching a webinar series where we'll continue to keep this front and center for you. We're launching a bootcamp where we're going to learn a set of skills for you to be more adaptable and resilient. In addition to the other two moves I talked about which is how do you leverage the right data to get ahead and lead with insights. And three, how do you truly cultivate and sharper your negotiation muscle? So all of those three things we're going to cover in this bootcamp that is about to be launched. But these five moves are really important for the first one, adaptability and resilience. Learning to notice you're in a triggered state and calming, reconnecting with purpose. Learning to shift into a resilient mindset, connecting with your team, assuring them being vulnerable and cultivating psychological safety and really harnessing their potential and their ideas and continuing as an individual and as a team to invest in your well being. Now let's shift to the second capability which was the capability around really leveraging data and analytics to chart your fate forward, to really assess risk and hence in the context of that, decide the actions you need to take externally. So let's break that down on the demand side, which is what you sell and on the supply side what you buy. Look, most economists agree that because of these tariffs, prices are going to go up, people are going to pass these prices forward. But how much of this you are able to Price forward is going to be dependent on your size, the nature of your business and the contracts you have in place. So number one, you have to think and very quickly assess your customers and how sensitive they would be to price changes. If you directly sell to consumers, you can do things like price sensitivity analysis. You can look historically at what has happened when you've taken prices. If you sell to customers who then sell to consumers, you again can look at the price changes and looking at historically, how have your demand, your volumes, changed from that. Second, you have to think about what your competitors are doing and how your business is similar or dissimilar. Are they affected more by tariffs or less? Do they have a mostly onshore supply chain versus an offshore supply chain? So it's really, really important to understand how they might be affected and in certain ways what might be an advantage or disadvantage for you. Number three, you have to really segment your customers. You have to segment your customers. You have to know which are the most important and where do they really fall. And fourth, you have to think about your contracts. You have to really think about your contracts and what kind of price pass through options do you have, what other clauses do you have? Leveraging this data internally around what percentage of your costs are going up, the price sensitivity of your customers and market data on what competitor actions are taking will be critical for you to be able to develop the rice response that you can then engage with your customers on. Similarly, there's a set of actions and data you need to do on the supply side. Number one, you have to look at all the products, all the supplies that you import, and really at a bill of material level, understand which of those components and costs are most impacted right now. Now there's a very powerful tool we used with over my 20 years in consulting. It was called the should cost modeling tool. Many of these now through AI and other solutions, you can accelerate and do very quickly. But basically thinking about anything you buy and breaking it down into material, labor and overhead is the way you can think about it. For all the materials, think about which are the ones that are most impacted and what's the impact of that. But don't stop there. Even if you don't buy full materials but assembled parts, you have to think about that for your suppliers. So you have to look at tier two and tier three, because know that they will also be passing these forward to you. And so you need to know how much of that is acceptable or not. Finally, my friends, we know how relationships matter at small medium businesses in particular, we pride ourselves on long standing relationships in this moment, right now, it is important because of so many sands that are shifting, to truly understand, at least understand what other competitive options you might have if you face a large supplier who might hold you hostage. You need to know your options. So you have to make sure that you're prepared for alternatives, even if it's not in the short term, in the midterm. So again, you have to look internally at your data around the costs and bill of materials of what you buy directly and what your suppliers buy, how much of that is really impacted based on tariffs and countries and where you get them from. And you have to look externally at options that you might have. If you're able to do this on the supplier side and you're able to customer side and you're able to do it quickly, you're now well prepared to really execute on the third capability that will come in handy, which is a bias for action and negotiations excellence. Friends, whether you like it or not, running a business is incredibly hard. And know that this is coming to you in the next 4, 8 and 12 weeks this is what you're going to face. Your largest customers are going to push back at accepting price increases. Your largest suppliers are going to push forward, they their prices threatening that you can't get their material and your factories can't run. Some of your large customers, even if they are not directly affected, will use this as an opportunity to ask for price negotiations and ask for price discounts. Even if you are not increasing price, there is a very good chance that you might get a 1, 5, 10% discount letter request from your largest customers asking you in this moment to drop prices, not raise prices, because there are other parts of their business that are impacted and they feel their viability is at struggle. And so negotiation excellence and how do you actually respond to that is going to be really, really critical. Now think about these three critical events or set of negotiations you'll have to prepare for in the next four weeks. You have to get ahead and connect with your customers customer negotiations to tell them what's happening, how prices are changing. You'll have to prepare for these tough conversations. You'll have to show them the data that you collected from the prior step. You'll have to do it from a place of grounded, emotional and creative, resilient mindset thinking. You'll have to show them how you've added value. So the first four weeks you have to get ahead because these customer negotiations are going to be critical about how much of the price you're able to pass forward the next critical set of negotiations you'll have to do over the first eight weeks, so slightly longer, but not that long. And that's with your suppliers. Your suppliers are probably already reaching out to you, asking for price increases. Or as I heard from one of my clients on Friday, their Vietnam supplier shut down their factories for two weeks and are choosing not to ship them any product, not to ship them any product because they're not sure they're going to get paid. They're not sure what they will have to pay when the product hits. And they don't want to take a loss. And so they're like, we'd rather shut down and not deal with it. So you might face that. You might have suppliers saying, we're not actually going to pass this forward. So you really need to get prepared and be creative around the range of options, around how you can collaborate with your suppliers. You also need to make sure that you have the data to inform how much of the price increase your suppliers are passing forward is fair. Finally, over the next 12 weeks, you really need to step back and rethink the bigger picture. You have to rethink your supply chains friends over the last 20, 25 years. I remember reading this book when I was doing my business school at Chicago. Booth, Lexus and the Olive Tree. It was about globalization. It was all about how the work goes to the countries that are best placed to place it from labor. It was all about labor arbitrage. It was all the rage in the last 20 years. More and more companies, and I wouldn't be surprised if it's you too who have moved your supply chains and reconfigured them for efficiency. Leveraging opportunities in Mexico and Canada, leveraging nafta, leveraging Vietnam, China, Asia, Asian suppliers to lower the costs, maybe doing only final assembly development here. There are many companies who've moved there looking for that operational excellence, that lever, because everybody was doing it. And the barriers to trade were lowering our ability to buy. Things was getting better, much easier. All that is up in the air now. If there is one thing that I'm 100% sure of, that the volatility, uncertainty and complexity will continue to go up. I think we are at a new era and the era looking forward will definitely have less globalization. We're seeing this already. It's going to be more of a trend of inshoring, near shoring. Some of these global supply chains are going to get unraveled. You've got to get ahead of it now. There is not A lot of capacity that exists near shore or onshore. Your ability to think and make the right moves, make sure that you are able to get ahead of the queue of everybody else. You have to really think about what might be alternate places where you can go both nearshore and other countries. You might need to redesign products to avoid expensive material or redesign products to use materials or components that come from other parts of the world. You might need to rethink about making some key parts yourself. So it's a step back to holistically think about your business and be strategic because this regardless of where the tariffs land, we are going to have some tariffs that are going to be there. And as a result these actions are going to be critical. So friends, three key moves as I mentioned, three key capabilities are going to determine how much of this 150 billion are you able to offset or even take advantage of adaptability and resilience as leaders individually and for your organization using data and analytics even more to be able to show you the path in this fog which has been like never before. The fog of uncertainty and three, a bias for action and negotiation excellence to know and have the best tools of leading negotiators now at Happiness Squad. When I left McKinsey two and a half years ago, I really committed myself to helping democratize flourishing. Helping individuals and leaders truly integrate the science of work well being and flourishing into how they live, work and lead so they can help organizations be at their best. I fundamentally believe from all the research friends, the science that has come out, research at Oxford, the data that was published at the World Economic Forum, data from Harvard, that performance and sustainable performance requires well being. Businesses can't flourish long term if employees don't flourish. But this is also true businesses. When businesses struggle, employees struggle too. Today, as businesses face this unprecedented threat, we decided to partner with five of our leaders, five of the leaders I had worked with in the past to really help you make sure that you are in the best place. I knew that if we don't help you as a business flourish and be around, your employees are going to struggle even more. Our well being as individuals is impacted the most when we lose employment. And given that 50% of our economy is driven by you, 50% of the growth is driven by you. We wanted to make sure that we jumped into the arena to help give you the best chances to win. We're going to focus and give you the skills you need to be adaptable and resilient. But we're not doing it alone. I'm joined by five of my dear friends who have all committed to jump in to help you navigate. One, Chuck White, who is the former Chief Procurement Officer of Schwab and Nationwide. Chuck is joined together with five other leaders. Tim Smith, who for the last 20 years has been teaching pricing at DePaul and runs a pricing consultancy firm, Pratap Venkateshen, who started a company called Emperor Tech, who provides data and analytics support to companies. We also have a range of other experts who are going to be spending time with us. The former CPO of Kellogg, the former CPO of Mars, the Chief Procurement Officer of JBS Mori, who is one of the leading negotiations experts at Wharton. All of them have said yes. I reached out to them over the last 24 to 48 hours and they all agreed in some shape or capacity to be able to be available to help you. So together with them we are launching a set of things for you as leaders, no matter where you are, how big you are, to be able to access one by the end of this week you're going to have a white paper that you can download from a new website we're launching called tariff responseteam.com we will also be hosting daily webinars that you can join into. Both of these resources are completely free for you. We're going to connect, we're going to keep sharing some of these capabilities, tools you can use to navigate this crisis over the next 12 weeks. In addition to that, we are also launching three paid offerings that you can leverage based on what you need. One, we're going to have these experts available for one on one coaching and consultation for you. Second, we are going to launch a four hour bootcamp once a week. There we will cover negotiation excellence, data and analytics around sourcing and pricing and adaptability and resilience. So it's going to be a powerful four hours for your leaders to be able to learn these skills and and to navigate. And three, we're going to launch a mastermind with 20 to 30 companies who want to explore this journey in a more deliberate, longer term way. These are going to be two hour sessions once a week that we're going to run that allow us collectively to harness the wisdom, capabilities and expertise that we all have to navigate this together. Stay tuned for those. You'll learn more about that in the next couple of weeks. We'll reach out to you personally. If you know a small or medium business owner, I really urge you to please forward this special podcast episode to them. We're going to be posting a lot of this on our Happiness squad page on LinkedIn. Please forward those posts to them. Friends, we are only going to get through this crisis we are in the midst of together. So join us at Happiness Squad and our dear friends who have all stepped in to navigate and give our small medium business owners the best chance to not just survive but truly thrive through this crisis. Thank you and hope you have a wonderful day that wraps up another episode.

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