There are a lot of executives, managers and businesses out there who don't quite understand what a slowdown or recession actually means or how the beats works. When it hits, your business can quite literally 'Hit The Wall' and stop in its tracks.
In a single 24 hours of reporting, 12,000 job cuts were announced between the UK and the US in such recession-proof companies as DHL, Nortel and even DairyCrest - after all we all have to keep sending things, make phone calls and drink milk. Don't we?
Tell that to Starbucks whose profits collapsed in the fourth quarter amidst a sales slowdown that may herald the end of the coffee shop culture that has thrived in the boom time.
Hitting The Wall
The pattern is this - one quarter business is fine, the next business has smashed into an immovable object. In less than 3 months, new car sales dropped 21% and immediately Pendragon lay off 2,500 staff while mega-companies like GM and Ford are financially in danger. In the US Circuit City went from solid High Street business to Chapter 11 and a potential 43,000 job casualties.
Today the UK unemployment figures will be announced and everyone is expecting the figure to rise above 1.8m for the first time since 1998. As the effects of the bail out after the Credit Crunch we are still unsure of the effects on the financial markets as companies like AIG go for a third top up of an additional $40bn, so do not be surprised if bank lending habits will not change too rapidly even if the base rate drops - remember most banks lend against the LIBOR rate not base rate and LIBOR remains substantially higher than bank base.
Beating The Recession
I have blogged before on this. While your business may look good or even vibrant right now, the biggest mistake you can make is to believe it cannot change. Recessions are like that - they hit and hurt - and fast. As headline companies take a pelting, the effects ripple outwards and hit at frightening speed. Even countries, take China for example - one minute growth capital of the world hosting a spectacular Olympics and its GDP enjoying the boom as 70% of it was reliant on manufacturing and the booming export markets. As recession bites, exports fall (freight prices have collapsed by over 90%) China is hammered having to lay off workers - all within a 3 month timeframe.
So plan for change - whether you think a recession is good or bad, just plan.
My Advice is:
- Make sure you take a long hard look at your forecasted sales and the individual pipeline deals and test their validity. Be specific and look at every one.
- Amend your assumptions - test all that you thought before and apply 'what ifs'.
- Look at who your major customers today and try to understand what the recession means for them and how that could affect you. Recessions are all about knock on effects.
- Take a long hard look at your costs - make sure you are not spending money as if it is a boom time - make sure very item of spend has instant return associated with it. The mantra is to spend every penny as it it was your last. Look at all general expenses like travel and get hard on policy now - stop first or business class travel, high quality hotels and expensive meals - make people aware and savvy. Use alternative technologies like confereing when you can to reduce travel.
- Take a look at your cash requirements as a business. Firstly, make sure you are maximising your cashflow - collect cash more voraciously and hang onto payments longer. Save what you can and build up your reserves. Talk to your bank early about your facilities - don't wait until your desperate as no-one will lend you cash for expenses.
- Take a look at your staffing requirements. Rather than just filling holes in the headcount, why not think about contracting in skills when and where you need them to do specific tasks which have immediate ROI. Try not to take on any further employment liabilities, use a 'Pay as You Go' mentality as there is a vast and experienced pool of people out there willing to contract.
- Think about modifying bonus structures to get the right staff behaviour. Don't just carry on as usual but gear highly for results and behaviour which support your goals in a downturn.
- Talk to your customer base - show them how you are thinking about them. Make sure you are putting a blanket of value and service around them to justify the business they give to you at the price they pay. Things will get competitive as everyone gets a little desperate - make sure you sell on value not price and that the customer understands, acknowledges and accepts it.
- Don't embark on massive customer acquisition programs and high marketing spend. What companies want to hear in tough times is what you can do to help them survive, reduce costs or increase profits. Make sure your value proposition is strong, clear and quantifiable for every customer you sell to and that all customer facing staff can articulate it.
- Choose your new customers very carefully - don't end up with your best deal being Lehman Bros days before they collapse. Profile who you want to do business with, research the companies that fit and direct your sales people with strong value propositions and messages directly at them.
- Network more - the world of networking has changed dramatically. With cheap tools like LinkedIn and Zoominfo you can pin point names and people you may want to connect with to help your business. Be disciplined and network for a specific period EVERYDAY and increase your reach. Get active in discussion groups, ask and answer questions and show your expertise, and reference your company whenever you can. You will attract more enquiries.
- Talk about yourself more. If you have insight or positive things happening, get press releases and out and talk to journalists - they will be desperate for good news and stories. Make case studies and get customer statements - make your own positive vibe, just don't sound smug about it.
People Can Make The Difference
Above all, join your staff into the plans. Communicate your thoughts and ideas with them and let them join in. There was a marvelous story recently how Caterpillar staff came up with more flexible working times to ensure 300 jobs were saved. If the staff feel they are also accountable for success or failure, they will help deliver. They want to survive as much as you do.
The biggest disservice you can do to shareholders, staff and investors is to stick your head in the sand and think the recession cannot hit you, then 3 months later or less your business 'Hits The Wall' and you are left with having to make drastic cuts and changes just to survive. That is when people turn on you and the drag on the company due to ill feeling, lack of trust and fear just increases the inertia. As you try to push the business forward, it just slips further backward as if in its own spiral of despair.
If you plan early, weather the storm and make sure your business is well prepared for downturns then when the upswing comes, as surely it will, you will be better prepared and placed to take advantage of the opportunities at hand and be able to watch all those companies who are still making cuts and lagging be left behind.
Just don't ignore it. In the next year unemployment may rise to 3m and possibly 30,000 businesses will fail - recessions are real and they bite.
No comments:
Post a Comment