Growing Your Business During This Recession
Whenever your recession (and your customers’) started and regardless of whether your business is a leading or lagging indicator of a recession, it doesn’t matter when you’re in the middle of one. For many of us coping with this recession has been a lot like going through the four phases of loss namely denial, anger, self pity and acceptance. In this era, many of us are moving into acceptance of our new reality and are ready to take steps to make the best of our gifts and blessings. The more we reflect on the last few decades, the more we realize how much better and smarter we could have been when times were easier and now know that getting ever better and smarter is the difference between success and failure. In our recession there seems to be a fine line between success and failure. Success may be defined as not failing. And failure can come from simply or deviating from success. As we consider our circumstances and recognize that our business lives must go on, what can we do to grow and save our businesses during these times?
In this article, I will lay out three areas you need to triage, four areas where you should respond and three strategies on how to profit during these times.
Three Areas You Need To Triage.
Triage, when ER doctors and nurses determine who lives, who dies and who will be healed later, is exactly the right approach to take in your business as do in their jobs. Instead of patients you will be triaging your customers, projects and cash.
- Triage your customer relationships.
- It’s going to be critical to decide which customers you can keep, which ones you need to renegotiate terms with.
- Fire your unprofitable or difficult customers now and use great discretion in choosing the prospects to pursue. Someone else may have fired them first.
- Most companies start first by providing extra value and service to their incumbent customers. During these times, their loyalty and fear of switching will keep them close to you if you stay close to them.
- Reevaluate ongoing projects.
- Take a hard look at what you’re working on. Kill any project with an unclear payback or one, which will consume more resources than will plausibly make in the next 36 months.
- Restructure any project that’s critical but has no clear payback, accountabilities or resources.
- Prioritize and focus on completing any project with the ability to enhance revenue, reduce costs or protect wealth.
- Manage your cash.
- With liquidity likely to be scarce at best, hoard what you have. Use cash as a reward for vendors, employees and others who are sacrificing for you or your goals.
- Use your cash or lack of it as a weapon in dealing with companies and customers who rely on you and previously expected you to finance receivables.
Four areas where you should respond.
Once you have triaged your customers, projects and cash, look to four areas where you can respond to your new reality. These are:
- Price for profit and to avoid loss.
- Price your products and services in terms of the value they not only provide to your customers but how they help your customer’s customers profit. Learn where and how your products make others money and align your pricing with theirs.
- Where you must make sizable investments in raw materials, ensure your pricing terms allow you to recoup your investment as soon as you’ve made it.
- Reward your customer’s liquidity with favorable pricing. Those who can pay you up front deserve discounts.
- Finally, use your pricing to protect yourself from those who exploit you. Immediately raise prices on customers who pay slowly. Create collection terms for poor payment just as you would offer good terms for fast payment.
- Manage your credit furiously.
- Do what you can to get more credit. If you can open a second line or other source of credit, do so even at a price you would not normally pay, especially if these are from confidential or “angel” sources.
- Use your credit prudently. Don’t assume you need to finance everything yourself. Get creative and aggressive in what you ask others to carry and fund.
- Thirdly, use other people’s money wherever possible. Many aggressive sellers and bargain hunters may have credit you can use in the course of doing business with them.
- Lead decisively.
- Show your confidence in all you say and do. While you may not feel it, your optimism, confidence and conviction will be a beacon of hope for those who are more scared than you are.
- Motivate your vendors, staff and customers to stay committed, keep their promises and take the same risks you are in an anticipation of better times and the promise of deferred rewards.
- When times are tough, show your stoicism in the face of bad news and inevitable hiccups.
- Demonstrate balance in your short-term pursuit of survival and your long-term perspective for better times and deferred rewards.
- Reinforce your Best and Highest Use®.
- Ensure that you and your company are focused on what you like doing, you are good at doing and your marketplace values you for doing.
- Bring as much value and enthusiasm to getting better and doing better at what you focus on.
- Take heart in knowing you are very good at what you do and this is a true advantage in these times where impostors are exposed, pretenders prove incapable and amateurs just give up.
Three strategies on how to profit.
After you have triaged your business and responded in four areas, turn your focus to new strategies to profit now and over time:
- Take market share.
- Understand switching costs for the prospects you are trying to close. Make it easy for them to move their business to you and your superior value.
- Buy up your rivals for pennies on the dollar. Many companies today do not have enough sales to cover their overhead. Better yet, just buy the companies’ customers without the overhead of their failed companies.
- Grow your share of your existing customers. If you are trusted and invaluable, then ask for more of their business. Be quick to respond if another supplier stumbles, or is on the ropes.
- Sell new value.
- Instead of selling just your product or service, take responsibility for your customer’s success and outcomes. Offer to warranty or insure that their success will come from your product or service.
- Recast your value proposition if your customers’ needs are changing. If so, rethink how you get paid, how you package your services and how you price your products.
- Realize you are going to work harder, spend more time, and possibly get paid less for serving the same customers. Consider it an investment in the future.
- Invest for the recovery.
- Now is a great time for buying services and raw materials at a discount. If you can, invest now at a fraction of what it may cost to buy what you need when the economy picks up.
- With sales down, you probably can find extra time to work on the future. Take advantage of not being busy and get busy building your next success.
- Finally, as you come out of denial and self pity, push yourself into actions that will ensure your success and preserve your survival. Work harder and more decisively while your competitors are whining and paralyzed.
Our next year will continue to be hard as credit remains tight, new sectors of the economy are impacted, and the country adjusts to our new reality. You can grow your business during this recession if you triage, respond and develop strategies to profit. As the small guys in a world of goliaths, the recovery is largely in our hands as it always has been and will surely be again.
Need assistance growing your business during recession or difficult economic times. Contact Andy Birol below for more help.