With the economy taking a downward spiral in recent months, it is important for companies to be prepared to face a recessional period. Andrew Stacey founding partner of Custometrics, discusses the measures that businesses need to take to survive . In a recession very little changes from normal business life, it just gets tougher.
As the recession deepens, managers will be under greater pressure to do three things: the first of which is obviously to save money.
But how to do it without damaging the business, and allowing for growth when the time comes?
The easiest and quickest thing to do is fire hoards of people. They are expensive assets to maintain when sales begin to dry up. The cheap ones are the cheapest to make redundant, and their costs do add up. But will their lack of presence create serious holes in the business?
Next, assess every project – capital or otherwise. Be it new IT, a partnership program , CRM, new transportation or a new building. The old adage of ‘STOP’, START, CONTINUE comes immediately to mind.
What can be stopped? Can it be done without negative effect on the business? How many people might it free up for the redundancy queue? How much would it save in outside suppliers costs? Will it pre s e rve cash? Or what should be started? What can be done in the immediate term that will have maximum, positive effect on the bottom line, or improved cash flow? Or by doing something now, will it generate a serious advantage over our competitors?
And then continue. Continue things that are already providing maximum benefit to the business. But beware – would it cost more to stop rather than continue? Or can completion be brought forw a rd? How might scaling back improve ROI?
Then it’s the turn of the Directors, Managers or Owner/Managers to look at themselves. The (remaining) staff can still be motivated, if they see the bosses suffering as well. First Class travel, chauffeurs, lunches, waiting taxis, all need to be pared back. And there are n u m e rous budget pots that can be trimmed, from flowers to newspapers and magazines.
“ In a recession very little changes from normal business life, it just gets tougher.”
E v e rything that can be looked at needs to be looked at. If there ’s no good reason to spend cash, don’t. It’s far better off in your company’s bank account than someone else’s .
The second important area is protecting your existing customers
Firstly look at the profitable ones. How will the recession affect them? Then look at their customers, and so on up the supply chain. How will all their re c e s s i o n a ry actions filter down to, and beyond, your company?
Investigate processes and pro c e d u res for handling customers. If they can be made more e ffective and efficient then everyone wins. A recession is a good time to discuss with customers how you both might take on these t roubled times together.
How can interactions be streamlined? It then becomes a dialogue, initiated by the supplier, instead of an edict promulgated by the customer. Then look at the unprofitable and marg i n a l l y p rofitable. It is unlikely they will magically become more profitable in a recession. Can they be isolated, in a ‘managing the re l a t i o n s h i p ’ sense, from the rest of the organization? And t h e re f o re, can you manage them out of the business, or do some thing that increases the m a rgin, such as reducing service levels.
T h i rd on the list is to try and sell more
This is always difficult, at any time. But recession can bring out the best in some companies – they will try something new or d i ff e rent, maybe they’ll even take a miniscule risk. That ‘try something…’ might be your c o m p a n y ’s products or services, but customers will want the same, or even more – for less.
So look at the pricing strategy – what can be o ff e red that may bring in more business? Recession is a good time to watch your competitors in an even more hawk like way than usual. Are there signs to show they are having problems, or weathering the storm better than you? If your company is successful, a re they a potential take over or merg e r t a rget; if not are you?
Recession is all about survival, and to paraphrase Darwin ‘only the fittest surv i v e ’ . And that’s not just fit for today’s business. The winners will be those businesses that are fully fit to accept, and ride, the wave of change for the future .
L a s t l y, it’s a good idea to keep a ‘re c e s s i o n a ry mentality’ when times get better. It is a pity, from a shareholder viewpoint, that when things improve, company Directors and Managers forget how to operate in a recession. Recessions are not new, they are just cyclic phases. But many of today’s managers will not have managed their way t h rough a recession, so it’s a great time to l e a rn. There will be another one – guaranteed. This article has been re p roduced with the kind permission of Author: Andrew Stacey (custometrics.co.uk) originally published in the Sales Director December 2001.