Wednesday, 27 August 2008

International or European Expansion - How do you go about it?

My ‘If Only’ Story

A long time ago, I was offered a job as the UK Sales Manager of a US Company entering into the European market. It had a natty name but they were simultaneously changing the name to the founder’s name and adopting an innovative ‘direct only’ sales model, almost unheard of in the industry at the time. Stock options, salary rise and all, my then employer persuaded me this would never catch on and I actually turned the job down.

The Company launched in the UK and changed its name to Dell. The rest, as they say, is history.

Some Companies are Different – Why?

Dell is joined by other Companies like Symantec, Autodesk, Microsoft, HP, Oracle, Apple, IBM, and SAP in that they all have very strong international businesses so much so that all of them have significantly more revenue coming from their combined international operations than from their domestic markets. And it isn’t a coincidence.

It’s a fact that rapidly growing, early-stage companies have to focus on domestic markets initially to build credibility with reference customers and that pleases the VC and banks they partner with no end. But to be a dominant force in future years, companies must also make plans for business development internationally, and in reality this should be undertaken as early as possible.

Some Companies Missed Their Opportunity

After the boom and bust of Web 1.0 where so much money was wasted on futile ideas, VCs and therefore fledgling Companies became very reticent about international expansion. In fact, US Companies began to view European trade as not cost effective because of the multitude of languages, cultural differences, business rules, accounting issues, potential duplication of resources and shear size that they adopted a ‘suck it and see’ approach. Local agents were appointed or persuasive Channel Companies given exclusives or single-man-in territories were set up as a ‘shoestring’ method was adopted to cultivate markets. Yet they knew full well that to be successful, they needed to extend their tried and tested domestic model to the international markets. It was doomed to fail and it did. I can’t remember how many Companies I spoke to post-web 1.0 who wanted to take that approach and failed.

We could all name one or two of those that failed to take advantage of their domestic leadership to become serious global companies but it is just history now. Web 2.0 and newer thinking in terms of VC money is helping drive a fresher approach.

It’s all in the Timing

The timing conundrum is a two question issue:

1. When should a Company start planning to expand internationally?

The first question is relatively easy to answer as those who haven’t had an inkling or a vision of international business expansion at the very outset are probably never going to succeed in being a global player or indeed they may be happy with a domestic market only. So the trick is to start planning as early as possible. Having this international expansion vision early sets the expectation early in management and cascades through the organisation from the start. This poses an interesting question of its own – ‘Do I have management who are sufficiently bought into international expansion?’

As a quick anecdote on this, when I first met the management at PlaceWare, the VP Marketing felt very strongly that Europeans and Brits in particular were not capable of working at the pace required to be in synch with the US parent – and he referred to working at ‘Internet speed’ (no doubt he had read some Bill Gates throwaway comment). Some months later, the VP Sales joined me on a sales tour. The first day started badly when I had him check out of the hotel he bad booked into for 3 days as I pointed out that the agenda I had sent mentioned visits outside of London – he was not amused having little idea of European geography. We visited a large Enterprise customer in London, travelled to West London to visit a major Telecoms Company and then got on a plane to Paris. The next day we visited several customers in Paris before flying to Nice and having a day visiting Companies in Sophia Antipolis. At one point he very nearly fired me because he had not had time to get his morning injection of coffee. He later regaled to the story to our annual Sales Conference in California highlighting to never, ever underestimate the work ethic of the Europeans.

But it was illustrative of a type of US management character that tree-hugged domestic sales even when talking a good game about international business. The VP of Marketing in question had a degree from Trinity College, Dublin and that might have explained a slight misconception about European work ethic!

Planning early is about being committed to grow internationally from the start and this means understanding the implications of decisions made on future international business early. Having that thought process in planning growth early is a vital part of building a platform for international success in the future, even if it is not to do something on an international basis immediately.

There are an awful lot of things to consider – have no doubt. Local accounting practices, tax, legal contracts, terms and conditions, pricing, cash collection, product development, languages etc but these really kick in on implementation.

2. When should the Company start implementing an international strategy?

In reality, while there are other key issues as I have mentioned above, to consider, implementation is mostly about sales and marketing and their execution. Classically, if the decision is made to implement international expansion too early, there may not be enough dollars to do the job properly.

When at PlaceWare, management foresight brought them to set up a European business very early. In doing so, I was able to build a small team and actually out-sell PlaceWare’s domestic nemesis, WebEx, and become the European market leader within a year. But PlaceWare had extended itself too far on US expansion and ploughed a lot of money into product development – not enough was left to drive sales and marketing in Europe. Consequently, a year later, WebEx made its move and set up in Amsterdam. It put a whole lot of funds in to drive marketing and sales. A year later, the status quo was achieved and WebEx became the worldwide market leader. PlaceWare got bought by Microsoft for a song; WebEx has been sold for billions to Cisco.
It was all about sales and marketing execution.

Taking the Right Approach

I have seen it so many times. The first move by a US Company is to either buy plane tickets or to believe in the smiling chap who has alighted on their offices and told them they are the most successful sales agent or Distributor in Europe. A year later either there has been some sporadic success in named customers or the Distributor won’t take your calls because they don’t have the time.

Getting the focus required to succeed isn’t easy and it comes from the planning.

The daft thing is that nobody would adopt the same approach in trying to extend their reach domestically, so what on earth possesses people to make such leaps of faith is mystifying.
My free advice and it’s worth every penny, is save yourself that airline ticket and save the cup of coffee for the grinning foreign Rep. Do some planning and research instead – there is no real substitute for this. It may cost a little time and even money but believe me it is small fry compared to the cost of plane trips to nowhere.

Ask Yourself Questions

It may seem obvious, but every Company needs to ask itself: ‘Why do I want or need to address international markets at all?’

As I mentioned earlier, some Companies may be happy that they can only be successful in their domestic market – and that’s actually a good strategy if it fits into their financial goals. You don’t have to be an international player to be a successful Company in many instances so don’t be afraid to answer the question in the negative.

If you have answered negatively but in your business plan to the VC you promised you had access to a global market worth $3 billion, don’t be surprised if there may be some repercussions!

It is fair to say that this would be unusual in the high-tech arena, in any case there are some questions which need to be answered:

Going back to the VC business plan -

  • What are the overall goals of our various stakeholders, and does international market penetration feature as a requirement in those plans?

  • What are the individual international market dynamics and requirements?

  • What is the competition doing?

  • Why are they doing it that way – is it being successful?

  • Is international market entry more of a defensive measure because the competition is there or you have one or two customer subsidiaries who want product or is it for a genuine market leadership move?

  • What are the costs involved?

  • How do these costs compare with doing more of the same in domestic markets?

Get Expert Advice

It is important to get advice – and expert advice rather than barstool anecdotes. There is plentiful research available on the web about demographics, industry trends and they can be very targeted on the specific markets you wish to address.
And there are experts who have been there and done it before – who bear the scars and the success stories.

People like me have had experience of working with and for US Companies who want to get into Europe. Knowledge and know-how is vital but does cost money. It’s as well you know that up front but it’s worth it in avoiding issues and mistakes later, and getting traction and sales much, much earlier.

Also, commit internally and externally to the resources required early. In developing a plan for international expansion, have someone whose role and responsibility encompasses this and is not swamped by their day job. That or employ or contract to some one who can do just that.
More importantly, the company needs to be able to articulate the reason for international business development to the stakeholders, and to justify the resources necessary to make it a success.

The Differences You Can Expect

Once you have decided that international expansion is a strategic goal, and via a considered research and planning phase you have identified the key markets to attack by assessing the proposition and size of market opportunity, then you have to consider some of the nuances and complexities that, quite literally, go with the territory. I always describe Europe to any prospective client as being like the United States – a single large geography with individual state boundaries. Sadly, each speak a different language and have different cultures and ethics – unlike the USA which has 50 states adopting the same currency and language largely watching the same TV shows. So watch out for just a few of the issues:

  • Language

  • Culture and ethics

  • Business methodology

  • Finance and tax regulations

  • Employment Law

Try not to second guess how people buy in each territory because chances are they are different.
Equally, things are changing – many EU countries have adopted a single currency and many of their contractual laws are similar. But it is fair to say that a different approach will be required in many territories and you need to assess the viability of each beforehand.

Obvious ideas on market entry are:

  • To set up a wholly owned subsidiary

  • Build a channel contracted distributors, sales agents, OEMs or resellers

  • Have a local joint venture with an exclusive partner.

There are several ways of doing it but this is where the Expert Advice becomes invaluable as this is where the largest, long term error can be made.

Return on Investment (ROI) Selling – hype or best practice?

ROI is a much hyped and misleading term, in my opinion. It’s certainly not the best measurement for evaluating IT purchases and there is considerable difference in methodology in calculation to believe many people do not calculate it correctly or that there is enough consistency in approach to compare apples with apples. However, like it or not it is here to stay.

In these economically challenged times, customers have been feeling increasing pressures to justify potential investments – it makes you wonder what they were doing beforehand but let’s just leave it at that for now. As a result, the number of companies requiring an ROI analysis to justify IT purchases has risen to over 85% according to Ernst & Young research. Canny Vendors have retaliated by concocting ROI tools, white papers and case studies to address the customer concerns and arm salespeople. However, as little as 8% of Hi Tech companies consider ROI a valuable tool in improving sales, it is alleged. The fact is that most Hi Tech companies are missing the opportunity as they at best consider it as a selling tool rather than a key method of understanding the customer’s needs and decision criteria. It also means that most Hi Tech salespeople have little idea what ROI really is all about from a customer’s perspective and tend to use legacy tools learnt from different career moves as a basic template.

Why is ROI Important?

The ability to demonstrate that your service or product can generate positive returns to customers is very necessary, but the real benefit to the Vendor is in devising a process or methodology which stacks up to their own assessment and those of the customer as well for understanding any customers’ needs and how they may change in time.

From long experience I have learnt the only way to measure sales is look at the number of customers and the average deal size. Many ROI initiatives try to increase the number of deals by driving up the number of deals won as a fraction of prospects touched – known as the hit-rate. Another good method is to try to decrease the sales cycle time so that more deals can be compressed into the same period of time. This all really comes down repeatable success. While some may argue spouting a better ROI percentage is what counts, ultimately repeatable success comes from demonstrating understanding customers’ perception of value. This enables trust to be built quickly which in terms helps strong customer relationships. The ability for a salesman to prove their solution’s value is the primary reason for avoiding discounting or allows them to justify higher price.

So a well thought-out ROI model provides the platform to create value-based pricing which in turn allows the flexibility to adjust pricing models, which also gives the ability to improve prices, which allows control and management of discounts which in turn controls sales margins. It actually gives a great tool for qualifying leads to make efficient use of the salesforce which in turn drives the hit-rate by giving them more closable opportunities.

Naturally, these benefits can be very rewarding in terms of driving sales and profitability, but they do not account for the benefits of getting and utilising the customer’s input in any ROI analysis – it should be the prime source of market information. With the help of input from real customer meetings or calls, positioning messages can be changed on the fly and benefits they thought would chime the bells but in reality do not, can be stripped out. The marketers can use customer input to determine optimum market segmentations and tailor the messaging, pricing, and product features to optimise profitability. But more importantly, it provides feedback link between the field and headquarters to get a harmonised story across the entire salesforce and get real data about customers’ perception on the value proposition.

Some Tips on ROI Models

1) Continuous Improvement

Gaining customer feedback and real information is not a one-off project. Clearly it needs to be done on an ongoing basis. It requires continuous improvement and fresh data in order to stay current and keep apace of market trends. The salesforce need to have this continuous support in customer situations which change almost daily.

Many firms choose to engage external Contractors to help build a model and then use internal resources to support the model. However, it has been found that over 95% companies relying entirely on internal support fail to have a model in use 6 months later. This is usually because they a) fail to create ownership, b) develop sufficient in-house expertise in creating and maintaining models and c) the wealth of information customers are sharing is being wasted.

2) Get Sales Buy-in

Once you have developed your excellent ROI model, there is little point just printing it up in a laminated sheet and handing it out. In order for it to be valuable to customers, it needs to be seen by them. There is zero point in marketing holding the 'Secret Sauce' for themselves and so become the champions and not involving the salesforce. The salesforce, bless them, need to be educated and trained in how to use the model, know what inputs are required to work it and then how to communicate the results with confidence to customers. The biggest danger is that your best weapon could misfire or worse still hardly get fired at all. It should be natural to every salesperson in the team.

3) Make Sure It Holds Water

As a salesperson about the worst thing that could happen to me is that I think using an ROI tool would make the sale more difficult or even kill it. I can tell when someone has dreamed up a pithy ROI case without consulting customers because the first time you use it, someone remarks ‘That’s not actually how we work things here,’ or ‘That’s interesting but you haven’t included such and such’, it's a sinking feeling. The mantra must be – build the ROI model or value proposition and validate it with real customers before deploying widely. The most daft crime is to assume you know everything about a customer’s business – so by glibly saying ‘I can shave 60% off your OpEx’ or ‘I can improve the margin on your beverage sales by reducing your IT spend’, don’t be surprised if people say, ‘But my OpEx includes logistical costs which are 50% of the total and you’re saying by buying this IT service/product you can save 60% of those costs too?’ or ‘The margin on my beverage sales is the difference between sales and cost prices of the products and does not include IT costs.’ There are umpteen variations which may need to be incorporated so it is best to get a handle on them and build in leeway in the model to accommodate them – beforehand. Otherwise it means either the model has to be rebuilt for each customer which is very time-consuming and costly or, worse still, salespeople will quickly ditch it.

4) Don’t Blind People with Mathematics

Okay, I’m a simple sales-type yet I can crunch a spreadsheet with the best of them. But I know, in order to get my point across, if I can handily reel off 10 key benefit statements, each having substantial impact on cost or bottom line, then it is far more impactful than sending an Excel spreadsheet via email. Again, spreadsheeting assumes that you understand exactly how your customer plans their business and budgets – and you should know from personal experience that business planning varies markedly from company to company and often department to department. A really good ROI analysis can be used by a customer to champion the project internally, but most customers still develop their own ROI. This occurs because Vendors focus on showing Excel calculations instead of using ROI calculations to reinforce sales messages. A list of 10 benefits prevents the customer from remembering any one specific benefit. You have to remember, very often there are multiple decision-makers, each with their own agenda, by using 10 powerful statements, it is likely they will resonate strongly with more of the decision-makers.

How to Tackle ROI Properly

Like any good story, it starts at the beginning. Any ROI project is doomed without the long-term buy-in of sales and marketing. The first thing to remember is that building an ROI is itself a project that costs money so you need to budget it and plan for the maintenance in advance, rather like a customer might actually do in order to justify buying your product or service. You need to think about design, materials, training and ongoing support. As I pointed out, many companies fall into the trap of focusing on one key fact, laminating the story and sending out to the salesforce. Validation of the proposition is vital before doing this and only real customers can provide the valuable input required to do this. This step will save time, money and frustration later as well as the credibility of the champion. Keep the model flexible which allows customers to make changes to create the ROI they want so they don’t have to re-create it separately. And most importantly, use the ROI as a process for facilitating conversations with both customers and internally between sales, marketing, and engineering.

The fact of the matter is that many see ROI as just another piece of terminology from some sales-guru whereas it is at the heart of the value that your product and solution will bring to your customers. It is the value proposition that will set customers salivating. It is the template for repeatable success. It is the platform for all professional salespeople to build their credibility and trust with their customers that will help them differentiate themselves over their competition. It is the way to pre-qualify in-bound leads to ensure only the ones that fit the ROI model are sent to the salesforce. Ultimately, it is the single most productive tool to help drive hit-rates up and sales cycles down – it is also the most compelling story to tell any new salesperson.

It is your ‘Secret Sauce’ to pour on every sale to make your solution more appetising than any other. Design it well and use it liberally – and enjoy greater success.

Dragon or Pussycat?

'Entrepreneurs say they got burnt by investors' demands', shrieks the headlines in this week's Sunday Times.

'What a surprise' some may say in response. I listened to that nice James Caan's talk recently at the EREC in London when he described the Dragon's Den Show as terrifying at first as the Dragons had to make instant investment decisions without foreknowledge or due diligence. A 20 minute pitch and you make up your mind.

The article basically says that a few entrepreneurs have endured the nerve-wracking TV exposure and got their deals with a Dragon only to find that subsequently for one reason or another the deal falls foul.

TV Reality reflects Life

For once it seems a TV Reality show actually mimics reality. Gaining investment is not an easy process and inevitably it means that the two parties must ask deep questions about the veracity of the entrepreneur's claims, knowledge and ability to execute on the plans. If not then the Dragon may as well put their large sums on the 5.30 at Kempton Park with as much hope of a win.

In one instant, an Australian entrepreneur had an agreement in principle from two of the Dragons only to find 4 months later that it fell through. In a further instant, a chap who had a Foot Deodoriser had an agreement to invest but the deal fell through when it was found that he did not have a patent on the product although the entrepreneur claimed it was the Dragon who had put him under as much cosh as an employee.

How good is a deal anyway?

Some entrepreneurs have claimed the deals are not healthy. Lara Goodbody (surely an Ian Fleming name), the co-founder of YogaBugs, declined £200,000 for a 30% stake in her business and later got £250,000 for 15% in the business from another unrelated investor.

And here is the reality. Dragons Den is all about making good TV. Sure the Dragons have made a lot of money but they did not do it by chucking £100 or £200,000 down the pan on poor ideas. Likewise, people who give away 40-50% of their company for inward investment are effectively making themselves an employee at best and certainly the voracious ability to own your idea has been diluted greatly. Moreover, where is the equity left to hand out to diligent employees in the future when the share-grabbing Dragon has such a large stake.

Entrepreneurs switch off your TVs

The reality is that the Dragons Den model is not good for real investing. The Dragons are making multiple investments for small cash in their terms that would normally consume large portions of their time to make the business successful. The entrepreneurs meanwhile seem to want to desperately give away huge chunks of their equity for relatively small capital stakes in the vain hope that James Caan or Duncan Bannantyne knows someone that can get them a quick hit to make millions.

In practice, gaining inward investment needs a strong business idea, an even stronger business plan which has sound research and strategy and then people who can execute. Entrepreneurs come in all shapes, sizes and backgrounds yet it is rare that you get the combination of all those things. Most commonly missing in people who have great ideas is the ability to take the idea to market or sustain that market. These people may be great at selling the concept but seeing a deal through to fruition may be very different.

My advice to would-be entrepreneurs is to build a proof of concept first. This means building a prototype business with the minimum possible outlay and creating the first few sales to prove your idea has legs. The first thing you may realise is that the idea actually pays its way so the investment required is for expansion only rather than getting the product built. The second thing you may realise is where your deficiencies lie and so the investment may be to get the correct manufacturing contract to build or people to sell etc. Proof of concept pinpoints exactly where the money will be spent rather than the investor seeing only large salary cheques being paid with their money.

It also means the entrepreneur has the upper hand. It will not mean you have to give away large chunks of your company for comparatively small sums. What you have proved is that you can take a small share of a large market and so you can sell the end scenario rather than next year's - the idea that the £250,000 for 15% is not an investment in a company with a small market but one that can take 10% of a £multi-billion market. If the investor cannot see that then walk away.

Dragons are real

What the article shows is that the Dragons in the Den are real. They don't actually give away all that money without due diligence and there are plenty of caveats before the entrepreneurs get their cash that are not shown on camera. However, the reality is that unless the entrepreneur can see a distinct and real advantage of taking a Dragons' money other than for the money itself, then this is exactly not the way to get inward investment in a great idea.

Tuesday, 26 August 2008

New Employee Background Checks - Good Practice or Breach of Privacy?

'Criminal records on sale for just £37', was the headline on Page 7 of this week's Sunday Times.

The article referred to the growing practice by employers and corporate investigators (numbering 50 between them so far)buying access to files at the Criminal Records Bureau (CRB) to do background checks on new employees. The CRB was set up 6 years ago to carry out checks on prospective employees whose work would bring them into contact with children and vulnerable adults - i.e. to find out if the prospective employee was unsuitable for that kind of work.

However, certain recruiters and employers are now getting access to CRB files to check the background of employees who are applying for jobs which do not involve access to children or vulnerable adults.

These agencies are now offering these unlawful checks to cover potential business partners and staff ranging from clerical staff to web designers.

Is Enhanced Disclosure Good Practice or Unlawful Prying?

One firm mentioned in the article offered to carry out 'Enhanced Background Checks' of administrative staff for companies claiming they were justified, caveatting this with the employee's consent should be sought although the firm's director admitted that they had not 'thoroughly checked' whether such permissions were given.

Another firm specialising in the same practice operated out of Essex but was headquartered in New Zealand claiming its Essex office was 'registered' with the CRB to have access to such records, although it confirmed it was not 'accredited' by the CRB.

The question may be arising - is this such a bad thing? After all, it is very important to follow up references given by employees rigorously and I would always recommend employers do this diligently and, if possible, cross reference the information. In this I mean, if possible, test whether a claim in a candidate's CV is spurious or not such as attending Chairman's Club or winning a specific deal etc when asking the referee. Of course, the referee may exercise the right of no reply which should not be taken as a denial but most referees will usually corroborate true facts.

So would getting access to the CRB files be further good practice or diligence? To give an example of the downside, the article claims that one such background check found that a complaint made to the information commissioner revealed a CRB check on an individual had shown the person had stolen a packet of meat worth 99p in 1984 when the person was just 16.

Where Does The Law Stand?

The article cites the landmark case of a gardener who was fired from their job after an 'Enhanced Background Check' had revealed two spent offences. He claims the checks were unlawful and unwarranted. The information commissioner has supported his claim which goes to court seeking compensation.

The CRB helpline was found to aggravate the situation as when one complainant called the person was told it would be prudent to comply to have the check done or face not being employed.

The fact is that the law is cloudy rather than clear. Such checks are specifically designed to stop sex offenders having jobs which involve children or vulnerable adults. If there is no suggestion of either being involved, then such checks are not justified.

What Ifs?

So if an employer suggested that a gardener may come into contact with children whilst carrying out their duties, would that be justified even they 'stretched the truth'? And what if a sales manager were to be in contact with unmarried young ladies, would that be justified on the grounds that the employer might want to know if the prospective manager had a history of sex offences, and in doing such checks just happened to find out the person's misdemeanour 20 years ago involving persistent apple scrumping?

What the report did reveal is that detailed financial checks can be made for as little as £20, police files for about £40, driving for £20 and identity at around £20.

Where Do You Stand On This?

As a person making decisions on behalf of a company that will cost significant money in terms of recruiting fees, compensation but also opportunity cost for making a wrong decision would it not be good, if not, even best practice to do as thorough as possible background check to minimise risk?

I remember a famous incident of a quasi-government Agency (Note how vague I am being) who employed a Finance Director with apparent impeccable credentials and background. He subsequently allegedly hired a hotel room to 'interview candidates in bikinis' for the post of Assistant. The person subsequently flew to Chicago via Concorde to New York, checked into an expensive hotel and found that his meeting had not been confirmed and so flew back again. It was later revealed the person was bogus.

Closer to home, when I worked at a computer reseller, we employed a Scottish salesman who shared a name with a rather famous Spaceship Captain. He was larger than life in many respects including the fact it was not his real name and he had no fixed abode - we only found out when police popped by asking questions about him for various other reasons. There was also the recent case of the chap who passed himself off as a Forensic Scientist for many years and participated in many trials as an expert witness only to find he was just the local lad from a pub.

The fact of the matter is that employers should be able to mitigate risk as much as possible and protect themselves from potential 'rotten employees'. However, you have to also to temper this with the fact that a minor misdemeanour involving alcohol and some clumsily broken glasses in an Indian restaurant 23 years ago really was just a one off piece of high jinks that should have been settled with a cheque for a few quid, a dustpan and brush.

Information in the 'Information Era'

We do live in an era of unprecedented amounts of stored data. Much of this can be more easily accessible than we think even if we use the most sophisticated firewalls as more and more data is actively lawfully and not sold by agencies holding the data or even lost by daft employees getting their laptops or memory sticks stolen or even archive agencies flogging their old PCs on eBay. Our information is freely surrendered to all and sundry and can be accessed far too easily. And the embarrassing misdemeanours of the past can be more easily brought to light.

But is it fair for your employer to know you might have had a telly repossessed 15 years ago when times were hard or that you served a driving ban 10 years ago even though you don't have a company car in the job? Or is it sound information to have at hand when deciding on candidates to know one was arrested outside the House of Commons in a gay Rights march and the other was not?

I would be really be interested to hear your views.

Monday, 25 August 2008

Crisis? What Crisis?

It is not quite the same parallel to the famous period in the 70s when the then Labour Prime Minister went on holiday as the country literally disintegrated around him with rubbish piling high and uncollected in the streets and blackouts started in the evening as energy strikes bit. However, I can't help raising an eyebrow when people insist we are in a 'Credit Crunch' or 'Economic Slowdown' and not a recession.

What does 'Economic Slowdown' mean?

The technical definitions by economists are a few quarters of successive lack of growth and recession is the same but with negative growth. That's a pretty simple definition but of course to the average person in the street, we see the signs of such monsters a little earlier.

Inflation is the first thing to hit us. I struggle with Government definitions but I only have to look at petrol prices, the average weekly shop and energy prices (it now costs me over £1,800 per year to power and heat my home - a semi-detached 4 bedder) to know that inflation is rising. House prices are coming down and the market is stagnating - I know people who have had their property on the market for over a year, yet it was the sort of house that would have sold very quickly before that.

And then there is business.

How are you feeling the Business Pinch?

At a recent event, a good friend of mine who runs his own Hi Tech Recruitment Business, said he had not experienced any slowdown. In some respects I agree. My business is dependent on outside companies wanting to expand and grow in the European Market and I have certainly seen greater reticence by US companies wanting to expand but equally I found Israeli and Indian companies to take up the slack.

However, his comments did intrigue me. We all know that one of the direct outcomes of a recession is lower corporate profitability, moves to cost cutting and inevitably, job losses and higher unemployment. I read recent newspaper articles which show that the number of new headcount positions across industry generally peaked some months ago and is now falling dramatically, while the same articles predict unemployment in the UK to rise to over 2 million.

It may be that some sectors, like Hi Tech, do not see such effects so rapidly. Much of their revenue comes from capital spend rather than operating costs and so maybe that is still healthy? It shouldn't be - as capital raising and availability is one of the major consequences of the credit crunch. In fact borrowing in general for overhead funding should be harder. So why is the Hi Tech market apparently bullet-proof as we experience marked slow down factors like rising fuel and energy prices which affect the cost of manufacturing and transportation of Hi Tech goods?

Head in the Sand Management

One of the prevailing factors that led us to the Credit Crunch was 'Head in the Sand' management at banks and finance companies. No Black Swans in the system were required, it was common sense that all the assets could not rise harmoniously and endlessly - there had to be a debit somewhere, and we certainly got it. The same management will survive and talk of new financial models as if they learnt a lesson but ultimately it will be people like us who pay the cost of it through mortgages, loans and general lending products.

And so in the Hi Tech sector. Perhaps the apparent buoyancy of the Hi Tech recruitment market suggests a 'Head in the Sand' syndrome within management of these firms - a belief that they have not yet experienced a slowdown in revenues and so they may believe they will be immune to its effects? It would be interesting to see what such managers think and understand their logic.

Certainly, as the dollar-pound-euro exchange rates ease, US companies are going to feel a little more bullish about Europe and its possibilities. There has been a strange logic prevailing for the last year that says while the dollar rate is high, such companies did not want to employ local European staff as their salaries in dollar terms were often far in excess of equivalent jobs in the US or even of the hiring managers. Yet the same firms seem to be equally happy to pay agencies fairly huge sums to do some 'Market Testing', which usually involves a short term project at quite a substantial premium to the market rates. It has certainly been a curious time.

If you judge the general market for jobs as shrinking due to the almost non-existent Recruitment Supplements in the quality papers, the Hi Tech market seems to be getting stronger and stronger as new adverts appear on Linked In and Job Boards by the minute, new email alerts and now even text alerts. It seems business is not slowing down in the Hi Tech market - on the contrary, it appears to be booming. And recruitment is at the forefront as only a week or so ago Michael Page rejected a £1.3bn bid for its business, clearly reasoning its price will rise in the current market rather than shrink.

So is this a 'Credit Crunch', 'Economic Slowdown' or 'Recession'?

Between all the doom-mongering, reactionary talk, and alarmist commentary then laissez-faire management, Black Swan random event theories and economic cycles there must lie the answers to the questions of what is it we are experiencing, how far will affect us and for how long? It would be helpful to business planning for most of us although I would advocate a policy of Prudence. Some questions on LinkedIn recently have asked what should you do in slowdowns or recessions - gear up or cut cost? Knowing what we are in would help answer that question because the two schools of thought have merit but I would suggest the art of execution is all in the timing.

For those companies who cut their cloth, pull in the reins or chop out unprofitable business to focus on core, may well be in the middle of these activities when the upturn arrives and so they actually magnify the effect of the slowdown and often irreparably damage some of their future earnings by missing opportunities. While those companies who carry on gearing up suddenly find a massive whole in their finances and jeopardise the entire business - rather like the banks have done.

Common Sense Prevails

The most sensible route is to try and gauge the market. If you are going to gear up - think about what areas of product, service or expertise are actually more needed in recessionary times and put more effort in those areas. If you are going to cost cut, be sensible about which areas you damage and try to do it one action rather than instigating a 'death by a thousand cuts' which you see so often as management misread the situation and thought a few cuts here and there suffice. It ends up in demotivating those who stay and that produces inertia and inefficiency of its own accord.

For those companies wishing to expand into Europe from outside, I would definitely avoid talking to recruiters - they do not care whether your business survives or not. Ultimately, in my business my aim is to work with my clients so as to make my services redundant to them at the earliest opportunity. This means testing the market is not about putting a toe in the water it's about achieving results against which you can make sound investment decisions for the future. So define those milestones carefully so that achieving them will tell you what you want to know and above all, work with a professional company that has a track record of understanding what emerging businesses need in order to be successful in Europe. It isn't about just getting a few sales, it's about selling in the professional image of the parent, attracting good business, representing the company in the press, at events, seminars, workshops and driving the KPIs to achieve the results. You want it exactly as if you were doing it yourself and that requires the most important element - trust.

If this appeals - we should be talking.