Think, Act, Review - The Art of Executing Plans

In a business meeting today, the person I met described me as 'Cerebral' in my approach to business. For those who actually know me in business, social settings and in my family, they would laugh aloud at the description.

Applying some cerebral power to the comment I could understand the person's train of thought. I had described how I go about executing, and how I believe in thinking something through, devising my plan or strategy, and then rigorously executing on it, with a final step in the process of reviewing the results before adjusting and continuing to execute. It's a tried and tested process but in the heat of a sales battle, often rapid action is preferred as any perceived dalliance is itself deemed as indecisive.

Planning - The Vital Key To Success

In the last few years it has been a feature of business to drive business through a series of short term actions, often with short term goals in mind. Monthly targets are a key driver for this and we all know these are essential in business but they can lead to poor habits. However, as we suffer a deep recession, many of the exponents of short term actions have been the first to hand their organisations over to 'cost cutting' or 'restructuring experts' because they simply ran out of ideas for the next actions. One minute the garden looked rosy, the next it went to pot.

I have blogged about planning for a recession. Many people have said that I was talking a recession up and bringing it on myself, while others have commented that a lack of a positive approach leads you away from the opportunities. The latter may be true but as a person, although I may not always show it, I am a naturally worrier. I am always thinking about where my next sale will come from and making a success of the projects I am involved with.

When I plan for myself, I plan first for survival and then next for the upside.

I may not be the world's greatest at grabbing success by the horns but I have a better understanding of how things can fail and so avoid them more effectively. In this recession, my business has gone up and I would reassure myself that it was because I worried early about how I would survive so that I put into place a plan of actions that not only has so far got me through the recession but has actually help me to do better than I expected.

I still worry each night before I switch off the light, but at least I am thinking ahead to my next day in business.

The Power of Thought

To constantly think about something and do nothing, is a plan that rarely succeeds. To just do things without thought, is a fool's game - it will end in disaster. To think and then do, is the basis for success.

I advise people, when making decisions about their next actions, to think what they want to achieve in terms of strategy and sales 3 or even 5 years down the line, because your decisions today are likely to have a profound effect on that. I worked for John Weatherhead at Frontline who always said that what you do tomorrow morning will either make you or lose you millions - because it is the effect of your decision a year or so down the line that will be an outcome of your next action. That always made me think about things rather than just jumping in and doing them.

So if you do nothing for one day, it costs you the value of a day's sales a year or more later because you pushed it away by another day.

Similarly, if you make a decision today which has only a short term effect and buys you a problem a year down the line, then you have lost the value of the future sales.

Very often, Channel sales plans of emerging companies go exactly that way. Short term goals buy long term legacy problems that hinder sales at crucial inflexion points when graphs should be shooting upwards. You may be left with a small, boutique Distributor when you need one with financial and logistical muscle to take advantage of the market a short way down the line.

Thinking that little bit more should not cost time - it is a logical process that should focus on what you need to achieve and what the path to that success looks like and with a clear view on what can impact that success positively or negatively on the way.

It's not cerebral, it isn't rocket science, but experience does help.

I would contend that the Credit Crunch is the result of short term profit focus by banks who lost sight of the 'cause and effect' of their actions. Anyone looking in from the outside could see it was a stupid strategy which had simple flaws and many single points of stress or failure which would bring the whole thing down but short term profit has a terrible lure. When coupled with a flawed earnings scheme there can only be one outcome - total disaster. The issue has been that the solutions have been executed with the vision of restoring the status quo when any fool would know that you have to sort out the fundamental flaw first, restructure the system and ensure that banks focus on their core skills of supplying capital and credit instead of making money out of nothing.

Planning Through a Recession

Many of the bullish, sales-orientated CEOs who have handed their companies to accountants to sort out the mess, are those who have weak planning skills and the inability to think ahead properly or at least more than just when the graphs all point upwards. Recessions, if faced up to and planned for properly, can be times when new opportunities arise which fundamentally change companies and give them new, sustainable profit opportunities. For those who do not change, they can indeed get caught out.

Warren Buffett famously describes it as being caught with no trunks on when the tide goes out - i.e. a lack of strategy. Many retail businesses have collapsed because of this as they relied solely on the amount of money in people's pockets being large enough so that their products would be bought by the law of statistics rather than product differentiation. For many businesses in business to business sales, it has been the failure to strengthen and prove their Value Proposition which has caused problems. It is a dumb assumption to make that a business is either recession proof or customers always need your products. In recessions, everything changes and no assumption is always right.

Recruiters are one of the most vulnerable businesses right now. Open vacancies have slumped to a low while unemployment has risen to 2million and is expected to reach 3million by the end of next year. Even Dragon's Den heroes have their mettle tested in such environments and I have heard rumours that one of James Caan's proteges is suffering, as are the mighty Michael Page and many others. Yet companies like Intramezzo are actually innovating by focusing on where there is investment. They are looking at emerging businesses and ideas and matching experienced entrepreneurs with new money as VCs actually have plenty of it for new ideas but don't want to pump more into current businesses. It's that kind of clever thinking that will seed a new business opportunity for long after the recession and it came about through planning on how to make money in a recession.

Old Adages Die Hard in Recessions

'Half a plan, badly executed tomorrow, is better then doing nothing at all'. Tell that to the brainiacs rescuing the economy. Thinking does not take a long time but can save an awful lot of failure and money if done in conjunction with the proper devising and execution of a plan. Nothing beats a good plan, well executed - and it is always worth waiting for.

If that's cerebral, then call me Einstein. I think it's just learning from bitter experience and comes with age.

Planning For Survival

I make no apology for bringing up the subject again - we are officially in a recession and there has never been a more important time to understand how sensible, regular planning is a discipline in business that can help you not only survive but flourish.

But I'm A Nimble SME, Why Do I Need To Plan?

I have blogged ad nauseum that this recession has struck at a merciless speed and how, in short trading cycles, household name companies with long, proud trading histories have literally collapsed in front of ours eyes and gone bust.

Insolvency Practitioners and Liquidators are having a boom time as many more companies go to the wall and require their services - it's the nature of the beast.

One way to avoid all this is to do some basic, disciplined planning. And in my estimation this comes in two forms: 1) Front End - Sales and 2) Back Office - Finance. In reality the two are inextricably linked as one fuels the other. However, very often planning is only actually done in Finance - at the front end we have only Forecasting.

Forecasting vs Planning in Sales

It's a nit pick but I would say a basic salesman's forecast is pretty much guesswork based on historical data with a guesstimate on some of the more sizable deals which may have a larger effect. When this is rolled up to management level, very often there are factors and trends applied to arrive at the sales forecast en masse. By that time, the overall number is pretty much a real guess and bears little resemblance to the sum of the raw data. This may actually work fine when sales are buoyant as what often happens is that opportunities are plentiful enough to accommodate the odd deal drop out - the overall number becomes more predictable.

Generally, little planning is involved in that process. It's just an approximation and if sales are close to budget there are no real causes for concern. It's when things start to go wrong that you realise that a bit of planning might have helped.

Planning, when applied to forecasting, is actually reviewing every single deal and working out what is required to win that deal, what margin does it yield, is the customer capable of paying, making sure the terms are agreed, what factors in the market can effect it and what can you do mitigate their effect. This not only gives you a realistic view of every sale but it also gives a very full view of the cost implications of either winning or losing a sale.

Again, these implications seem less important when the graphs are pointing up and to the right, but when there are hazardous market conditions like downturns around, suddenly this level of understanding becomes important.

Right now, it's not a good time for a sizable proportion of your business being in sales to car makers or banks for example and even if they are it is highly likely that the sales may get protracted, become more price sensitive and possibly involve longer payment terms. This level of detail is vital as the Finance Planning is the key part that balances resources to sales.

Financial Planning

Most companies do a budget and a cashflow forecast but it is very likely that SMEs will tend to do these on a monthly, at best, and usually quarterly basis - some may only budget once a year. However, there are plenty of natty tools out there that could make Planning simple and a daily task (cf. www.adaptiveplanning.com)

If the Sales Planning has been done properly, then the Finance side can take the input and do a new level of scrutiny. The first step maybe to review the credit lines to every company on the sales forecast to take account of the prospective sales - the outcome may be to ensure that all existing invoice queries on the accounts are cleared down and settled, credit lines actually raised ahead of a big sale or the credit team can swing into action to look at options to help the customer pay like leasing or debt assignment etc. If the Planning is done properly, Finance can be proactive in helping to deliver sales rather than an order arriving and then tantrums occur as Finance won't extend the necessary credit.

For new customers, get a credit check done. They are not that expensive and they can save wasted effort and heartache. So often a deal comes in and Credit Control (sometimes called Sales Prevention) step in and say 'no credit'. Good Sales Planning will alert Finance early and they can get the checks done ahead and have time to plan if and how a sale can be managed. And there is a downside - sometimes sales are not worth pursuing because the customer does not have the necessary ability to pay - Sales need to know the hard truth early and in these austere times they need to be told if they have to go find another customer to make up the shortfall. Good planning breeds realistic thinking and focuses everyone on the really vital things and avoids 'wishful thinking'.

Once Finance has a realistic view on when sales will drop, when and how customers will pay and if this can be smoothed in any way, then they can take a detailed look at the overall cash position. When times get harder, they can start making decisions on policy to help get resources into winning sales rather than on less important things - a classic example might be cancelling the Corporate Jet when sales drop (take note Citigroup)!

The Results

What Business Planning can do is focus in on the really important things that can directly affect driving sales, creating cash and maximising profits (or indeed, minimising losses in some cases). In harmony, Sales can focus on tactics to close orders and get invoices out early, while Finance can help offer incentives for the customer to settle early or get leasing involved to secure the cash. Meanwhile, Finance can also turn their attention to suppliers to renegotiate or back off the terms of deals so that pain is shared on the cash front.

The key thing is anticipation of issues - when cash is tight you have to be on top of everything from negotiating terms, to collecting cash and extending terms with suppliers and paying as late as you can. One of the biggest areas of cash slowdown is mismatching terms or invoicing inaccurately - communication between front and back office becomes ever more important and this is where Planning really pays dividends so that all discounts, rate plans and terms are agreed formally and the details passed to Finance and equally Finance make sure the invoices are sent out accurately and early. Debt chasing should be more vigorous and leveraging the Sales relationship can often get customers to pay up on time especially when they need something urgently - Sales should have a handle on all that and get leverage.

Expenditure

While cash is king, profit is crucial and maximising it in tough times is a priority. Now is the time to challenge why people travel so much, entertain so often, travel Business Class or use trains when a car could be cheaper or vice versa, then look at all cost lines and squeeze every penny of saving you can so that as much resources can be applied to winning sales as possible and not go on flowery 'nice to haves'.

I have said this before but never underestimate the power of communication with staff. Everyone loves to get good news and pats on the back. But there seems to be an automatic assumption that either staff don't want to hear bad news or they can't handle it or they can't be trusted with it. All of those assumptions are wrong - in tough times, the support and innovation of your staff will help share pain when needed and equally help make sure cost cuts are achieved without a large loss of productivity and sales are made as planned. Leaving them out of the loop can really affect the plan detrimentally as well as ruin motivation.

Get Innovative

So much of sales behaviour is driven by compensation plans and you need to be able to gear the plans toward meeting priorities in tougher times. A profitable deal is not profitable until the cash is in, so why not think of either changing the point of commission payment to when the cash is collected or accelerate the earnings for early payment and the opposite for late payment. Further, focus on success so raise the barriers at which commission is paid but give more for overachieving.

Planning will also reveal the margin hotspots and highlight those deals where margins are low. If such deals are with customers whose payment records are poor then you know that your real margin is lower while possibly smaller deals with customers at higher margin and good payment records are worth proportionally more to you. Make sure you have all the information to make the judgement calls and give the bad news to salespeople early rather than wait for deals to come in or, worse still, snipe at them later. The decisions to accept these deals should be shared.

Tackle Cash Requirements Early

What this detailed Planning will allow you to do is to get a much more realistic picture of how your cash positions will pan out and therefore dictate how much cash may be needed and when. So much of what is going on in business right seems to be guesswork but in your own company it should not be that way. Having all the deals and expenditures explored, terms agreed, collections strategies in place, credit checks done will actually make the task of going to your bank or similar far easier. Why? Because you can answer their questions. There is nothing worse than bluffing in this situation as you don't get a second chance at that but having a detailed Plan with contingencies built in and the even the compensation plans geared to help, the Banks cannot fail to be impressed with your ability to know and run your business. They still lend on trust and that should be your priority.

Get Advice

There are going to be a lot of vultures out there who will want to start telling you how to cut and restructure your business, turnaround experts who are just accountants with knives. What you need is to give yourself a better chance to win business with a cost line that can support it. Too many companies Plan badly and then just hand over the company to accountants when things go wrong.

Plan better now and you will not only survive - you will THRIVE when the recession is over. Make sure your planning is done with your Sales and Customers in mind as the key priority - focusing inwardly will make you lose sight of your path to survival.

For help on planning to survive, call me on 0207 193 2356 or drop me a line at nigel.dunn@calxeurope.com.

Bonanza Is Over - Where's My Bonus?

It's hard to comprehend but Mr. Thain, CEO of Merrill's, who were saved at zero hour from going bust like Lehmans, has actually lobbied his Board for a $10m bonus saying if it wasn't for him the company would have gone bust.

I had to read it several times to work out whether this was a joke but sadly it is the Financial mentality - no doubt if he doesn't get it he will ask for $5m because he kept the office windows clean during the crisis. The fact that because of his mismanagement the entire company was at risk seems to have alluded him.

It's that bonus culture (some would say hallucination) which many believe got the banking sector into the terrible mess we see and it's heartwarming to know the little lambs are suffering and in need of bonuses despite the end of the bonanza.

Hey, Leave Off The Bankers

Let's face it, our friendly but greedy banking executives were not the only ones guzzling the rich honey of short term success. And I know you will reach for your hankies on this tear-jerking story.

Knight Frank, commercial property estate agents (no please, read on) have suffered a 40% decline in sales since their new year started in April. Further the Royal Institute of Chartered Surveyors (RICS) have forecasted that commercial property prices could halve in price by the end of next year, making this crash worse than the one experienced in the 1970s.

The staff and partners at Knight Frank shared out a measly £81m from the bonus pool last year while in April they only had £46.4m to share out and that to go around 28% more staff than the previous year, don't you know. The 46 partners, bless them, had average bonuses of £780,000. They are cautiously optimistic for next year they say.

Er, hello! The bonanza is over chaps, sales down 40% and rapidly falling prices after increasing staff by 28%. Get out those pencils and do the sums. The bonus pot will only be good to stop the leaky roof this year, I'm afraid.

The Scale of Things

Like the housing market, commercial property is set to slump alarmingly and forecasts recovery in 2011 according to RICS. Capital values have already slumped 25% since August 2007 and they predict drops of a further 16% this year and 10% next year. The belief is we are only half way in what they describe as a 'Price Correction' which always meant to me someone correcting a wrong digit, not slashing by two.

More worryingly, the CBI has reported that there is a marked slowdown in the Service Sector which accounts for 75% of UK economic growth and is suffering its worst drop in activity since records began a decade ago. The CBI calmly urged employees to prepare for a rush of redundancies - no 'Don't panic!' cry there then. To add to all this woe, the CBI further said profitability for consumer and business services were falling at unprecedented rates as appetite for spending dries up. To put a final nail in it, they said job losses in the Service Sector had been minimal so far but would falls would get faster in the coming months. Thanks.

Just a Slight Reminder

I know I have harped on about this but I get it every day - 'My business is recession proof' or 'I have not felt any effect yet' and so on. What the CBI is saying is that we haven't even started feeling it yet. The Service Sector is bloated with excess profit from the good years and it is very ripe for popping. For all those servicing major or minor businesses, it is a time to start to review that pipeline and check whether you are being realistic, then doing something about it. Things are changing very rapidly from day to day and those who do not plan to do something about the recession will be the victims and spectacularly so.

If you don't know what this means, just read my blogs or call me and I would be happy to explain.

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.

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.

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.

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.

Well, it's a rainy day. Now What?

A Lot Can Happen In A Week.

The 'Deripsaka Affair' momentarily took our eyes off the bad news. Today's Times tells us UK borrowing will rise to £60bn as Tax Revenues are predicted to collapse. Why do the laymen fraternising bars know more about the economy than Chancellors, reporters and City financiers? Pick a random pub in Britain 2 years ago and the sage sipping his pint would have told you a) house prices had risen way beyond all means to pay as had credit card credit which would end in tears and b) a recession will hit soon enough which will mean high unemployment, a higher burden on the state, less corporate profits and therefore less tax collected - so a hole in tax revenues would occur. And mine's a lager.

Doom and gloom is suddenly upon us now that 'Mr. Prudent Brown' has finally succumbed and uttered the 'R' word - Recession. In the last quarter UK GDP shrank by 0.5% and worse is predicted to come, indicating a technical recession. I almost sighed a relief that at least we can now prepare for it having admitted it, like a drunk facing their addiction at last.

But just a week ago, most people I met suggested their business was still doing well, and no downturn had been seen.

This week, one of my own clients failed to secure their next tranche of VC Funding mainly as the pot was empty as the VC was Hedge Fund-fuelled. Almost like an avalanche, bad news kept coming in.

The Bad News Keeps Coming

Mervyn King, Governor of the Bank of England, delivered his annual Financial Stability Report, you know that stability Mr. Brown talks of for the last 10 years. Well it went a bit wobbly. Last week, King announced the banking system came the closest to collapse since World War I and that it was due to 'Systemic Failure' - advice he could have got in any of the last 5 years in my household but he's only paid to do his job. He estimated the total loss in the Banking System is around £1.8 trillion and so far globally Governments have consumed £750 bn in bail outs (I think his sums are wrong personally). The litany of failed banks is long - RBoS, HBoS, Lloyds TSB, Northern Rock, Bradford & Bingley, and Barnsley Building Society in the UK have old gone into partial or total public ownership exposing the tax payer to hundreds of billions of potential liability. In Iceland, there was a total failure of the country's banks as credit was denied them - pushing them to meltdown while they held over £1bn of UK public money plus private savings - the country itself almost went bankrupt. In the US we saw mortgage giants Fannie Mae and Freddie Mac go public while Lehmans popped its clogs, Merrills got bought, AIG was rescued twice.........oh I am depressing myself.

The UK housing market according to Nationwide will lose more than 25% of its value and reading different reports it will mean between 1.2 and 2.5 million mortgage holders going into negative equity. The market, it's predicted, will not recover until 2013. A little factoid for you, as the UK house builders quite literally hit a wall, less bricks were made for the UK market this year than at any time since 1945.

Unemployment is fast approaching 2 million and estimates say that it will reach 3 million before it gets better putting another huge burden on the State - it is now higher than when 'Prudence' Brown took over, as indeed is inflation which at its highest for 16 years, so much for puny targets.

As we contemplate the interest payments on the £400bn bank bailouts and cheer Mr. Brown for ensuring that not a UK deposit of savings was lost, he tells us that borrowing more to pay for all this and increasing public spending is actually the right way, as his well-worn Keynes book tells him. The borrowing that independent bodies like Ernst & Young, the IMF and OECD have told him was way too high 5 years ago, that is. This year's Government target, which will be 'robustly' broken like all their fiscal make-believe, was £38bn. If the predictions are right, very shortly it will not far off be double that and it goes way beyond 50% of our GDP.

Britain is being mortgaged in a major way. If our debts were called in, each taxpayer would approximately owe the Government around £50,000 whether you were able to pay or not - around the same for the US.

And the Banking issue is not yet resolved as the Stock Markets indicate. The FTSE 100 is now down at around 3800 and still shows signs of frailty while the pound is at a 5 year low against the dollar - a sharp fall in less than a year of around 42 cents. It is estimated around $535 trillion of open derivative positions, those nasty money-making vehicles at the root of our problems, exist and to put that into perspective that's a mere 35 times the US GDP. Oh and there's a further associated $400 trillion of insurance positions to account for.

China, that bastion of emerging economies, is also slowing as demand for their cheap goods which account for over 70% of their GDP, slows dramatically. Retail sales, which have held up remarkably well, dropped by 0.4% in September and shops predict the worst Christmas buying period for years. The pound drop means a hop to New York for Xmas shopping in the Thanksgiving Sales simply is no longer worth it, while cheap French booze is no longer that.

The good times really are over.

It poses all sorts of questions about how we should have avoided this and that all this 'Global Crisis' affecting the UK as if we were not part of the problem being hokum - but that really doesn't help the small businessperson, trying a) grow or b) survive recession now that we have it.

Any Good News?

Today BP announced $10bn PBT for the last quarter and oil prices have shot down from a peak of $147 to $62 per barrel which at least makes fuel cheaper at last.

And that's about it.

How To Survive

Enough with the gloom - we have all seen the Sequoia Presentation on the web which it presented at its All Hands CEO Meeting for its protege companies, well there was some sound advice for us all, if most of it was simply presenting the financial predicaments graphically for those who couldn't read.

Last week I made a presentation to a group of Entrepreneurs and while I focused on some common business weaknesses for small or emerging businesses, gave some tips on how to expand their networking (which I have blogged on before), I also gave my tips on how to survive a recession. So here goes - it isn't exhaustive and it's deliberately simple:

• Common Areas of Business Weakness

1. Wishful thinking - most businesses see their future they way they would like it and a lot is rose-tinted. Recession hits most businesses in some way or another and its best to acknowledge it will hit and have some impact. Plan for it and don't deny it.
2. Understanding the Sales Cycle - most emerging businesses think that sales will occur naturally and that once the light bulb goes on, companies buy. The fact is, the bigger the company you sell to, the more lights need to go on and usually that means more people resort to process to buy. If you think your sales cycle is likely to be 3 months, double it for larger companies and then don't be surprised if it's longer. Further, if your product or service is synonymous with the 'Good Times' so is a nice to have not essential, it is highly likely that in recessionary times companies will simply not buy. Think about how your product impacts the bottom line and reassess your 'Value Proposition' to customers - I will address this separately. Remember, sales is a game of numbers - the more people you meet, the more likley you are to increase sales. Similarly, don't rely on a few large customers, spread the risk. If one customer suffers a downturn then you are more likley to survive unless you wholly dependent on them.
3. Spending Money in The Wrong Areas - many small businesses don't think through the impact of cost or capital spend on their bottom line. In recessionary times Sequoia tell us 'To spend every dollar as if it was your last' which is pretty scary but the maxim works. Think about every detail of spend and then test it against the benefit it directly produces. If it does not stack up, don't spend. Reassess all current spend and look to see where savings can be gained as cash is absolute king - the last thing you should be doing in a recession is increasing borrowing for working capital, and banks will not support it.
4. Assumptions - 'are the mother of all evil' - well that was my invention. At any time, we all make assumptions, particularly in forecasts. Recessions are horrible beasts, they actually ruin forecasts because one minute all the numbers and graphs look great and the next they all go red and point down. Gordon Brown made a whole lot of assumptions and his continual denial to himself that the growth in the country was unsustainable cost us all an enormous amount of money and liability to pay for his damage. We are his lifeline, his collateral or assets to save his neck and the country. It doesn't work like that for small businesses - you get your assumptions wrong and there is no-one to bail you out. So acknowledge recession, think about its consequences in your market and start thinking about whether your assumptions and forecasts actually reflect what could happen. Remember should you 'hit the wall', no one is going to believe you if you predict for a few pounds more, the graphs will again go up and figures go black - reality is really a swine.

It's all about balancing Optimism with Objectivity

The Value Proposition

Picking up on my theme above, companies in recession will buy only against certain criteria. Like you they will not buy products or services which do not impact the bottom line and they will be rigorous on this.

All sorts of reality bites. As a for instance, if you are in recruitment, as unemployment goes up and open headcount goes down, the competition for every open position increases dramatically and once again we will see what on earth value is there is charging 30%+ of salary as fees for searching keywords on CV database? Differentiation is critical and track record is worth not a jot in a desperate market. Cost is king.

The Value Proposition in a situation like this is critical. How can you deliver more value versus your competition and so justify your cost? Remember it has to have a direct effect on the bottom line. For those who want an answer to that question, I have a free download on my website www.calxeurope.com which gives some ideas entitled 'The Cost of Bad Recruitment' - the Value Proposition for customers and recruiters alike is highlighted in there.

And so for all other businesses, think about what extra you are directly delivering to someones bottom line and why - quantify it. At this point, my thought is do not get hung up on the competition, but focus on each customer and tailor the Value to them specifically. Give examples of those successes and ask existing customers to talk on your behalf or give testimonials. Think about what impact does the customer have if they do not buy from you? Quantify that and think about a specific timescale when that benefit is either lost or gained - a 'Compelling Event' if you like, the D-Day of increased cost for not using you.

In a recession, your biggest competitor is 'No Change' - make sure you tailor your Value Proposition to answer that specific situation and remember customers will buy but only demonstrable value.

Keep Flexible - Put The Workforce Where It Is Needed

• It's usual to contract out payroll, cleaning, accounting, even manual labour but what about sales and marketing?
• There is a huge, experienced labour market already out there - guns for hire.
• They can be used at short and long notice to augment your efforts.
• These people are not employees and they live by their results and reputation, so they always go that extra yard to succeed and deliver.
• They can be paid more inventively, highly geared to results and even made part-time. It's a 'Pay as you go' culture.
• More importantly your needs change constantly, one week you may need telesales, the next face to face experience - pay for what you need, when you need it. Similarly in marketing, one month you need copywriters, the next web maintainers or designers - pick and choose the expertise and apply it when and where you need it.
• Negate onerous employee obligations and costs. While daily rates may seem higher, you only pay for what you need, when you need it.
• Be adaptable - pay for the skills you need as you go.
• Pay for experience as you need it.
• Pay for geographic reach as and when.

Pay for what you need, when you need it - be flexible, lean and mean.

Recession Beating Thoughts

The Sequoia Presentation highlights some key thoughts for small and emerging businesses and here's my take:

• Focus on costs - evaluate 'return on every cost'. Don't keep spending just because it's in the budget. Review, reforecast and adjust spends in all areas. And do it now.
• Be Realistic - Make the tough calls now. Recession is ugly and forecasting and adjusting is vital. That will inevitably mean review of major investments, projects and even people. Make the tough calls now. When the recession as at its hardest or even beginning to ease, it is not the time to be making tough decisions on cost because it is very unlikely that your finances will be strong enough to take advantage of the upswing. Of the last 6 major downturns, the markets have recovered - so make sure you are thinking about weathering the storm and the upswing and that means make tough decisions beforehand rather than after.
• Budget to Survive - There is no point thinking the position you are in now is going to last. Everyone will get affected in some way, there will be even some who benefit. Sit back, reforecast and budget to make sure you survive rather than being hopelessly optimistic in the face of the obvious. Now is not the time to be embarking on major programs of investments or new projects which do not have immediate returns.
• Pay for Results Not Failure - Make sure all staff are joined into the position. Recently Caterpillar saved 300 jobs by the workforce going onto flexible working. People will be reasonable and help if you are communicative and sensible - and lead by example. Banks who fly executives to Spa resorts at the time of crisis don't win favours so think about your own largess in front of employees. They will respect your decisions if you also live by the same credo. Link any new payments to results - make sure all new costs are covered only by the profit created rather than paying in advance.
• Choose Your Customers Very Carefully - remember, it costs around 5 times as much to find new customers than keep existing ones. Throw a blanket of value around your existing customers and go that extra yard to make sure service never degrades. Pick new customer acquisition very carefully. Keep away from competition and price sensitivity - some business can really be bad business. Assess their worth, the cost it might take to acquire them and your capability given your existing resources in servicing the business.
• Keep Reviewing Your Pipeline - In a recession customer buying moods change like the wind. Make sure you constantly review the pipeline of deals to ensure they are realistic and reforecast and adjust accordingly.
• Conserve Cash - above all make sure you collect cash voraciously and hang onto it as long as possible. Remember nobody will lend you cash for Working Capital like salaries or possibly even to buy stock. Banks are more risk averse than ever and if there is one major consequence of all that avarice at the top end it is that the small customer and consumer pays the price, because we simply have no choice but to do so.
• Funding - getting new funding specifically from VCs in 2009 in particular is going to be tough as their own sources of funds are drying up but they will certainly be calling the shots on any deals. Don't put yourself in that situation if you can avoid it. If you are starting up, pick a market where your products and services will be bought no matter what the economy is doing, build a proof of concept in terms of getting early sales and then ask for money to grow rather than really start up.

All this may seem a little excessive before the real party begins. Well things can change very quickly. As mortgages dried up, Estate Agents saw their average house sales drop to 1 sale per week in no time, Savills reported an 80% drop in high house sales in a single quarter. The recession will cause a sharp and very hard fall in confidence and it will affect you. Plan now to avoid its consequences.

If you need further advice on any or all this, please call me on +44(2) 207 193 2356 or mail to info@calxeurope.com.

US Emerging Hi Tech Firms - Is now the time to invest in International Expansion to the UK?

'Sterling slumps to lowest in 16 years,' was yesterday's Business headline in one UK broadsheet as the value of the pound against the dollar plunged to just $1.7863. A far cry from the heady $2.00 to the pound experienced not so very long ago.

Lower Value Sterling Presents Opportunities

Over the last year or so, emerging US Hi Tech firms have shown a distinct ambivalence to investing in expanding into the UK and Europe markets as the value of pound and Euro have made the spending power of the dollar weaker. In my own survey of US Hi Tech firms in the last year, I have found that CEOs of emerging US Hi Tech companies concerned at all levels about the cost of entry into Europe. All costs are escalated from recruitment, salaries, fuel, overheads, office rentals - everything appears expensive plus there is the psychological problem that particularly UK salaries expressed in dollars may actually exceed those of the executives hiring them - a mental blocker if ever there was one.

Now sterling has swung the other way. Partly, it is because the OECD (Organisation for Economic Co-operation and Development) believes that the UK is already in recession though strictly speaking growth has ground to a halt in the last quarter not yet receded according the the Treasury, but also the OECD was concerned about the UK's pledge of £600m to bail out the housing market. It has been housing, with over 160% growth in the average price of a UK house, that has pretty much fuelled the boom in the UK in the last 10 years as house-owners leverage equity for cheap money to fuel the spending boom.

The interesting prospect for emerging US Hi Tech firms is that now Europe is looking much better value as the currencies move downward and the UK in particular is offering some unique opportunities to act as the launch platform for European Expansion.

Market Conditions

A recent survey by the KPMG and the Recruitment & Employment Confederation showed that the number of permanent jobs available has fallen at the sharpest rate since late 2001.

• There will be a richer pool of executives and staff to chose from in the UK due to the slowdown of the UK economy
• The average salaries of these people will be more affordable as the dollar gains strength against sterling

As the property market cools rapidly (average house prices in the UK fell over 10% in the last 12 months and analysts suggest a further fall of 18% or more is likely before the market bottoms out), so too will the average office space rental and lease costs ease. There is already an abundance of available office and warehouse space in the UK and as the economy slows or even goes into recession, the costs of office set up and rentals will fall also.

• Available, high quality office space is widely available in major, attractive city locations throughout the UK and prices are coming down
• Again the growing strength of the dollar to sterling will increase the effect

Some Great Examples

As the economy cools in the UK, businesses will be looking to save costs. This can be achieved in many different ways but companies offering innovative solutions in identifying significant revenue reclamation such as in Revenue Assurance or Billings Integrity will have a significant advantage, particularly if the solution is innovatively priced and easily deployable, making the benefits accessible faster - one way to get growth in a shrinking market is to identify what you are not billing today; it's simply lost money reclaimed. Telecom companies, insurance companies, the NHS - all are companies who miss opportunities to bill all their customers for all services consumed.

Companies with high productivity advantages such as eCollaboration which can dramatically reduce the need to travel, the cost of which has soured in Europe as fuel costs rise, will have a distinct advantage. Companies offering ways to consolidate compliance and governance for financial and safety regulations will look to use to tools to mitigate cost exposure in terms of insurance, fines and accidental costs.

• Teleonto - A Revenue Assurance Solution aimed at Telecom providers and carriers of all categories which is Saas based, with no upfront costs or capital spend, helps fast identify all forms of revenue leakage and provides immediate and rich ROI
• ActionBase - a clever Action Tracking solution which is tightly integrated with Microsoft Office helps companies translate (and track) paper based processes into Human Activity and have full audit trails for compliance and governance. The solution is gaining much traction in the Oil & Gas sector but also in Finance, Manufacturing and Telecoms increasing management efficiency but up to 30% and decreasing compliance issues such as HSE, SOX or FSA regulations.

Corporations will be looking to re-budget and re-plan as the markets change and they make sure they have anticipated growing costs and potential less revenue. Those who plan ahead will adapt easier, faster and not be surprised by 'holes' appearing in their forecasts. Companies looking to consolidate spend on services like IT, Telecoms and recruitment will look to innovative suppliers who can quickly identify and realise savings. Once again, outsourcers look like good value.

• Intelligentcomms - an independent platform and consultancy specialises in helping companies identify and save costs across their entire Telecom spend, without a tie to any Telecom vendor to get impartial advice with a risk/reward method of payment to ensure fast win-win
• Adaptive Planning - an innovative SaaS based platform which is easily deployable that can help organisations streamline budgeting and planning to ensure companies plan more frequently and deeper to anticipate changing market conditions and adapt quicker
• Workday - a new SaaS based HR Management solution from the people behind PeopleSoft has already attracted the largest ever SaaS software order at Flextronics.
• Taleo - another innovative SaaS based in-house recruitment management system that helps smooth the process of managing recruitment and contractors

Those companies who look to drive growth through other methods like the internet can take advantage by rapidly expanding their online activities by outsourcing their Ad and Media Operations to companies who have deep market expertise and scalability enabling fast market traction and negating the need to hire staff or expensive contractors for peak requirements only.

• Theorem Inc - is rapidly expanding its footprint in the UK and provides outsourced Ad and Media Operations to companies wishing to take advantage of market expansion via the internet without having to hire staff for peak periods only, providing an ongoing partnership for scalability

Outsourcing is again back on the agenda - as costs are of a concern and staff levels, companies are again looking to leverage clever offshore companies who are experts in BPO, application management, consolidating enterprise applications and data and customising applications.

• Ephlux - is one a new generation of sub-continent based companies who are driving savings to companies by off-loading critical back office processes, applications and data
• Accexperts - is a China-based outsourcing company expert in Finance and Accounting with deep technology experience and expertise in all aspects of accounting and financial governance across a wide range of markets

Now is The Time to Act

So if you are an emerging US Hi Tech firm and you have an innovative solution that can help companies mitigate costs or realise extra profits fast, then now is a great time to enter the European Market and specifically via the UK. There is a rich experience in the sales, marketing and technical workforce, costs are more affordable and the timing is just right. Calx Europe is the experts in the field in helping manage your expansion in Europe and driving sales.

For more information on any of the companies mentioned above or on how to enter the UK and European Market to expand, please drop us a line at info@calxeurope.com or call on +44 (0)207 193 2356.