Roy Morgan’s business confidence index dropped 8.8 points in February 2026 to 88.6, its lowest reading in more than five years. A record high 67.2 per cent of Australian businesses now expect “bad times” for the economy over the next five years.
Sit with that for a second. Two out of every three owners you know, quietly preparing for the worst. Cutting budgets. Pausing hires. Sitting on quotes they would have chased this time last year.
That is not a signal to panic. For the right kind of operator, that is a signal to lean in.
This article is about being optimistic when the room is not. It is about the specific, repeatable pattern of how businesses pull ahead while their competitors retreat, and what that looks like practically for a small Australian business right now.
What Harvey Norman Actually Did in 2020
Start with the most Australian example in living memory.
When COVID hit in 2020 and most of the retail sector was talking about survival, Harvey Norman did something different. They kept investing. They kept opening. They leaned harder into their catalogues, their TV spots, and their store footprint. When international travel stopped and Australians poured discretionary spend into their homes, Harvey Norman was the obvious place to land it.
Harvey Norman reported a profit before tax of $661.29 million for FY20, up 15.1 per cent on the previous year. Excluding the one-off impact of new lease accounting rules and property revaluations, the underlying profit before tax rose 26.0 per cent to $635.60 million.
The Australian franchisee result grew. The New Zealand business set a record. Even Ireland and Northern Ireland, which had been a fringe bet, more than doubled their retail result to $16.87 million.
By FY25, net profit after tax had lifted 47 per cent to $518.02 million. By 1H26, profit before tax was up another 16.5 per cent to $466.3 million, and the interim dividend was up 20.8 per cent. Sales at the 196 Australian franchisees had grown to $3.5 billion, driven by AI-enabled computing and mobile devices.
Say what you like about Gerry Harvey personally. As an operator, he made a decision the data now backs completely. When everyone else was retreating, he doubled down. He caught a wave of demand that was genuinely there, at prices his competitors were too scared to compete with, in categories his competitors had quietly de-prioritised.
This Is Not a One-Off, It Is a Pattern
The Harvey Norman story is not a fluke, and it is not just an Australian thing. The research on this has been consistent for forty years.
Harvard Business Review ran a landmark yearlong study called Roaring Out of Recession. They found that 17 per cent of companies do not survive a downturn at all. A further 80 per cent do not return to their prerecession growth rates in sales and profits within three years. Only 9 per cent come out stronger than they went in.
The obvious assumption is that the winners are either the aggressive cost cutters or the bold spenders. The data says otherwise.
Businesses that cut costs fastest and deepest have a 21 per cent chance of pulling ahead of the competition when conditions improve. That is the lowest of any group. Businesses that aggressively invested without regard to efficiency were only slightly better, at 26 per cent.
The group that won, the 37 per cent with the best odds of breaking away from the pack, used a specific combination. They cut costs selectively by focusing on operational efficiency rather than on slashing headcount. At the same time, they invested relatively comprehensively in R&D, marketing, and new assets. They were disciplined with cash and bold with growth, at the same time.
In other words, they were optimistic in a very specific way. Not naive. Not reckless. Selectively offensive while being structurally efficient.
The Marketing Evidence Is Uncomfortably Clear
If you want to get even more specific, look at marketing spend during downturns. This is where many small businesses quietly sabotage themselves.
A McGraw-Hill study of 600 companies across 16 industries during the 1980-1985 recession found that companies that maintained or increased advertising during the two-year recession saw a 256 per cent higher sales than those that cut, once the economy returned to growth. The businesses that cut their marketing budgets saw no market share increase and just 18 per cent sales growth.
A follow up study put the effect at 275 per cent higher sales three years after the recession, compared with 19 per cent for those who pulled back.
Other research has repeatedly found the same thing. Businesses that increased advertising by 28 per cent or more gained an average of 1.5 points of market share. Economic downturns reward the aggressive advertiser and penalise the timid one.
This matters because marketing is usually the first line item small business owners cut when confidence drops. It feels responsible. It is almost always a mistake, at least if it is cut without a plan to replace that demand somewhere else.
Why This Happens: The Psychology of a Contracting Market
Step back and the reason this pattern keeps repeating is simple.
When confidence drops, most businesses do the same thing at the same time. They cut marketing, freeze hiring, defer investment, tighten credit, and hunker down. That is a rational response at an individual level. At a market level, it creates a series of gaps.
Customers who still need to buy now face fewer options, less marketing, slower quotes, and less competition. The businesses that keep showing up look bigger, more confident, and more available than they actually are. The market share is not created, it is redistributed, from the fearful to the focused.
At the same time, the cost of almost everything else moves in favour of the businesses still playing. Advertising rates soften because fewer competitors are bidding. Talent becomes available because other businesses are letting people go. Suppliers are more willing to negotiate. Commercial property gets cheaper.
That is why the pragmatic, progressive operator does so well in a downturn. Not because they are smarter or braver, but because they are in the room when the room empties out.
What “Playing Offence” Actually Looks Like for a Small Business
Harvey Norman is easy to look at and harder to apply. For a small Australian business right now, playing offence does not mean bet the house. It means a set of deliberate moves that most of your competitors will not make.
Keep Your Marketing On, And Make It Sharper
Do not cut your marketing budget because the market feels soft. Reshape it. Review which channels are actually producing leads, which offers are converting, and which audiences are still buying. Kill the noise. Fund the things that work, harder.
If you have been sitting on content, a new offer, or a social campaign, now is the time to push it out. The competition for attention is quieter than it was two years ago.
Invest in the Customer Relationships You Already Have
Your existing customers are the cheapest, most defensible part of your business. In a market where everyone is scared of losing customers, the business that gets proactive, communicative, and genuinely useful will grow without spending a dollar more on acquisition.
That looks like quarterly check in calls, genuine value-add content, and clear communication about what you are seeing in the market and how you are responding. It is not complicated. It is almost never done consistently.
Hire Ahead of the Curve, Selectively
When the labour market loosens, great people become available who could not be hired when everyone was competing. You do not need to expand headcount. You do need to keep an eye on the one or two strategic hires that would let you step into opportunities your competitors cannot.
That might be a senior tradie who opens a new service line. A marketing hire who can bring agency work in house. An operations person who unlocks the owner from daily firefighting. The question is not “can we afford it this quarter?” The question is “what does this hire make possible in 18 months?”
Review Pricing and Offers, Not Just Costs
Everyone cuts costs in a downturn. Fewer operators use the same window to rebuild their offer. What do your customers actually need more of right now? Where can you package services together in a way that reduces their risk and lifts your margin? What is the premium tier you have been nervous to launch?
Downturns reward businesses that sharpen what they sell, not just what they spend.
Buy the Assets Nobody Else Wants Right Now
Second-hand equipment, commercial leases, underutilised businesses, websites, domain names, brand names. When confidence is low, quality assets get cheap. Not every business needs to be acquiring, but most owners should at least be paying attention to what is on the market.
The $20,000 instant asset write-off, in place until 30 June 2026, is one concrete example. If you were going to buy the ute, the tools, the compressor, or the machinery anyway, doing it before June gets you the full deduction in one year instead of spread over several.
Say Yes to the Work Others Are Saying No To
In tighter markets, bigger competitors often quietly exit certain categories, postcodes, or job sizes because they need to chase higher margin work. That leaves a surprising amount of good work on the table for smaller operators who are willing to do it properly.
This is not about chasing every cheap job. It is about noticing where the competition has vacated and deciding whether there is a sensible play to take that ground.
The Risk of Getting This Wrong
Being optimistic is not the same as being reckless. The research is specific about this, and the distinction matters.
The Harvard study was clear that businesses that boldly invested more than their rivals during a recession, without also being disciplined on efficiency, had only a 26 per cent chance of coming out ahead. The winners cut selectively and invested selectively. They did not just spend.
Playing offence without a plan, without accurate numbers, and without a clear sense of which bets are structural and which are speculative is how businesses go backwards in a downturn.
That is why this moment is not really about mindset. It is about structure. Who in the business is looking at the leads, the margins, the fleet costs, the pricing, and the marketing performance on a monthly basis? Who is deciding what to double down on and what to cut? Who is holding the owner accountable to the plan when the newsfeed is screaming something else?
The Coach in Your Corner
There is a reason elite athletes have coaches and elite operators rarely do. Somewhere along the way, owning the business came to mean owning every decision alone.
The problem with running your own playbook in a contracting market is that the same biases that make you cautious at the wrong moment will make you brave at the wrong moment. Without someone outside the business looking at the numbers and asking better questions, most owners either freeze or over-extend, and both cost them.
An outside the box thinking coach is not a cheerleader. They are the person who will ask why your marketing budget is being cut when your cost per lead is the lowest it has ever been. Who will point out that your best hire in a decade is probably available this quarter. Who will sit with you over the pricing review you keep putting off, and make sure it actually happens.
That is what Candour Strategy does. We work with small and medium Australian businesses to turn the pressure of a soft market into a genuine competitive advantage. Not by pretending the environment is easy, but by being honest about what to cut, what to protect, and where to lean in.
Good times reward scale. Hard times reward clarity. The businesses that come out of 2026 stronger will not be the ones with the best vibes. They will be the ones that made a small number of deliberate, uncomfortable decisions while their competitors were busy being scared.
If you want to be one of them, book a strategy call with Candour Strategy and we will work out what that looks like in your business, with your numbers, in the next 90 days.