Hunkering Down In A Recession
Look around you – even though the recession and global financial crisis seems to be easing somewhat, there’s still business that are going bankrupt and closing every day. If you’ve survived this long, congratulations. It’s not easy.
In any downturn, there tend to be three things that happen to companies:
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They don’t manage to sustain themselves, they run out of money, and dissolve or sell off.
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They “hunker down” and manage to survive, and emerge as a weaker version of their former selves.
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They are more aggressive, position themselves for the new reality, and emerge as the new leaders.
Many people think that the difference between these last two options comes down to luck, cash reserves, and loyal customers, but that’s really not the main story. What makes industry leadership change hands is that a few companies still manage to think creatively, despite the recession, and make careful choices based on a new and different reality.
Let me use an example that’s come to mind recently. The construction industry here in the US is still in very bad shape, and many companies are gasping for air. But I can now see a difference between those who are assuming that we’ll eventually return to the market of five years ago, versus those who realize that the nature of the market has permanently changed.
I don’t mean that we won’t see a return to growth in new residential and commercial construction. We will. But it’s also true that:
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We will have a huge, huge backlog of foreclosed and underutilized properties, which means that much more money will be spent renovating those buildings than for new construction.
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There’s a strong shift toward energy conservation, so companies who have invested to build their expertise in LEED and other technologies should be rewarded with more demand.
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The structure of financing has become much more rigorous, because governments have recognized that easy debt caused people to take too many risks, triggering the recession.
I believe that each of these signals a change in the basic structure of construction and related industries, and the strong leaders of the future will be those who position themselves to be the best choice in this new reality. You may not like it, but there’s always things about the market that you have to work around.
What’s the new reality in YOUR industry?
Carl Dierschow
Small Fish Business Coaching Fort Collins
www.smallfish.us
Your Role As The Business Grows
I was talking to a couple of business owners recently who are struggling with growing their companies beyond the stage where they’re just a single person with maybe some contractors. Both of them remarked that, perhaps, they might not want to personally be the President of a larger company – even if that’s just 5 people.
The neat thing is that there’s lots of great models about migrating into something more creative. If you enjoy the technical part of what your company delivers, maybe you don’t want to spend time managing others. These days, it’s possible to team up with someone else who wants to do that. Or someone who wants to focus on marketing. Or delivering great service.
You might not hesitate to hire someone who is great at the financial aspects to be your first CFO, but somehow it feels strange to bring in an “outsider” to be your CEO. But in fact, a lot of people do just that.
And it doesn’t mean you have to give up control of all the big decisions. You can still remain as a primary shareholder, thus controlling the BIG decisions.
It does get a bit tricky, sure. When are you the employee, versus the primary shareholder? Your poor CEO wouldn’t want to have every decision question and challenged; that would be ineffective.
But the same is true for partnerships. You have to separate the roles for doing tasks versus making major directional shifts, and then stick to it. Partnerships have a certain way of making operational decisions, mostly as a single individual, while making the large strategic decisions as a pair or group. And it CAN work, if you think through it carefully and then stick to your decisions.
Maybe it doesn’t look like an average corporate org chart, but maybe that’s not the kind of business you want to have.
Carl Dierschow
Small Fish Business Coaching Fort Collins
www.smallfish.us
Limited by the Available Market? Get Creative!
I was talking with a local franchisee recently who has run into a bit of frustration with his business: He’s limited on his available region. Since he’s only allowed to service a specific region, and there’s a certain number of customers here, it seems that his company’s growth is tied to that of the population. Of course, he can try to take away points of market share from the competition, but that gets harder and harder.
This is actually quite similar to the scenario I described in my April column, Grow your business in a down market. No matter what the cause, when you’re seeing external limits to your growth, it’s time to get creative.
One of the first things to look at is the up-sell and re-sell opportunity. Your richest source of customers is actually your existing customers. Why? Because they know you, and like you well enough that they have already given you money for what you provided. Sure, those customers might only need so much of your product or service each year. But you certainly can:
- Sell them some different products in addition
- Move some of them to a higher quality product at a higher price
- Look at structuring things differently so that they have an interest in preferring you over the competition at every purchase point
- Change the pricing structure in general to be more appropriate to current conditions – either down OR up
- Buy out some competitors
- Create alliances with partners who can help drive more business to you
Beyond that, there’s a number of ideas around just getting the money that you’re owed:
- Give customers options for payment, perhaps giving you some money earlier
- Work your accounts receivable
These are very useful when you’re in a cash-flow crunch, but will sometimes help to drive more total business to your business as well.
Limited by the available market? Time to get creative!
Carl Dierschow
Small Fish Business Coaching Fort Collins
www.smallfish.us
