Are You an Optimist or A Wishful Thinker?

Salesmen and Entrepreneurs are optimistic by nature – for them the glass is always half full. After 25 years in business, I have come to realise that sometimes the glass is also half empty and it’s as well to recognise when it is.

The Difference – And Hear Me Out, Please

From time to time every golfer will find themselves behind a large tree which blocks their route to the hole. The optimistic golfer will reason that there is more space between the branches than the solid wood of the branches and so will be prepared to take their chances and play the ball through the branches. Pragmatic or pessimistic golfers will actually play the ball to a point where the tree no longer poses an obstacle and then play on to the green. The argument here is that the pessimist will have wasted a precious shot in being conservative while the optimist will have got a shot ahead, never thinking about the downside.

In all my optimistic golf, I have found that you have no more than a 1 in 5 chance of getting through the tree – and believe me I have evidence to show this. More often than not I will hit a branch yet all my statistical training will tell me that’s simply not possible – there is far more space than solid. I was being a Wishful Thinker.

However, if you stop to consider this for a moment it isn’t so strange. You see we have clubs which have sloped faces which give the ball its given trajectory and knowing the distance we stand from the tree, we could approximate the path of the ball. Given we are not perfect and allow for a margin of error, the ball will probably travel through a circle ahead which will include branch and tree. The uncertainty of the shot and the conditions now play their part and when you home it down the solid effect of the tree becomes more pronounced in that circle. By being more accurate you actually increase your chances of hitting wood rather than decreasing it should you not be as random as the tree itself.

Even when I have selected less sloped clubs to go under the branches I have contrived to get unexpected loft or misdirection and hit low branches or the trunk itself. The fact of the matter is that it is better to take the tree out of the equation entirely as in all probability even if you get through the branches you will most likely be in no better position than the pessimist anyway, unless you are Tiger Woods or Seve Ballesteros.

Even an optimist can see that. But a Wishful Thinker is absolutely driven by the single hope, against the evidence even if it is overwhelming, of getting through the tree.

Golf – A Metaphor for Business?

Well the observation has merit. All Entrepreneurs it is alleged have similar backgrounds and traits which cannot be learnt. It is curious then that my sister has a Training business in South Wales called Learn Kit Ltd which this year celebrated 20 years in business. My sister does not play golf and she will kill me for saying she is not your archetypal Entrepreneur yet through the best of times and the worst of times she has run a business which is now one of the most respected and accredited of its type in Great Britain – that’s some achievement. Particularly as her previous roles were in Public Service and no one in the family had a track record of Entrepreneurial spirit or any money.

In fact I cannot remember a time when she had not worried about the next pound of revenue she was to find or worry equally about the next penny of cost. She was never a traditional optimist but by understanding her customer base, focusing on delivering value, excellence and service while knowing her business model to the nth degree and having a fantastic staff all dedicated to the same values, she has a business which has never performed better than this year.

Why? Because while she may only thinly be described as an optimist, she has certainly never been a Wishful Thinker. And therein lies the rub.

The Entrepreneur and Salesperson's Blight

Wishful thinking is the scourge of all Entrepreneurs and salespeople. I recently met with a boutique pre-seed specialist VC whose company has ‘chased the deals’ for the last 4 years, often grabbing semblances of ideas many with no actual business plans. The most common area of failure was wishful thinking – either the Entrepreneur had assumed too many things about the market or customers, bet heavily on too few customers or horribly misjudged the pace and structure of the buying cycles.

Salesmen too have a terrible habit of over-calling their hand. Operating on gut instinct, experience and sheer blind hope they talk up their pipeline in glowing terms when a pragmatic approach would tell them there was at minimum a lot to be done or they might even be chasing lost causes.

Planning During a Recession

For these reasons, many businesses and particularly sales driven or Entrepreneurial –led companies will find it very hard to face a Recession for what it really is – a severe downturn in the number of opportunities to sell products and service. Dress it up, put on brave face or simply deny its existence at your peril because even if you think you are impregnable, businesses around you certainly are not – and that is the big issue.

Just as you may think you are a great driver that does not stop you having accidents as it is the idiots around you who you cannot always account for. But what you can do is think about as many possibly dangerous situations as you can and drive accordingly to avoid them, or choose to take a train in icy weather for example.

The same goes for business. Planning is crucial and reviewing plans equally so to help avoid the obvious dangers and to drive your business accordingly.

This Recession has been looming for some time and only the housing market in the UK has helped us resist it until now, but the absurd value of growth in housing will likely mean we have further to fall and for longer than most economies. So while we sit on the first wave of Recession and maybe feel ok, there is plenty to come. And the ripples caused by it will spread soon enough. As major companies like BT, Citigroup, Woolworths and MFI start cutting large chunks of workforce and cost, the effect of such slowdowns in spend will surely hit all areas of the market at some point.

So start thinking now, while you have money in the bank and sales. Leaving it too late will inevitably mean you have little course of action left other than severe and sharp downsizing – and you know what? That’s just unforgivable because you could have and should have planned to avoid it.

Just like that golfer and that tree. It may cost a short term loss in momentum, but you will take the risk of failure away by doing so. And you owe that to your staff to do so.

How to Start Planning

1) Review Your Entire Sales Pipeline

Your existing customer base is your lifeblood. Now is the time to know how they may be thinking and planning. What cuts are they going to be making? How can that affect you? Is there anything you can do to mitigate this – maybe by approaching the customer and extending a deal while taking a lower revenue short term? The risk is losing out entirely to a competitor based on cost.

New business – what deals have you in the pipeline? Are they going to be affected by the downturn? What is happening in those potential clients? Is there a plan to represent the deals innovatively to create a better cost case? Be very realistic – wishful thinking is the greatest danger. Look for warning signs early – think ahead.

Realign the sales effort if needed. If you realise you are going to lose 50% of your pipeline don’t just sit there. Look for other sales. Profile what you can sell easily and out the right resources behind it to get them. For instance, you may need a massive Telesales effort so put the force there. Marketing is less effective in a downturn so don’t plan major spend here.

2) Look For Warning Signs

One of the biggest problems with wishful thinking is denying the truth or evidence. If 30% of your customers’ base is in Finance Markets then you have a problem. If a further 15% is in Telecoms, you have major issues to face. In that example, 45% of the business is at direct risk to some extent. Don’t ignore it.

If your customer base obeys the 80-20 and you haven’t a great volume of customers, then you have a problem. If any one customer is more than 15% of your business, then it’s a warning sign. If a single customer constitutes more than 50% of your business, then you have a major area for concern and it’s as well to understand how that customer will be affected by the downturn – and hurry.

3) Salespeople Fib

I can’t put any better than that but salespeople have a tendency to at least be either economic with the truth, wishful thinkers and generally they will flower a story. To the rest of us it’s fibbing. In good times they can probably get away with it as often they will have more opportunities than threats. But in a downturn wishful thinking and fibbing are a massive danger. It is time to get pragmatic and ask tougher questions, probe answers, don’t take things at face value, cross check and go see for yourself.

Many Sales Managers and Directors are Optimists verging on the Wishful Thinkers themselves and so it is often harder to ask your own kind the tough questions as they tend to want to hear a good story and only the good news. So don’t be afraid to use third party managers, the CEO or even external people to do it. The truth is more important than ever in a recession.

4) Be Realistic

For some, even the bad news is not enough of a warning. Remember, in the face of often overwhelming evidence, Wishful Thinkers will plough on regardless. It takes a tough cookie to challenge this but you have to be realistic. More rides on this than egos – people’s livelihoods, jobs and securities.

5) Do It Early

The problem with leaving things late is that it limits you options. Citigroup’s denial of their flawed business model has caused the loss of 72,000 jobs. You can’t blame that on markets because only months before people were paying themselves fat bonuses – they just did not read the situation. Planning ahead can mean the difference between staying in and going out of business – it’s that scary. Plan before the bad times hit and not much will surprise you.

6) Don’t Be Afraid To Talk To Customers

Customers are your lifeblood and they are also part of your future. As you plan, tell them what you are doing and your rationale. Ask them how they see things, how they think that will affect you and what they want to see more or less of from you. Confront this early and do create a joint action plan – document it so that everyone is bought in. The danger is that the customer may forget you in all their knee-jerking and you may suffer in revenues, cost and even lose their business.

7) Join The Salesforce Into The Planning

Salespeople have a wonderful habit of blaming other people, competitors or markets. They have never been outsold. If you want a bad news session one the [proverbial hits the fan, you’ll get it. However, if at the start of early planning you ask them to be more realistic and come up with action plans to make up differences then they will respond more favourably. Salespeople like to see paths to the future, the air between the branches if you like. Sometimes you have to show them it but once there you will be amazed at how they can respond. Just don’t heap bad news on them – or else they will become part of the problem.

8) Adjust Targets & Compensation Plans

You have to lead by example here. It is no good hitting salespeople in the pocket if you are not prepared to have the same done to you. However, if sales are expected to go down, then so have costs. Again, make the position clear and do it early. Come up with innovative plans like gearing the commission higher for higher achievement but move the thresholds – don’t make things unrealistic as that’s no fun. Also think about deferring bonus or targets so that they will be paid in better times – it’s better than just taking a chunk of earnings away for all time.

9) Practice What You Preach

Whatever you do, make sure that the whole organisation is joined into the plans. There is a huge risk that you can ask staff or salespeople to take earnings holidays but don’t then organise an executive offsite in the Bahamas or a Chairman’s Club in Florida. I worked at one company when on the day we shut our Manchester office lay off many staff, the CEO took delivery of a shiny new red Bentley as a company car. He did not have the nerve to drive it anywhere for some months although it was forever known as the ‘Blood of Manchester’. CEO’s taking massive bonuses when cutting staff is plain disgusting frankly but it happens all the time.

10) Don’t Blame The Salespeople

There is also a massive and easy tendency to blame salespeople for bearing bad news. While they can deliver such news with dour aplomb when the market goes sour, without sensible direction on alternatives beforehand they are not to be blamed for the conditions caused by recession. Many managers go into high-blame mode, start losing their rag and even start firing people to make them feel better. But usually that’s because they haven’t anticipated the market, planned for it and so are equally to blame for the mess they are in. At this point, the company will already be on the slippery slope as replacing people takes time, money and management plus a lag for productivity while many will see open headcounts as savings. You can see the pattern develop early and so plan early.

‘Us and them’ management never got anybody anywhere. It’s usually around this time that a manager will notice that someone has taken a lot of sick leave, works flexi-hours, wears no tie, is asking for holiday – you know the sort of normal things that in tough times are construed as slacking. Usually at this point huge management gaffs are made in the eyes of the law so again, plan early, anticipate and communicate.

11) Mobilise Your Salesforce

Now is not the time to reduce effort. Take a long hard look at who is successful and how and why they are. If it is anything like reality, the majority of highly successful salespeople have similar habits – they work a little harder and smarter and they concentrate on repeating their successful formula wherever they can. They tend to lose fewer deals, sell at higher prices and generate more long term customers. If you have a Customer Relationship Management system (CRM) like Salesforce.com or Act!, then you can easily check what people are doing. You will quickly find the habits of successful people are clonable and you should endeavour to do so and typically they will make more calls, demos, visits etc while closing more sales. Share their habits for everyone to use them.

12) Constantly Review Progress

Once you have started planning, a recession has a habit of changing things. So while you may plot courses of action, you will find things change. You must continually look at your methods, value proposition and efforts and make changes as quickly as possible. The last thing you need to be doing is worrying about making cuts when the market is starting to recover but too many companies have very little flexibility.

13) Small Is Beautiful

One of the advantages of SMEs in recession is that while they can feel the body blows of major customer decisions harder, they can also effect change much faster. Large companies cannot change quickly and so when there are fewer opportunities to chase, small companies can chase them faster and harder. They will be hungrier for business, more adaptable to customer needs and more ready to make sacrifices to get business. This is a huge advantage and it all comes to the fore if the SME is realistic about opportunities, plans well and constantly reviews.

14) Think Small, Act Big

For many salespeople presented with the prospect of making sales in a downturn, there will be a period of inertia when they question whether the task is achievable. Even half-full optimists can find selling in a downturn tough. It is all about helping salespeople see the path to success. When presented with a tough sales target, the best thing to do is to work backwards. Think about the average deal size and how many deals are required to make the target. Then think about the normal hit rates of how many prospects are required to make a deal, then how many sales visits are needed to create a prospect deal and finally how many calls are usually needed to get a meeting. Suddenly the task does not look as daunting as usually less than 8 meetings and 100 calls per week can make significant targets. Whatever way you calculate it, your daily tasks are more than achievable in the main and that’s how optimists think. Just make the pessimists see it the same way. From small, repeatable actions, big targets can be achieved.

15) Reward Correct Behaviour and Success

While costs will be constrained, the one thing that must be delivered on is success against the revised plans. So make sure achievers are rewarded for their efforts. If you want people to make 50 calls a day, reward them in some way even if it is only recognition by a pat on the back. For real success, make sure you deliver on all the remuneration promises and don’t suddenly have a volte-face when someone blasts a target. Just plan it carefully as this is where many managers go wrong. They think of something in a knee jerk way and when it’s achieved they claim it was luck.

Don’t put anything out as a reward you are not prepared to honour and when you give, do it with a smile.

Conclusion

I have concentrated on sales planning here – the art of being realistic in the face of a downturn. Don’t confuse this with cost cutting although there may be a harsh realisation when the planning starts that a hole may appear in the revenue some months down the line. If that is the case, either plot a way around it as an astute golfer may do with a tree or make tough decisions early. By tackling it early, you may avoid cutting staff by merely stop replacing headcounts or cutting other budgets.

Sales planning is crucial to avoid Hitting The Wall as I call it. Denial is too easy in the face of a recession, wishful thinking even worse. By planning ahead and tackling the tough issues before they arise, you will not only preserve your company in a recession, you may even thrive and you will certainly be best placed for the upswing at the end.

"My Business is Recession-proof"

I just happened to be sitting in a mid-market restaurant in the West End last week interviewing someone who had to abandon his business, when a pompous fellow at the next table bellowed to his table-mate that his business was recession-proof.

I could not help but overhear as half the other customers did. He continued to assert that 'everyone wants web design'. It was cold comfort for my co-diner as his business had been precisely that.

How Does a Recession Work?

Well that's the thing. They mercifully don't happen that often in a technical sense, i.e. two successive quarters of negative growth, although most businesses may suffer such similar blips in their time. The fact is, when an entire economy fails and the global one at that, just about everyone is exposed in some way. If you are an Insolvency Practitioner, you may well wring your hands with delight and take on extra staff, as one sure outcome is that the rate at which businesses fail will increase - and very sharply at that.

If you are an Outplacement Consultant, you may will afford a wry smile as your services suddenly are in high demand. If you are a Recruiter, times will certainly be glum.

In general, the amount of Companies which will feel downward pressure or no growth in a Recession will far exceed those who experience growth.

I am talking the obvious - everyone knows this? Not the larger-than-life chap at the next door table. For him, the world continues as if nothing has happened. I just hope he did not have contracts with Lehman Bros, MFI, Woolworths, Citigroup, BT, RBS, HBOS, Northern Rock, Bradford & Bingley, AIG, Bear Stearns...... you get my drift.

The Ripple Effect

The problem with Recession is that most people have not experienced either managing a business or running teams during one. Some of us are old enough to bear the scars. What happens can be dramatic and incredibly swift. And in this current one we have a very important factor to add to the mix - a potential Perfect Storm - as we have the Credit Crunch to face as well. While Politicians will desperately tell you that the current financial crisis started in the US, it most definitely did not. Sub-prime mortgages sold in the Southern States of the US by Local Mutuals was not the cause of the Credit Crunch - that problem merely exposed a very flawed model for capital raising which flowed right the way to the top. At its peak, the UK housing market showed 160% growth over 10 years while the average family was in fact worse off in terms of real income and savings.

Britain was living off the increased value of its homes, as indeed the US were.

It could not be sustained and the consequence of that is that lending is severely constrained. That hits businesses hard. No matter what the Government will say about supporting Entrepreneurs, the fact of the matter is no Bank will lend to pay wages for survival. They lend against collateral like machines, plant or buildings - assets which can be turned into money if need be. Working Capital for wages goes straight into pockets and tax. At a push they will lend against future orders but that will not be at pleasant rates.

Quick as a flash, and wiping the smiles off our faces, things start to fail. I read a column in the Telegraph by an eminent Banker who said that the Financial Crisis was contained within that sector and the wider economy would not be affected. The problem with Bankers is that they have become so self-absorbed in their own 'game' that they have lost touch with what capital is for. Every business and consumer needs money to survive and grow and if it isn't there, it can't be used and spent.

As Banks collapsed, panicked Politicians and Bankers got together to bail out the Financial Sector, to the tune so far of £4.5 trillion globally, although the US has pumped another $800 bn into the markets just this week. Ominously, even the Governor of The Bank of England hinted this week to expect more banks to fail. The fact is no one knows how bad this problem is. But to put some perspective on it, world output in 2006 was estimated at $47 trillion and at that time the outstanding positions on derivatives was $473 trillion - this has risen to $535 trillion and it rises daily. The bubble is fit to burst and in some ways we have yet to see the full effects.

Meanwhile, as credit and recession collide, within single reporting cycles, mega-companies like BT lay off 6% of its workforce in an industry that everyone would tell you is growing. The roll call of job losses is daily as Companies Hit The Wall and have no room to move.

Like my man at the next door table, they never saw it coming. Why? Because last year the likes of BT did not sit down and look at its business customer profile and think about who its major customers were. A huge proportion of their business supports the Finance Sector and so they were horribly exposed to the effects of Banking crashes and lack of growth. And what about supporting businesses who depend upon BT?

Look At Your Own Business

What the man at the next door table had done was look at his product and determined everyone needs a website. What he had not done was look at where his customers lay. In the heart of the West End, he may well find many of his customers are media types and many of those will be directly exposed to the brunt of the recession which will be felt at the retail end. As household names like Woolworth and MFI fail, advertising and marketing spend by retailers will drop and sure enough websites will be left static or less maintained as money is channelled into survival rather than growth.

It will be a dramatic and speedy ripple effect.

So while you may believe your business is recession proof the problem is that businesses of your customers may not be. As the likes of BT hack 6% of its workforce in a knee jerk reaction, they will start cutting costs and spend with no real logic and what you may believe is an essential item will not be bought because the bulk of executives and managers do not work with that in mind, simply as they have never experienced a recession before and so paralysis and lack of decision-making kick in.

Worse still, most 'dynamic managers' shrink into their shell in the face of a recession and gladly hand the reins of the business to accountants and consultants who simply look at numbers. They care not a jot about what is essential for the future - it's all about survival and the now.

Think Before It's Too Late

I did not pass on any words of wisdom to the fellow at the next table. But if I did and he had listened I would have told him to go back to the office, take a long hard look at his existing customer base and his future pipeline and review it all line by line. Look very hard at those customers, deal values and sales cycles and think how could these deals be affected by the recession because the customer is dependent on others in the market, are not well funded, are laying off staff or cutting costs - whatever, just go take a look. Then get realistic.

For me - I help companies grow and VCs are very reticent to help their emerging proteges to do so right now. They know now is not the time to be spending their cash but to conserve it and keep their powder dry for the upturn. So my traditional customer base is stagnant - it happened in a short space of time in less than a week after Sequoia held its famous All Hands CEO meeting and the effect rippled quickly.

In a week 50% of my traditional business was at risk. But I had been anticipating this since August last year thanks to a local VC who thought this would be a consequence. Now my clients are based in 3 continents and two are dependent on Government spend which is more secure in the short term. Had I not planned for this, I would have slipped under without anyone noticing in a single quarter.

I cannot emphasise this enough - Recessions can be survived but it will mean changing in the short term and being realistic.

Ignore it at your peril.

Time to Polish Up Your Value Proposition?

In a recession or downturn customers cut back - if you don't believe me, read the headlines of major firms 'Hitting The Wall' and making severe cuts - most companies will be watching cost far more carefully. So now is not the time to have a nebulous argument about your products and/or services having a Return on Investment, it needs to be real, clear and provable or else you may find your sales start to fall or dry up. Crucial to your success in proving the worth of your product or service is the Value Proposition - the short, snappy, realistic and demonstrable argument that it will make an instant, positive bottom line impact to your customer.

What is The Difference Between Value and Cost

In a rather famous if pathetic demonstration worthy of David Brent, I once showed the difference between cost and value. At a company I worked at I had instigated a quarterly award for the top ranked salesperson. At an all-hands sales meeting we used to highlight that person's performance and hand out a genuine glass award complete with the person's name lavishly etched onto the glass.


I argued to the salesteam that the cost of the award plus engraving was no more than £30. Yet the Value was potentially hundreds of thousands of pounds. In a complex, mathematical proof, I calculated that in the right hands and expertly presented, the person who receives one or more of these awards could highlight it in their CV and job interviews for the future and demonstrably prove they were better than all other salespeople at that company. This, I argued, could put an extra value on their next sales compensation package anywhere from zero to say £10,000 per annum. Multiply that over 20 years as it will reset their earnings capacity from the moment they argue this and get their next job, and QED we have £200,000 extra earnings.

I proved an object which COST no more than £30 had a VALUE of £200,000.

Smoke, Mirrors & Targeting

It can work both ways and it's very much about the skill of a presenter, strength of argument and where you pitch it as equally I have argued that if you take a £100,000 Porsche to a disease infested, arid land it's value is no more then an object to sleep in. Take it to Wall Street and at bonus time it could be worth double its cost as it is instantly deliverable whereas most of the traders will have to wait for their toys.

The Value Proposition of anything has a specific and distinct meaning depending on where and to who you apply it.

So when working on your Value Proposition you need to be absolutely clear about how it is applied and works with every different type of customer. And in recessionary times, I would argue that means you need to apply it to the customers who a) are most likely to get the MOST benefit from your product or service and b) those customers who are more likely to AGREE with you.

There is a strong message here. In tough times, choose your target customers very carefully as diluting your sales effort will only decrease your chances of sales. Make sure you focus on the targets most likely to buy your wares.

Constructing Your Value Proposition

Your products/services mean a lot to you and so your perception of their value is potentially very different from what a customer may think or perceive - so the first step is to take off your rose-tinted glasses and put yourself in your customers' shoes.

Step 1 - understand your target customers' businesses.

Step2 - make sure your product/service is applicable

Now is not the time to be selling 'nice to haves' or non-essential things - make sure there is a clear need within the business you are selling too.

Step 3 - profile your target customer

By understanding your customers' businesses and comparing them to those you had success in, you can more accurately describe or profile not only the type of customer you are likely to be more successful selling too but even home in on the job function of the person most likely to be swayed by your argument. This is very critical to avoid wasted time being fanciful about your prospects. These are tough times, maximise the use of your resources and make sure you minimise the cost of customer acquisition - cash is king, remember.

Step 3 - review your current pipeline in detail and compare the current prospects with your target customer profile. Be ruthless, those that do not match discard and make very few exceptions. Salespeople are optimists by nature and guilty of wishful think - you don't have the luxury to indulge them in tough times.

Step 4 - Create your Value Proposition

• Ask - what does my product/service do for companies/people?
• What difference does it make?
• What would happen if a customer chose not implement my product/service - would it have a detrimental effect?
• What is the tangible benefit my customer receives from my product/service?
• Quantify that tangible benefit in terms of actual perceived benefit like cost saving or boost in profits. Remember a boost in profit might be reclaiming lost revenue or profit as well as finding new revenue or profit.
• Avoid Return on Investment arguments as they can often lead to long periods over which the return is realised. In recessions and downturns, companies are focused on the short term - weathering the storm. Only things that Return on Cost will really attract attention.
• Is the argument on benefit real and clear? Make sure you are not picking on contentious areas where the customer may question your assumptions - make sure you understand their business and how they account for costs to be sure.
• Research each customer before you call or visit - make sure you are hitting topical notes as business conditions are changing fast.
• Use references - make sure you can back up your benefit claims by referencing names of customers where you have already provided these benefits and where the customer is happy to either substantiate your claims or allow you to use their name and the quantified benefit. Try to get references n exactly your target customer areas to provide greater credibility.
• Try not to make general claims - using a general benefit statement like 'Use my service and I can save you 60% on your Opex' is contentious as a) how do you know that 60% saving is achievable and b) do you know exactly what is included in every customer's Opex? Be specific and avoid losing credibility early. Try things like 'By using my service Bloggs & Co who in your industry saved 60% on their IT maintenance Opex, I believe I can do the same for you' and have one of more ready for use.
• If you can, create a Compelling Event. This is really hard and what maybe a compelling event for you may not be the same in the customer's mind. It's about creating a point in time beyond which by not using your product/service a customer may actually quantifiably lose out. It could be specific legislation has been passed, a compliance or governance issue, a cost impact comes into effect (everyone uses a price rise, try something creative).
• Your biggest competitor is no change - remember the strength of your Value Proposition must address this.
• Be able to articulate the Value Proposition in a short paragraph or long sentence. Either by email, phone or face to face you will have very little time to gain impact and get someone's attention. The American 'Elevator Pitch' where you have less than the time it takes a lift to go up a few floors in which to grab the attention of senior people. If you cannot articulate the Value Proposition and the key benefit in that short period of time, you are highly likely not to get the attention of the individual you are selling to. In writing, it must b short, sharp and full of impact as most new emails are discarded before the first sentence is finished.
• Make sure the 'Elevator Pitch' is known by heart by EVERYONE in your team or company. There is zero point in not having consistency or not sharing the belief. Everyone must be both bought in and be able to articulate it at will. Everyone is responsible for the delivery of the Value Proposition.
• Test your Value Proposition - make sure you 'road test' your value by bouncing the Value Proposition off existing customers or external contacts. Adjust it if it does not resonate.
• Follow up - back up your short, sharp Elevator Pitch' with succinct material that explains the Value Proposition fully, graphically if you can and fully referenced to corroborate it.
• Pitch this Value Proposition to as many people as you can - make it a company mantra.

Your Value Proposition is your unique difference and your ability to articulate it is your passport to sales in a recession. Now is the time to make sure it is succinct, clear, quantifiable and proven.

Contrasting Fortunes

75,000 people. Yes read it again slowly - seventy-five thousand people will be losing their jobs from a single company, Citigroup, in the aftermath of the Credit Crunch fiasco.

Robbing Peter to Pay Paul - Zero Sum Finances Work

I haven't yet delved into the detail but I am fairly certain that the bonus pool paid out by Citigroup in the last 2 or 3 years would have been enough $billions to have paid for those people to stay in their jobs. It's not exactly what everyone has been raging about when they get upset about City Bonuses as most think about their own pockets. The Bank Bonus Pool would have been divided out in the main between a very small percentage of its employees - the elite, high fliers who 'create the wealth' as Mr. Fuld, formerly of Lehman Bros would describe it, no doubt. The reality will be that the mainstay of the job cuts will be everyday banking staff from backroom people to counter-manners and ATM stuffers. The thin wedge of elite will be mostly unaffected and even if they are they will have literally $millions to console themselves with.

Boom & Bust Cycles

It's happened before. Banks manage boom and bust cycles - make vast profits, gear up their businesses in mega-fashion, pay out incredible bonuses, then lose the lot and the average guy in the Bank plus the customer pays the price. In reality Banks make their real money out of loans, mortgages and charges - and that's about it.

Because it has happened so regularly, watching this bubble expand was particularly appalling as the average guy in the street knew it had to pop, and more so because the 'complex instruments of finance' which we were told we did not understand just appeared to us to be straight forward mega-bets with other people's money. It turned out we weren't so stupid after all.

Michael Lewis, who wrote a fine book called Liar's Poker about his time as a Salomon's Trader recently wrote a long article on what he now sees as the demise of Wall Street. In his book he thought that the public would gasp at the $3.1m salaries CEOs at Banks made or get angry that a trader could make a $250m loss and still get another job. But that was 80s money. Now Lewis asserts that Wall Street's big gambling arena must surely end.

I am willing to bet it won't. Too much vested interest will see to that and lots of free Government money too.

In contrast - Spend, Spend, Spend

Less than 6 months ago, if you cornered Gordon Brown in a lift and asked for a load of tax cuts so you can spend more he would probably have had you arrested for lunacy. His 'prudent' fiscal rules would not have allowed him to consider such heresy - in fact he has proudly resided over the largest growth in tax as a percentage of earnings in modern times, even more so than the Super-Tax of his long-forgotten forefathers like Jim Callaghan.

But in Callaghanesque style, Brown has concluded that despite the fact the country is already borrowing far too much in the IMF's eyes, and has so for 5 years or more, he now feels we should borrow for the Bank bail outs and, yes that's right, borrow to give us tax cuts too, so we will all go out and spend more.

Ignore the fact that inflation is now higher than when Labour took office, or unemployment too for that matter, and ignore the fact that major companies are shedding up to 6% of their staff in a single blow, ignore the fact that a potential 3m unemployed will place a massive tax burden on the country and create a hole in our tax revenue - just get out there and spend. And spend lots; just focus on that low interest rate.

Here is a pile of money to spend on buying new houses and goods, despite the fact that we have seen the biggest single fall in house prices in a year at 14% since 1932, it really does make sense to try and kick start the growth in the housing market.

And We Love It

In a perverse reverse of opinion, Brown's handling of the Financial Crisis has increased his personal stock when in fact we should be vilifying him for creating the mess. Thanks to numskull opposition leadership like Osbourne, the point seems to be missed every time.

The Economic Crisis in which we are sitting is a confluence of an economic downturn and a reluctance to lend. Both stemmed directly from the unreal growth experienced in the British Economy due to an unsustainable rise in house prices due a fiscal model which allowed Banks to offer more and more freely available, cheap and unregulated credit due to their adherence to unstable business borrowing based on financial instruments which were no better than bets at the horses.

As we lap up Brown's genius in gearing the country's borrowing to well over 50% of our GDP using our future tax receipts as collateral for the loans, remember each time we borrow more, Britain becomes less attractive as a place to invest. In the last few months it is estimated over £200bn has been sucked out of our Financial Markets, the very place we got that phenomenal growth in GDP from. Sterling has dropped through the floor, and Osbourne may well be right that there is more bad news for our currency as Britain becomes a walking credit risk for the future.

As The Day Dawns

Have we all worked it out yet? Yes, just like the 75,000 hapless people at Citigroup, it will not be the collective genius of our Parliamentarians who cough up the cost, it will be the guy in the street. As the 'Dark Lord' himself, Mandelson hinted, there may be some tax 'adjustments' in the future to cope with all this.

The future for Britain is on a knife edge. We are heavily reliant on two major sources of wealth as a country - 1) Oil and 2) Financial Markets. We already know that our North Sea reserves of oil are fast running dry but we are very close to seeing a potentially vast and possibly permanent exodus of capital from the City. Without much else to balance our payments, Britain stands on the brink of a slippery slope to financial ruin.

There is a heavy price to pay for the last 10 years of folly and the ultimate risk is that Britain becomes a poor Island. I really do believe, borrowing more and more will not help us turn this around in the long run. But then, I am not as clever as Mr. Brown, even though he could have called at any time in the last 5 years and I would have told him a massive hole would have appeared in his finances due to his reliance on the housing market growth which was vastly exaggerated.

In fact, any fool could have told him.

A Nice Little Earner, Thank You Very Much

Have you ever thought of being a Non-Executive Director (NED) in the UK? It's tough as old boots to get in unless you are one of the old school tie brigade or risen nicely in a well named company.

Once you're in, it's equally tough to get back out and in fact many NEDs sit on the Board of between 7 and 10 companies while supposedly doing a day job.

It's little wonder that Royal Mail continues to languish in no-man's land when their sparkling Chairman, Allan Leighton, shuttles between 8 other companies and still gets home for tea each day.

Obviously, their roles are not day to day ones and usually require no more than 1 or 2 days a month if that, generally listening to well-prepared management-speak on the company performance beautifully phrased and presented to deflect any nasty questions about how the company is actually doing. The art of the NED is to look as interested as possible, ask a few non-specific questions, name drop some names you may or may not call in search of some contacts and have your free lunch.

And the money isn't bad. Depending on your 'glitter' factor you can command a very happy living as an NED - usually in the form of flat fees and some companies offer maybe a few shares or stock options.

So Get This

Electric power and fibre optic cable maker, Volex, has just proposed a long term incentive scheme for its NEDs. Principal beneficiary is the newish Chairman but a small host of other 'lottery winners' get at the trough and some with little or no experience of the power or cable market like an ex-HP UK Director who joined the Board last year. They stand to split a £2m pot if they can increase the share price more than eightfold in 3 years.

Quite how they are going to do this on a couple of days a month is very curious, but it may set a new pattern of NED bonanzas for those in the tight old network.

I am sure, in these austere times, the workforce will be delighted to hear that a bunch of well-paid NEDs will bear the fruits of their labours for so little commitment - but let's be honest, if there's no money in banking how else are the poor lambs going to earn their crusts

Turning Negatives Into Positives - Communicate

I recently read how workers from Caterpillar in the UK joined in with management and agreed to go to more flexible working in order to save 300 jobs. It's that kind of open communication and joining in staff that will help combat downturns.

Face Reality Together

Downturns, recessions and credit crunches are not going to go away by not facing up to them and their consequences for your business or markets. Equally, if managers have hard decisions to make about the business, it really is no point in not using the power of the workforce to help understand what can be done. You would be very surprised at the results that can be achieved.

Trust is a vital component in leveraging the power of any workforce. Lose or abuse their trust and you will surely drive a divide between management and the staff that will be very hard to recover in the future. As BT may well find out, suddenly announcing the only way forward is to cull 6% of the workforce by March and possibly more in the future is about the worst way to announce to the staff, let alone the shareholders, suppliers and customers that there may be a problem in the business.

And that's the crucial word 'maybe'. To what extent did BT anticipate this problem and what could have been done beforehand to prevent such drastic measures that may end up in alienating the remaining workforce? The 'maybe' has turned into reality as BT 'Hit The Wall' rather than avoid it.

Joining in The Staff

It presupposes that management can understand that a downturn and recession will affect the business in some way - it always does but you would be surprised how many well qualified and experienced executives just deny it can affect them. It does, take it from me - and it could be positive but it is highly likely to be negative.

So often I hear people say 'There will always be a market for my product in good times and bad.' Tell that to BT. Reality is a swine, it really is.

So once management has come to terms with the fact there are things to consider, the next thing would be to start taking a detailed look across the business and understanding how well the business can cope with a downturn. How better to do that than ask those responsible for all parts of the business helping make that assessment and reviewing the results in order to clearly understand the problems. This way, the very same people can be part of the solution and responsible for it. If cuts need to be made, how better to identify where and how than the very people responsible for cost deciding what and how.

It makes the entire workforce joined in, bought in and accountable for the business well being. Better still, imagine if the right decisions are made and the company gets through the downturn - you will have the undying trust and loyalty of a workforce that would literally do anything for you.

Utopia?

It may be a Utopian view, but believe me, leave out the workforce in tough decision making and they will distrust you. That's not a good position in which to weather a storm like a recession. And when it comes to emerging the other side, just when you put the foot to the accelerator there will be little there as the remaining workforce start using the upturn as a time for bargaining.

My Advice

• Reforecast your business now - look at every deal in the pipeline, challenge it and check its validity
• Make sure you communicate the revised forecast widely, what the assumptions are and what that means to the business in terms of health, borrowing and costs
• Plan ahead - take a detailed look across your business
• Join in as many staff as you can - communicate the issues up front, make sure they understand what may happen if nothing is done.
• Make sure you plan and communicative early. Doing it too late disempowers people in being able to help. Don't use the moment to deliver a faite accompli
• Ask staff to quickly identify weaknesses, areas of cost saving or flexible working or different methodologies in order to make sure the business is able to withstand the pressure of a downturn
• Be realistic - look at all aspects of the business
• Listen to what people have to say as alternatives - don't make your mind up beforehand.
• Make sure you have a vision of where the company needs to be and when in order to take advantage of any upswing
• Make sure you have checked and rechecked your forecasts

Riding out a recession is hard enough. Make sure that workforce is on your side. Don't put the company in the hands of accountants who have no understanding of the long term and potential.

Above all, never, ever underestimate the power of your workforce and never abuse their trust. They have a habit of remembering at the most unfortunate of times.

Recession? Out Come The Knives

This week we got a stream of household names 'Hitting the Wall' and announcing shock job losses with the heaviest at British standard-bearer, BT where around 6% of the workforce will be lost by March and ominously the CEO hinted more to come.

It's argued that the most valuable member of staff or external consultant to any business over the next couple of quarters will be the 'Professional Cost-cutter'. How depressing that it went this way.

Handing The Keys of The Car to the Bank

It's like having a shiny new Ferrari on a loan. After driving it around proudly and recklessly, you can't pay for it anymore, so you hand the keys to the Bank Manager where the loan is. After a short while, the Bank Manager hands back the car with a smile, 'I've saved your car and now it will be more economical, less costly to service and easier to park. Best of all, I've reduced the loan and you can afford it.' Sounds good, but to your dismay, he hands you back a mini.

Cost cutting is all about ripping the heart out of business and it takes the decision-making power away from the executives and hands it to accountants. They know little about the markets, the opportunities, the vision but they know plenty about numbers. In their view, a mini is perfectly adequate to get you from A to B while the sales and marketing people know a Ferrari is needed to get to the long term goal. But it is the price you pay for laissez faire management, wishful thinking and not coming to terms with reality.

Back in the 80's IBM had an internal name for any manager who talked up their business as 'They gave good slide', a vernacular reference to their ability to dress up the business in a slick presentation. IBM, from dominant market leader, 'Hit a Wall' and lost market share and its dominance as it failed to see the market change. It took a guy who ran a cereal company, Louis Gerstner, to come in and give it a taste of cost-cutting reality. IBM was saved and while it was no mini, it was no better than a high end Ford for the future.

A Bit of Thatcherism at Work

It’s analogous to Margaret Thatcher coming to power after the disastrous Labour regime of the 70s. Britain was literally on its knees, held to ransom by a Union movement that had become cancerous. She made hard decisions on cutting the cancer out and in the process hacked the heart out of British business. Love her, hate her, deify her or demoniser her, she did the only thing left to do to save Britain form economic hell. The outcome was that she gave a recovered economic Britain to Labour in 97 but in culling manufacturing and privatising anything she could, she gave way to the rise of the Service Industry and Financial Sector upon which our GDP is so dependent, plus made privatised utilities vulnerable to foreign wolves.

The fact is that cost cutting has only an eye on business financial health and so often leaves companies in a poor position to tackle the future and in many instances the companies never, ever attain the same market status again, some get bought and some meander off into some new areas. There are not that many shining examples of cost-cutting becoming a strategy for the future.

Cost Cutting As a Business Strategy

Well you wouldn’t run our company on cost cutting alone – there wouldn’t be a great future in that. But equally why would you run your company on the expectation on continual growth when the market around you and your underlying performance tells you otherwise? The fact is executives and managers have been doing the latter for some time as the world financial situation unravelled a truth which everyone at least suspected and many just denied but knew it. The growth of the UK economy was entirely dependent on a falsely exaggerated growth due to a poor business model.

Yet for the last 10 years many firms have used cheap and freely available money with low security to grow. Now that not only have markets slowed but the supply of that cheap money has too.

Firms have not reforecast or budgeted with 'what ifs' and have directly run into a wall. The only way out is a Thatcher-style cost-cutting mania and out come the so-called experts to do so. What happened to executives and managers at BT forecasting and anticipating a downturn? How did BT within a reporting cycle come to have to cull 6% of its workforce? It is management out of touch with reality and giving each other the news everyone wants to hear. Now that the ‘Wall has been Hit’, BT managers are happy to hand across the problem to accountants to crunch the numbers and then they present the bad news to the workforce claiming unforeseen global problems when the average man in the street without an MBA could have told them last August at the latest that the world had changed.

This style of management makes me angry but it is also a huge learning point for all SMEs and businesses that have yet to take action and review their forecast, budget and plan taking account of the world economic position. Coincidentally, I read a press release from some Recruitment Outsourcing company who had landed a multi-million contract to supply people to BT. Well that’s a contract they are going to love and BT’s failure to communicate its position early probably means that supplier will have to make corresponding big cuts, I wonder if anyone anticipated it?

Call to Arms

At the risk of repeating myself, get out the pencil and paper and the spreadsheets – start reviewing your numbers and plans and do it now before bad times hit you.

- Review your forecasts
· Review every deal in the pipeline – do ‘what ifs’ and challenge salespeople’s thinking on reality
· Re-budget your costs to take account of the new view of the business
· Take decisions on costs – make sure you are not investing for a continued growth if it does not coincide with reality. Make sure any cost that does not yield instant ROI is not spent.
· Review easily adjustable costs like marketing, training, travel policy and general business trips – use technology like audio and webconferencing to save travel costs
· Make tough decisions early – if you have to make people cuts, do so with the future in mind not because you are desperate
· If you need extra resources, be innovative – look at getting people in on contract to do specific work with specific results in mind. Put the power and resource where it is needed and when. Try to avoid employing extra people until you can see clear returns on their roles. Also, think long and hard about back filling headcounts slots with permanent staff – be flexible and innovative and look to hire in the resource on short term projects as and when you need it.
· Make sure you join in your key customers – go and visit them, understand their business outlook and requirements in tough times. Throw a blanket of value and service around them to ensure they stay with you.
· Revisit your Value Proposition as a business, make sure you strengthen it, clarify it and quantify it, and then make sure everyone in the business can articulate it at will.
· Don’t bank on large scale customer acquisition projects working – unless you have the key to unlocking instant profit and with little change (an elixir) then companies will be loathe to change tack and more interested in cost savings rather than long term ROI calculations. Businesses will be looking for Return on Cost not Return on Investment. It’s important not to get swallowed by your own bull and wishful thinking.

Finally, if you do nothing else, just take a sanity check and ask yourself, what would happen if my next best new customer defers their decision to buy because their CFO mandates a 6% cut in people costs without warning?

Think it can’t happen?

Fighting The Recession - Increasing Power without Headcount

Being lean, mean, flexible and adaptable are all admirable qualities to have during a recession - but how can you achieve it on limited resources and headcount?

One of the problems of any business in tough times is that the market, and how to service it, is a moving target. Putting resources where they are required and when become crucial decisions to take advantage of opportunities or even shoring up existing business.

How can you be both adaptable and resourceful without an increase headcount?

Professional For Hire

There has never been a bigger pool of available, experienced, skilled and very willing sales and marketing people who are willing to contract and deliver results.

It is commonplace to hire in or outsource skills to do specific jobs whether that be temping at administration or finance, outsourcing payroll or accounting, IT, project work, cleaning, Management Information, web management, Telecoms or other functions. But it has never been vogue to hire in sales or marketing people to do specific jobs or for specific campaigns or projects.

But markets are changing. I have had the privilege to work with innovative skills companies like Theorem (www.theoreminc.net) who help companies who do digital online marketing to flex and scale their organisations on demand by having a vast pool of multi-skilled resource available.

The trick is to put the power where you need it and when you need - and pay for what you need.

The Issues

In tougher times, headcount is a heavy load. Further, flexing it is not easy. For every new head you need to make a leap of faith in terms of the role to fulfill even though the market may change rapidly or the opportunity is transient. There are associated recruitment costs, management time consumed in the selection process, potential guarantees of commissions for significant periods, employer taxes and then the potential back end costs if the individual does not perform or perhaps the opportunity passes by and you have to scale back. The responsibilities in law are rightly onerous and each new headcount is a heavy cost and responsibility. For small to medium sized companies, each new headcount or backfill is a considerable risk.

And what if the market changes and the resource you have just punted on is not actually what you need? Suppose you take on a Field salesperson and in 6 months you actually need a Telesalesperson instead? The cost of change is huge plus the time lag in the process for due procedure.

The concept of Professionals For Hire is having access to a significant pool of experienced people with a variety of skills and seniority to fit your requirements - as and when you need them.

Imagine having such resources available at short notice, pre-vetted for experience, skills and suitability, and willing to work on daily, weekly, monthly or specific duration projects and assignments. Not Interims but flexible professionals for specific tasks.

Advantages

• 'Pay As You Go' - only pay for as much resource as you need when you need it in a flexible way.
• Multi-skill availability - Have access to a wide variety of skills to pick which you need for specific tasks and when.
• 'Pay For Results' - It is easier to gear payment to success as these resources are far more orientated to reward for success.
• Mitigate costly guarantees and get access to highly motivated, results-orientated people who have everything to prove and much to lose.
• Mitigate onerous employee related costs such as tax, holiday pay, sick pay etc. Professionals For Hire are independent business people measured only on the time they work and the results they deliver.
• Decrease management time - these professionals are given specific tasks and require less management.
• Mitigate recruitment costs - screening has been done in advance and there is no cost for recruiting just time consumed in post.
• Decrease recruitment time - Professionals For Hire are available at short notice, it's their profession.
• Put the Power where it's needed and when. If you require Telesales first followed by Field Sales visits, get access to two specifically skilled and costed professionals to maximise results rather than hiring one person and trying to fit square pegs in round holes.
• Only use the resource you need for as long as needed - why hold onto resource beyond their period of worth? Conserve cash and costs by applying resource when you need it for the specific duration of the requirement only.
• Make your workforce more adaptable, flexible and powerful without all the associated employment costs.
• Be able to scale up your organisation quickly and efficiently to take advantage of market opportunities without the normal time lags.
• Be able to scale back your organisation when times are not so good without onerous employment responsibilities and costs.
• Put the Power exactly WHERE you need it - if your requirement is in Scotland or Germany and not the UK, have the ability to not only access resource quickly and easily when you need it but where you need it.
• Get market experience and knowhow fast and easily - Professionals For Hire gives access to a wide range of skills and market knowledge.
• 'Try Before You Buy' - one of the great advantages of having flexible, hired resource is that you can evaluate their skills and suitability at first hand and in the job. When you are ready to make the investment with better knowledge of the market opportunity, you will have 'field-tested' potential candidates

Beat The Recession And Be Ready For The Upswing

The economic news is not good with Mervyn King telling us the obvious and worse today. Many businesses are 'Hitting The Wall' and having seen their markets collapse in a matter of weeks not months. Think ahead to how you can conserve cash, cut costs but be able to pick off the opportunities in the market when they arise by scaling your organisation up and down as you need to. Be ready for the upswing which will come as we emerge at the other side and scale up to meet the new opportunities, faster and more efficiently than your competitors. Above all, make sure you take this recession in your stride rather than Hit The Wall and struggle, making hard decisions too late and after the worst of it.

Professionals For Hire is a reality. Call me for more details on +44 (0)207 193 2356.

Turning Negatives Into Positives To Beat The Downturn

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.

Wake Up And Smell The Coffee

For those of us who have never really seen the attraction of sour tasting coffee, it comes as no great surprise that the recession caught up with Starbucks as their fourth quarter profits 'Hit The Wall'. It's profits in the quarter to 28 September were just $5.4m worldwide down $158.5m from the same period last year on a 3% quarterly rise in revenue to $2.5bn while revenue dropped 8% in same stores from a year earlier.

Is The Coffee Shop Culture Over?

It could be argued that in recessionary times it's those little luxuries that go first, like the coffee on the way to work or at elevenses. If that's the case then this news cannot be good for the High Streets bristling with similar offerings like Costa and Nero for example. Starbucks point out that a good deal of the profit collapse was $105m spent in closing down unprofitable stores - 600 of them in the USA and 61 of them in Australia shedding over 1,000 jobs.

For us in the UK, it's a key indicator that people are watching the pennies. In the same breath, it was announced by the Royal Society for Chartered Surveyors that house sales had slumped to a 30 year low and a report from the British Retail Consortium stated UK retail sales have fallen over a 12-month-period for the first time in more than three years; total sales in October were 0.1% lower than the same month last year.

Gloom & Doom

As we collectively tighten our belts and head toward the worst retail Christmas sales for years, the outcome will be that the lower paid service jobs associated with 'luxury spending' on bespoke coffee and gifts will be lost first. While that seems a minor cut as many of these jobs may get paid the minimum wage but they attract the same state benefits for those who join the unemployment queue. Again, a side concern will be how many of those workers came from abroad and have not long been part of the tax system yet may well now pose a burden?

As tax revenues drop when unemployment rises and consequently there is a heavier burden of tax on those in jobs to pay for it, a vicious spiral begins. Pundits have predicted that in this recession unemployment could rise swiftly to 3m, that's just less than double where we are today - add that to the long term claiming benefits unable to work due to disability and we are well over 4m out of work.

Inflation has risen to 5.2% although with producer prices falling rapidly and oil prices falling, it is assumed that prices will drop particularly as interest rates are so low at 3%. But that's cold comfort for all of us who have seen weekly food bills rise sharply and the price of energy still at high levels, so it will take a while to filter through.

Manufacturing shrank in October for the sixth month in a row as pressure builds in the economy. It is little wonder that interest rates were slashed so dramatically - it was the Bank of England's equivalent of defibrillation on the economy.

But how many jolts will it take? And how long to recover afterwards? And can we afford the 'electricity' to do it?

It's a small parallel, but when the South Sea Bubble popped, coffee houses were at their peak in British cities. It took them an awful long time to be so popular again. Perhaps history is repeating itself.

Funfzig lashes if you please, Judge

Max Mosley is some guy. If secretly filmed in a sordid sex session with a bunch of dominatrix paid-for ladies I would wager most people would be horrified and embarrassed, and possibly shrink from public life. It surely would be difficult to look loved ones in the eye and friends too - and goodness knows about work colleagues and business associates. Wouldn't we? Or am I living in a different world?

Not so Mr. Mosley. He actually turned the tables and made the whole thing a breach of his privacy. That takes some chin, but then again he's from a family not short of sticking its neck out and indulging in something repellent to most sane and decent-minded individuals.

What Are The Real Implications?

It was a bizarre affair that you couldn't have made up.

When a key witness did not show up the Judge in the case, Mr. Justice Eady, invoked the Human Rights Act to support legal action against the News of The World which had published the story and film to effectively expose his moral shortcomings, an age-old right of newspapers. Former Lord Chancellor Lord Falconer stuck with his old chum and said the Judge did the right thing. Interesting.

Mr. Justice Eady ruled that the paper had breached Mr. Mosley's privacy while he had taken part in a sado-masochistic sex session with five prostitutes, in the process falsely claiming that it had a Nazi theme - which confused all of us who actually looked at the thing. I wonder why Max and the ladies didn't speak in menacing West Wales accents - surely it would have had a similar effects or perhaps we should ask the Judge.

In fact Justice Eady claimed Mr. Mosley was entitled to privacy for consensual 'sexual activities (albeit unconventional)'. It seemed to omit the fact he paid the ladies for the consensual activities, but no matter.

Enter The Daily Mail

I don't have a massive amount of time for newspapers editors, I think they do regularly overstep the boundaries of privacy. But in this instance, frankly Mosley had it coming. Paul Dacre, Editor-in-Chief at the Daily Mail, at the Society of Editors annual conference contended most people would consider Mr. Mosley's activities to be perverted and depraved.

I would draw readers' attention to my previous blogs on Denial as a Coping Mechanism. Psychopaths use the power of denial to distance themselves from their actions otherwise they surely would be overcome by their enormity while we regularly use denial to cope with deal with bereavement or similar. Mr. Mosley uses denial to make us believe the problem is with a warped newspaper who think his privacy is more sacrosanct than his depraved activities.

Dacre rightly points out the particular Judge has 'Form' on such rulings and contends that he is effectively passing laws. Even the PM would have had to set out a bill and get it passed by both Houses, a passage which everyone knows is no 'slam dunk'. Not so Justice Eady, asserts Dacre.

'...one judge with a subjective and highly relativist moral sense can do the same with a stroke of his pen,' said Dacre. 'I would personally would rather have never heard of Max Mosley and the squalid purgatory he inhabits. It is the others I care about - the crooks, the liars, the cheats, the rich and the corrupt sheltering behind a law of privacy being created by an unaccountable judge.'

Do We Agree?

Clearly the power of the vote of motorsport's governing body for whom Mr. Mosley works, do not agree - they gave him a vote of confidence although it might be alleged Mr. Mosley was happy to have accepted lashes instead.

I do agree this has a an implication for newspapers and society generally. If we extend Justice Eady's judgement then we may never know if politicians like Mandelson, Mellor, Blunkett, Conway, Hamilton or others far worse are doing anything which we ought to know about. It does have implications - it's called trust. While sexual activities may be a private matter in general, if you are in a high profile position or indeed in any where your actions may be construed by others as odd, depraved or unusual, do not be surprised if you take a fall. This applies to everyone when you think about it.

But here's the rub. Max Mosley slipped out of the situation because he has money. A great deal of it. If an employee, whatever rank in a company, had a video of his or herself published on YouTube of even an embarrassing incident let alone sexually depraved act they might possibly be disciplined or worse if their employers got to know. While they might argue a breach of privacy, the fact is they took the risk knowing the repercussions.

As usual in life, just as Formula One getting dispensation to get cigarette advertising a special dispensation even when it is clinically proven smoking harms health and can kill possibly with a greater risk than driving an F1 car, money talks.

Conclusion

All senses of morals say that a man in his position has betrayed the trust of his employer, wife, family and friends but that doesn't mean a jot and it outraged a lot of people who cannot understand how he keeps such a highly paid, high profile, ambassadorial job in a sport we love - in year when we have a British world champion to be proud of.

It makes you think it's a sport, much like banking, that is unhealthily in the hands of very few people who make more money than we could imagine. Perhaps it's time they joined the real world and got some sense of values and perspective, then they may actually realise this wasn't about privacy it was about trust.

Is Your Business In Danger of 'Hitting The Wall'?

So everything is going well - even perhaps better than ever. What's all this Credit Crunch and Recession worry about? It can't affect me, my business is growing at 25-50% and even a slowdown means at worst I will just have low growth.

Economists reckon we have seen the worst of this economic crisis - so we can only see upturn. My business is perfectly poised to take advantage. Or is it?

Hitting The Wall

The recent Sequoia presentation at its All Hands CEO Meeting in California clearly illustrated the concern by VC companies and warned 'Spend every dollar as it was your last' while mandating all its portfolio to reforecast - and fast. There was no doubt in the VC community that everything had changed.

There is no hiding from a recession. It will affect every business in some way or another - some profoundly, some only slightly, some positive and mostly negative. The one constant is that everyone will see some effect even it means an increase in business.

I cannot urge enough - rethink your business forecasts and plan for change whether it's good or bad. If you don't, you are in grave danger of what I term 'Hitting The Wall'.

If you are an emerging business, evangelising your product or service, you are particularly vulnerable to the downturn as larger businesses will be more reticent to risk new things or change from trusted methods. There will be less money to make less risk.

'Hitting The Wall' is the term stolen from the experience marathon runners have at some point when the they hit a pain barrier that can prevent them from going further and completing the challenge. Some simply grind to a halt and don't make it - others conserve their resources and tactically survive to get through the pain and emerge renewed, better placed to complete their challenge. It's very similar for any business, particularly emerging ones and more so in times of recession.

The effect of this recession has come about at the confluence of a dramatic and unexpected economic crisis that came from left field. It means we have constrained credit, far greater conservatism to risk and an economic slowdown. It's a mixture as toxic as a sub-prime mortgage.

For a business, if you don't have a plan to survive or thrive in a recession, you will surely be a victim by some degree and possibly even 'Hit The Wall' where survival means a drastic retrenchment in the face of the recession which will mean failure for many businesses.

The Speed of Recession

The last thing you need is a business model dependent on fine margins with high lending - a minor slowdown can hammer your business and no bank will lend just for working capital now. There is no alternative but drastic and rapid cuts. Yahoo! is a typical example of this. A swift and comparatively minor downturn in revenue hit their bottom line by 64% and caused an immediate lay off 1,500 jobs. If they do not dramatically change their model, I suggest they will have a similar problem in 3 months. They literally 'Hit the Wall'.

In the UK Estate Agents like Savills suffered an 82% downturn as they are locked into high home sales - they are going to have a long hard battle to survive ahead. Even more widely placed Estate Agents are selling homes at an average of one per week and even less in London and the South East. They are in huge trouble.

Car makers are getting hammered as sales of new cars dropped 21% putting those dealers reliant on hitting quotas of sales for margins in big trouble as well as significant job losses.

Builders and associated suppliers are also 'Hitting The Wall'. The speed of it has been dramatic and less than a few months ago none of them had foreseen it or planned for it. Lehman Bros is great example of a company who paid huge bonuses last year, got a triple A credit rating as recent as August and were even approving pay offs to fired executives to the tune of several million a few days before their demise.

An example of little drop off to date is IT and related sales. Most software and hardware firms in the supply chain are predicting growth rather than slowdown. Dream on - as the recession bites all costs will get cut, it simply hasn't filtered through yet and when it does it come it will be hard and swift.

Plan Now

I have blogged on this before and there is a a presentation on my LinkedIn Profile and my website to download free of charge. My strongest advice is to take a look and see if it helps your thinking.

In short:

• Think how the recession is going to affect your business and how you are placed
• Focus hard on the value you provide to customers, enhance it and work on how you position it. Rethink your Value Proposition.
• Reforecast - don't think this will not affect you, it will somehow whether good or bad
• Don't be needing cash for survival, banks will have little sympathy
• Make tough decisions on cost now - don't spend on what does not return immediate profit
• Sell harder - profile what customers bring most profit, then call more of them
• Decrease your dependence on individual large customers, any slowdown can hurt harder
• Throw a blanket of value and service around your best customers, make sure they feel loved
• Outsource as much of your headcount as you can. Be flexible, put skills where you need them when you need them, pay for results and mitigate onerous employment costs

In a recession, customers focus on bottom line impact and real value to the business. Nice-to-haves and non-essential products or services will get cut. Fluid budgets like travel, accommodation, entertaining, marketing and training are always the first to go - make sure you are not only dependent on revenue from such products.

Get Advice

The last thing you need to do is put your head in the sand or carry on as normal. As the Credit Crunch took banks by surprise executives were still going on corporate jollies to expensive Spas as if the world would never change.

If you do not know how the recession will affect you and your business, seek good advice. Most SME businesses around today will be run by people who have never experienced a recession, there are few left who bear the scars. Managing a business in a downturn comes only from hard experience as anyone can run a business in the good times.