By Wayne Kurzen.
The current economic conditions have brought a whole new level of “stress” to today’s entrepreneur. Business as usual will probably not work. The following is a list of considerations for surviving and even thriving in a recessionary economy.
1. Cut “Financial Drag." Methodically cut unnecessary expenses.
Cut your overhead. Now is a time to look at every item on your profit & loss statement and ask the hard question–"can we cut this without hurting our top line?" During good times, we get pretty sloppy with our expenses. Involve your team in this line-by-line discussion. Some companies assign every line item to an individual on the team. But don’t cut marketing (see below).
You cannot manage what you do not measure. If your financials—your profit and loss, balance sheet, and cash flow statements—are not current, accurate and relevant, now is the time to get your books in order.
Review your financials often. Review your financials at least once per month, and cash flow statement weekly.
2. Get rid of your “C” players. Top performing companies always have an “A” team. In fact, if you carry “C” players on your team, it is unlikely that you will ever rise to the top. The motto in hiring and firing should be “slow to hire and quick to fire.” However, much of the time business owners do the opposite! If you have been hanging on to your marginal performers, now is the time to free them. The question to ask yourself is this: “Would I enthusiastically hire this person today?” If you cannot answer "yes," you probably do not have an “A” player. There are “A” players available because many have been let go or fear their company won’t be around in the future…they are ready to move. Now is the time to create your “A” team. Leading employee productivity companies, like the Container Store, believe that one “A” player is worth three “C” players. The Container Store pays more per hour than the competition, but their overall payroll expense is less.
3. Expand your Business. Acquire your competitors or expand your product or service. Perhaps you need to expand your reach or change your target customer. If you have been involved in residential construction, you may want to expand your target reach into commercial or add more to your service department...one person’s nightmare is another person’s once-in-a-lifetime opportunity.
Be on the lookout for struggling businesses that compliment your business…there are some great bargains! And you may not need cash or a loan to get them. NOTE: Buying a distressed business is just like buying distressed property: you can often find a great deal that is a win-win. Perhaps you offer to take over a struggling business and pay nothing but to offer the owner a job. You get a customer list, their equipment, possible licensing, and someone to run that part of the business for you. The seller escapes struggling and possible bankruptcy. It is a win-win.
Look at not only acquiring competitors, but also look at expanding your product line. For example, if you are an electrical contractor, look at adding other complimentary produces like low-voltage or security systems to your total product offering. Also consider acquiring minority-owned businesses, thus increasing your opportunity to bid on government contracts.
4. Expand your “Sandbox”. Consider increasing the size of your geographic boundaries. This may involve going somewhere where your product is still in demand. For example, if you are a contractor in Florida, you may have to go to another state for awhile.
5. Increase Quality of Workmanship. Avoid the temptation to cut quality. As you compete for business with less business available, the last thing you want to cut is quality. Think value, value, value.
6. Measure Employee Productivity. Know your revenue/profit per employee. It is a proven fact, people perform at a higher level when they know their performance is being measured. Establish a “key performance indicator” for every employee. Measure revenue/profit per employee is one of the easiest metrics to monitor. Consider putting Global Positioning System (GPS) in your vehicles. GPS has become a relatively inexpensive tool, and it has proven to increases productivity—both from a scheduling and individual performance standpoint.
7. Know Your "Uncommon Offering." During economic downturns, price does become a bigger factor. But still, do your best to compete on "value," not price. The mastermind behind the initial Southwest Airlines marketing, Bob Bloom, defines “uncommon offering” as the “what” you offer. It represents both the tangible benefit of your product or service and the emotional experience you will deliver to your customer. What is it like doing business with you that makes you better than your competition? Are you more reliable, flexible, responsive, and cutting-edge?
8. Don’t Cut Marketing. Expand it! Six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only increases sales but increases profits. This fact has held true for all post-World War II recessions studied by the American Business Press. Marketing does not have to be expensive. Some of the best marketing is free marketing! You will get more business from referrals, publications, and other unconventional methods with a system and a very low budget. It’s also very important during this time to keep a balanced marketing portfolio. Don’t invest in just one or two strategies.
9. Get on the Phone. Get personally involved in calling all of your current customers. Let them know that you are not only still in business, but that you are aggressively seeking their business. Best-selling author and top business guru Tom Peters says, “Work the damn phones...Keep working the damn phones...Show up…Keep showing up.” There is less business out there, so go after it. Build and reinforce your relationships. Talk about your “uncommon offering.” The squeaky wheel gets the oil.
10. Share the Pain. Involve your team, set the example. If everyone needs to take a temporary cut in pay, take one yourself. But do not keep “C” players on the payroll. Remember, you are running a business, not a rehab center.
11. Work on Yourself. Best-selling author, John Maxwell says a business will never outgrow the owner. Educate yourself…learn, learn, learn. It’s not the one who works the hardest, but the one who works the smartest that ultimately wins. Do what you need to do to “get the edge” in your industry.
12. Hire a Coach. Nearly all of the most successful people in any area have a coach or coaches. Whether it is Tiger Woods or a time-proven and experienced CEO, coaching improves performance by providing insights and ideas, serving as a sounding board, helping define goals with clarity, and providing accountability to execute proven ideas.
Wayne Kurzen is a Platinum Master Business Coach with ActionCOACH. He has been selected among 1,000 worldwide Action Coaches as North America Coach of the Year (in his category). He is also one of 70 Gazelles Growth Coaches worldwide, qualified to teach the “best practices ” of the leading mid-sized business in the world. He is an affiliate member of IEC and specializes in helping owners of electrical contractors grow profits and have more personal away from the business.
Wayne Kurzen will be presenting "Thriving in the Economic Meltdown" on January 29, 2009 from 12:30-1:30 Eastern. To register for this web event, please visit the NSPE Education Web page.
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