Newspapers and TV programs are full of the dreaded “R” word and there is a danger that we are getting brainwashed into a stage were businesses become so petrified that recession materialised as a self fulfilling prophecy: We hesitate to invest in our business, cut down on resources that generate business or provide customer service and do a number of things that can lead to a deterioration of service and sales activities. We might save on advertisement and training, and voila, what you have at hand is a situation where your business is developing backwards instead of upwards. Worse even, you probably wouldn’t have started this downward spiral if nobody had talked you in to a change of strategy because of an impending recession.
We must not be ignorant about what is happening around us, but let us apply a little common sense and recognise that an economic downturn is indeed something that does not automatically hit all industry. In fact many industries strive. Think of interim and turnaround management, think of fast food vs expensive restaurants, think of Aldi vs Waitrose, think of the bicycle industry vs car manufacturers. The list is endless and in every “challenging situation” (I like this expression far better than the “r” word) the cards are shuffled anew and a lot of companies have been founded during tough times and a bunch of other companies actually made a lot of money during tough times.
During the last economic downturn the airlines SABENA and SWISSAIR went bankrupt while LUFTHANSA and SAS declared record profits. Has recession only affected half of the airline industry but not the others? No, of curse not! Let’s face it: It is all down to good or bad management. If you managed your finance wisely and with providence, avoided to take out loans and built up cash reserves, you are in a pretty strong position and can drive a hard bargain now, buying property, stock, equipment or whatever at a super price.
When the going gets tough, consumers think twice when they spend their money and good old values such as customer service, value for money, reliability and guarantee trump, and the good news is that these are all areas where you still can out-perform your competitors.
Here are 10 tips on how to not only survive but strive during challenging periods:
1. Maintain a good, positive attitude, personally and within your organisation. If you are all doom and gloom, you will turn off people. Nobody wants to be intoxicated by someone lamenting and moaning. Cutting back on bonuses or recognition for those who actually deserved them by still bringing in the harvest, is like the baker who decided to stop baking bread since it would save him the cost for flour.
2. Practice financial discipline; Freeze all non-essential spending until any debt is paid of. This does not mean to save on the fuel that generates business, such as sales training, advertisement and traveling. I have seen companies asking their sales force to stay in the office so travel expenses are saved. That’s literarily saving money at all cost, in this case at the cost of sales. Be firm with your debtors. I know of companies that don’t chase their money for half a year. No surprise this results into cash flow problems.
3. Consider changes: There are a lot of services in a company that can be outsourced and turned from fixed overheads into flexible costs. Accounting, secretarial service, IT, HR, technical after sales service, marketing, this all and more is classic potential for efficiency improvement.
4. Consider actually investing in areas that will drive business short term, such as customer relationship management or a specialised turnaround consultant or outsourcing expert.
5. Communicate and treat your staff as intelligent adults. Many companies pretend and make their employees believe it’s not all that bad when it really is. Give your staff a true picture of the business situation. Not only have they deserved it, but people who understand the issue tend to try helping and work harder or come up with a lot of good ideas. Set clear goals – everybody must understand that they have to earn their keep and they will be measured and need to perform.
6. Do not feel guilty and don’t hesitate to let go of under-performers. You are running a business and not a welfare organisation. Your responsibility to keep the company alive and provide for those who do perform is greater than your social responsibility for those who had their chance and blew it. If the ship has a leak, the captain has to throw everything over board that isn’t absolutely necessary for survival. Nobody will thank you when you went belly up for hanging on to every single one until the bitter end.
7. Diversify early. Last time I counted there was 1 domestic market and Protected content markets. It is not very likely that an economic downturn hits all Protected content in the world simultaneously. Most businesses are exportable, especially with the availability of the Internet. Sit down and do some strategic thinking, finding out about new markets, niche markets and new products. Putting all eggs in one basket has never been a good idea, so why putting all business eggs in one market?
8. Think of such markets that are not likely to reduce their buying habits. The NHS in the UK and the US Government in Europe still provide business opportunities so vast that you can easily offset any losses and actually growth your business. Especially the US Government in Europe buys practically all sorts of products and service in supply of their Armed Forces bases and UK suppliers are cut out because there is no language barrier and they are much closer to their client that US suppliers. Just here is a $ Protected content market.
9. Use all available low-cost and no-cost help. There are lots of grants available and there are lots of tenders if you only sit down and take the time to work them. Since it is likely that you will have a few spare hours when business is low, why not investing them and fill in some of these dread tenders that you usually would never bother with because you don’t have the time? Now you have the time. Get in touch with Enterprising Enfield, who offers a special coaching for London based businesses, an initiative that is public funded and almost free.
10. Keep a log and capture the lessons learned from this crisis. It is likely that sooner or later in life you will experience a similar challenging situation. Image the peace of mind, reassurance and readiness when you can pull out a checklist and are prepared to deal with the situation, rather than wondering what to do.
The author, Eugene Rembor is CEO of Rembor & Partners management consultants. Protected content