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Surviving a Down Economy: Failure is Not an Option

Written by: Randy Moon

Article Overview: Every company must take a serious look at their operations and decide if they need to make serious and deeply painful cuts or if their best strategy is to make minor adjustments and simply push forward. Either way, every company owner or president must move forward and lead with a certain conviction and strength of will. That conviction must be felt by every manager and employee in the company.

Surviving a Down Economy: Failure is Not an Option

We shouldn’t immediately assume that a company’s best strategy for surviving this current downturn is making a lot of minor adjustments. Of course most companies don’t want to make massive cuts, close a division and lay off formerly key personnel. But maybe they should.

If the company has been strongly profitable in the recent past, then perhaps only a reduction in headcount or hours and a few other minor changes is all they need. But if they have been struggling with profitability in the recent past, then now may be the best time for a complete overhaul, as scary as that may seem. Bold action during tough times is the trademark of some of the real captains of industry. The problem often is that the small business owner needs to make that assessment of their own company and ask, “Do we need a complete overhaul or just a few adjustments?” Often they cannot be that objective. Getting a third party opinion, an advisor or consultant, is often helpful.

But regardless of what a company chooses to do, the owner or president must have a certain mindset going into 2009. Some people call it refusing to participate in the recession. I call it moving forward with your eyes open and with a "failure-is-not-an-option" conviction.

1. Be aware or just “know” that there is opportunity in every downturn.

While virtually all of us were running from the stock market last year, Warren Buffet, the sage of Omaha, was putting billions back into it. Yes, he can afford it and his $10 billion dollar investment in Goldman Sachs and General Electric was like you or me investing $10,000. But even at that smaller amount, who of us was willing to go in with all of the bad news circulating. That’s not the point.
The point is that when the herd is running in a certain direction, there’s a reason (but not always a sound reason) and there’s a way to parlay that movement into a better position by keeping our heads above the herd and moving upstream to the current. In a down economy, most people drink a lot more. How about buying liquor stocks? Are your feelers open to the possibilities?

2. Don’t just accept that sales will be down.

As the CEO of your small or large company, you set the tone; always. Even if sales do fall this coming year, your personal drive while demanding more and demanding excellence from everyone around you will increase those sales. Brainstorm ideas with a group of employees or fellow owners in your industry! Take risks and move into new areas you’ve been thinking about if you can without increasing spending. Just don’t go along with all the other doom meisters. Lead! Instill in everyone a sense of purpose and determination.

3. Bid more jobs at more competitive rates.

Now is the time to be less picky. Smaller jobs, government jobs (assuming you’re qualified), larger jobs, or whatever type of job you used to avoid in the past to fit your desired business needs to be bid on. Keep people busy. And since cash flow is so important, tighten those bids up and lower profit expectations if you have to.

If you are making cuts in other areas and reducing overhead then your “overhead factor” or overhead load on each job is being reduced and if you get involved personally in the bids and construction to ensure they run right, you might even turn a solid profit where you otherwise thought you couldn’t.

4. Convert a department manager (or another employee) into a more sales-oriented job.

Recently a Holland, MI commercial HVAC contractor that I worked with saw their installation sales fall off the edge of the table even while their service division continued strongly. The installation side of their business contributed 40% of their sales but only 5% of the profit. Nonetheless, the installation business contributed to covering operating costs and was needed business. This had been occurring as early as last March and so back then we acted to make the installation manager position much more sales-oriented by changing the job description and designing a “sales process” for him to follow in the hopes of increasing bid opportunities.

Unfortunately, he didn’t like that role and was not successful so eventually he was terminated. We moved one of the service techs who had excellent rapport with clients into a more sales-oriented role, landing new prospects and the owners got more involved in bidding. The company has had better success in keeping slower but steady installation work bids coming in.

5. Consider purchasing or merging with a competitor.

Right now, no matter how bad off you are, someone is doing worse and contemplating closing their doors. Now is the time to call around to your competitors. Listen to their issues. Maybe they have something (business, clients, equipment, a facility, location) you’d like to have. Maybe there is a way to purchase them at a real bargain. Weigh the risks. Maybe a merger makes sense. What have you got to lose? If nothing else, you may get some ideas on how to proceed.

6. Recession-proof products and services.

Nothing is probably truly recession-proof but higher-end, higher-priced products or services should not, as a rule, be impacted as much as lower end products. I’m not talking so much about products or services that require credit. Obviously, there is a pinch in that area, but as a whole, the people who can afford decorative concrete versus plain concrete, high-end designer paint for their walls, or high-end heating and cooling units versus the lower-priced ones, are still going to want those better products and services. They can afford it. They will of course be looking for bargains but generally you can hold good margin there. Those areas of your business catering to a higher-end client may be where you want to spend advertising dollars. Simply put, those with higher incomes are not as impacted as those with lesser incomes. Keep that in your thinking.

7. Take the long term view.

Recently a flower shop/interior design company I’ve worked with spent a lot of money putting together a fantastic three day event (Fri/Sat/Sun) before the Thanksgiving weekend. They made it a grand occasion, with an incredible array of Christmas trees decorated as if from around the world, served hors devours and wine and had a huge turnout. This shop has been struggling; business has been sluggish though growing well in certain areas. Many clients would not have budgeted this type of expense but I thought it was a great idea because it generated immediate business but more importantly it supported the long term goal of making the “The Flower Gallery” the most talked about, “must-visit” store in the area; a virtual Mecca for shopping if you visited Manitowoc, WI.

What are your long term goals? Do you think Buffet was thinking short term when he invested $10 billion in a dying market? A recession is a good time to reflect on your core competencies as a company; to cut waste and get back to doing what you do best or go the opposite way and take some risks and try something new altogether. But most of all it’s a chance to look at what you’re really trying to accomplish in the long term. Opportunity awaits those who can spot it.

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Article Tags: bold action, captains of industry, dollar investment, down economy, downturn, failure is not an option, general electric, goldman sachs, headcount, massive cuts, mindset, minor adjustments, minor changes, recession, sage of omaha, small business owner, sound reason, stock market, tough times, warren buffet



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