“R-word” discussions can be overheard these days, even as they are conducted in whispers. If and when a recession is going to happen isn’t what needs to be discussed. The important point of focus needs to be: what it means to be in a recession.
Recessions are Darwinian business cycles. They instigate the great “culling of the herd.” They set in motion the battle that rages across all business sectors creating a “survival of the fittest” scenario.
What determines how your company will fare in this battle? Here are five considerations to ponder....
• How are your fundamentals?
A solid foundation in the fundamental practices of business and your market segment is the key to success. How strong are your products? How solid is your team? How resilient are your business practices and systems? How well do you take care of customers? How strong is your reputation in the marketplace?
When answering these questions, if you spot, sense or suspect there might be a weakness, shore it up! If you’ve put issues on the back burner or swept them under the rug, deal with them. Now.
Untended issues quickly become serious liabilities in battle.
• What is your cash position?
The first salvo in a recession-driven market-place skirmish is price reduction. Weaker rivals always think they can best survive by offering the lowest price.
This is folly.
Lowering prices “to the bone” ultimately means quality – in product, service and support – gets compromised and that results in a reduction in overall value.
In a recession, goods and services are still needed. Consumers start looking at money as a precious commodity. They become even more concerned with and focused on gaining the most value. They want what they purchase to last. “Best bang for the buck.” “Waste not, want not.”
This is why ensuring you have the fundamentals of your business covered is so important. This is when that foundation really starts to pay dividends.
But know this, it won’t make you immune to price reductions. You’re still going to have to listen to the market place. You will need to be flexible. You will need to stay competitive. You will need to have a cash position that allows you to withstand lower margins while maintaining quality levels. Your price-cutting competitors won’t have the cash on hand needed to survive the battle. They’re going to be weighed down with debt. You have to be in the position to outlast them.
With the fundamentals in line, when you are running a lean, mean efficient machine, you will be able to lower margins, retain quality and win the business.
People will continue to pay more for overall value. You must let them know you are the value choice... and you must consistently deliver it.
• Are you willing to sacrifice?
This will be the most difficult consideration to take to heart, but, if you do, the returns will be well worth it.
The recession will call for financial cuts. Margins will be lower. Profits will be lower. Payable cycles will be extended. Receivables will be extended even further.
You will experience a cash crunch. You will need to make cuts. Don’t take them out on your employees. Don’t draw first blood from them. Make operational adjustments. Cut the fat. Cut the waste. Involve your team in the effort. Ask them for ideas. Adjust your payables. Be more aggressive on receivables. Overall, increase efficiency and productivity.
If you have to start looking deeper, be a leader. You make the first sacrifice. Cut your “secret perks” from the company. If you own your facilities and lease them back, stop paying yourself the rent. Take a pay cut. Stop taking a salary or draws, if you have to. (You know you have a rainy day fund. This recession is going to be a hurricane. Use it. That’s why it’s there....)
When your employees see you taking the hits to protect them, company morale will skyrocket. Your value proposition to your customers will become bullet proof. Your employees will have your back.
If times get really tough and there is no other move left but to make payroll cuts, be sure the employees are well aware of the situation – ahead of time. Have them help come up with creative solutions like reduced hours or job sharing. If layoffs are inevitable, help those who receive the pink slip sign up for unemployment. Help make up the difference in their pay loss with a severance package, if at all possible. People talk. And talk can ruin reputations. If you treat your employees with respect when let go – when they know you’ve done everything possible to keep them on --they’ll speak well of you. That positive word will be passed around. (Why is this important? Because negative “gossip” hits 3 times as many people as the positive.)
• Are you getting the word out?
You’ve worked hard and sacrificed to ensure your team is offering the very best value in your market segment.
But do people know that?
When the recession battle is on, the one thing you must do is continue to get the word out. Never cut advertising. Never. In fact, find ways to increase your advertising.
As your competition focuses on surviving the price-cutting moves that ruined their cash flow, they are going to stop advertising. This means they will disappear from the public eye. They will have no “top of mind” awareness. They will have to rely on word of mouth.
This will be their fatal mistake. Their desperate price-cutting is going to ruin their value story. This will poison their word-of-mouth. Their social media reviews will turn sour.
Very sour.
Very fast.
Their pain is truly your gain.
This is your time to grab market share from them. The only way to do that is to be the one the public sees, be the one who is top of mind.
Take this opportunity to play “Let’s Make A Deal” with your advertising partners. They’re in the recession battle along with you. They’re seeing client lists shrink and revenue projections tumble. Let them know you’re committed to advertising and are even open to increasing your presence – if the right deal can be struck. Be bold... but also be reasonable. They don’t want you to walk and they know you can’t afford to walk since you’re in the game to increase market share. Work with them. Be a partner with them. Ad channels have a lot of wiggle room in pricing once their hard costs are met. Squeeze them... but make it more of a firm, respectful hug.
• Are you willing to get your hands dirty?
Surviving a recession means it’s time for all hands on deck. Everyone needs to pitch in. One of the most effective ways to do this, as the business owner, is to interact directly with your customers. Make sure they are happy with your products and the services provided. Take care of any issues immediately, effectively, efficiently. Go the extra mile. Ensure those 5-star ratings keep flowing. You’re going to be the company consumers think of when they need your product or service. You’re going to be the one they research online for reviews. They need to know you’re going to be the company that will deliver the value they demand.
Keep involved with your employees. Make certain they have the skills, tools, and attitude required to keep things running smoothly. Fostering high morale is critical in a battle for survival. When the employees see the owner working hard – and genuinely caring for their wellbeing – they will work with you to make the company survive, succeed and prosper.
When the recession finally gives way to economic growth, your company will be well-positioned to maximize the new opportunities now available because your fundamentals will be firmer, your cash position will be stronger, you will have made the tough sacrifices, you will have enhanced your public visibility and you will have the battle tested team needed to soar to new heights.
Your company will have survived... to thrive.
Bill McGowan is the Chief Creative Officer of BMCG Creative Services, Inc., a full-service, boutique, advertising agency focusing on small business. For over three decades, BCS has been helping the leading names in the automotive, electronics and medical fields successfully overcome their communications challenges.