April 2008
OPPORTUNITIES IN A SLOW-DOWN
By Tony Mulkern
Whether it is merely a slump or the beginning of a recession, there is no doubt the economy is slowing down. First quarter growth of gross domestic product is seasonally adjusted to 0.6%. Decline of GDP is expected for the second quarter, business spending is down about 2.5%, and housing is still taking a big hit.
While few entrepreneurs and CEOs would wish for such numbers, it is worth reflecting upon the opportunities that may be imbedded in them, for strengthening the firm and making it even more competitive when more robust growth returns.
This reflection itself provides a competitive advantage, since many businesses owners in even the most modest slowdown become despondent, decrease their marketing and advertising efforts, demoralize their employees, skimp on customer services, and help fulfill their own prophecies of imminent decline. This is not a matter of denying what is real, but of being clear about what is possible.
So what are some of the opportunities and how can you capitalize on them?
- Get rid of marginal contributors. The Hollywood and television stereotype of the ruthless business owner who cares only about profits and nothing about people does not fit the successful entrepreneurs that I know and have known. Perhaps from a misplaced sense of loyalty or a soft heart, they too often allow poor performers who are barely getting by to take advantage of them, in the hopes that eventually they will be productive. This not only creates unnecessary costs and missed opportunities; it can also damage the morale of the top performers. When things are tighter, however, sound management practices look more attractive. When implemented humanely, they also seems more palatable when everyone understands that there is just less money to go around.
- Seek new markets and customers with natural affinities. Examples: Starbucks expanded into tea, juice, salads and sandwiches. Many supermarkets stock a wide selection of quality wines and house pharmacies, dry cleaners, and bank branches. Gasoline stations sell groceries and drinks, which have become their highest profit items. Some airlines have duty-free shopping in the air. Pet supply stores provide trims and training. What natural expansion of your products and services are you missing that could help you to weather downturns? Consider new products or services that appeal more to customers in a downturn. The recent 6% decline in gasoline demand means people are driving less. Could they now be more interested in home entertainment systems—or home delivery?
- Win customers from struggling competitors—even acquire them outright. If competitors are neglecting their customers, cutting back on service, or starting to nickel-and-dime them, this is an opportunity to capture market share. Some competitors will be so poorly prepared for a slowdown that they cannot survive. They may make excellent acquisition opportunities. But be careful not to purchase a business whose customers you could have captured otherwise at lower costs through shrewd marketing.
- Use slower times to do the training that has been put off too long I have yet to see a company that considers itself caught up in terms of training needs. From basic computer instruction to advanced executive skills, there are probably many areas where lack of training is costing you revenue or opportunity. Shortages of time or money are the reasons often given, and the truth is that extra dollars are usually easier to find than extra hours. But in a slowdown the time is available. Making this investment signals to employees that you are bullish on the long-term future of the company, a reassurance your top talent may need in order to stick around when things get a bit tough.
- Sharpen sales skills—this is no time to ramble on with prospects about benefits and features like a hawker on late night TV ads. It is a time to uncover problems through skilful questioning and genuine empathy and to instead provide solutions. People’s needs do not go away in a slowdown. They might actually increase, though in different ways than in an economic expansion. What are you doing to monitor changing customer needs and to adapt to them? Staying responsive can win you customer loyalty for the long term.
- Think twice before cutting your marketing or ad budget, though it is a good idea to assess what really works. If business is scarcer, this is not the time to make your business harder to discover. Leave that to your competitors who have not planned for leaner times.
- More than ever, distinguish yourself from the competition. There will always be a part of the market for which lowest price is the main criterion. Unless you have strategically selected this niche as Wal-Mart has, pass it by and make a strong case for the value that you bring that makes you not the cheapest. Clearly demonstrated integrity, reliability, extraordinary service, and top quality will always be valued—and in the long run usually less expensive. Consider offering discounts for early payment or more favorable terms payment terms with a down payment. Such measures can actually increase your cash flow, rather than put you in a bind, especially if slow payments have been a problem.
- Continue to think in terms of expansion and growth, and they can be yours, when the next up-turn occurs, as it surely will. It is easy to be optimistic when everything is going your way. Leadership requires enrolling employees in a sunny vision of the future—even when the present is partly cloudy or stormy. Keep employees informed and trust them to be grown-up enough to handle the truth.
Most importantly, retain your perspective. Even the most pessimistic forecasters of a recession paint an economic picture that will still be the envy of the world. Belt-tightening is not the same as starvation, and like dieting for an athlete in training it can actually be the discipline that makes you more prepared for victories in the future.
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Copyright, Mulkern Associates, 2008
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