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Recession Blues

"Since this recession I’m losing my baby,
Because the times are getting so hard"
BB King, Recession Blues

Surviving the downturn is the hot topic of the moment. We watch every minor movement in the economy and convince ourselves that the recession is here and with the downturn will be the ultimate decline of our business. The last person to listen to is the old 'grey-hairs' who start the conversation with the phrase, “When you’ve survived as many recessions as I have…”.

Please note that, despite what they say, there is no evidence that their actions saved their businesses. What we have here is called 'survivorship bias' – we only listen to what the survivors claim made them successful and assume these actions caused their success – the old cause and effect (or chicken and egg) conundrum. What’s important to note here is that we ‘listen’ to the winners but not to the losers; and both justify their position by re-writing their own history to fit the results; so listening to their side of the story may not be that helpful.

Most ‘research’ ignores the key fact that the difference between the winners and the losers is marginal. There are more similarities than differences. Maybe the big difference is just luck: being in the right place… or bumping into the right people… or randomly deciding the right price… or making ‘that phone call’. Meanwhile the successful survivors attribute their ‘results’ to their skill. Nonsense – success comes from doing the right things and being in receipt of a generous dose of good luck! 

There are two extreme approaches to surviving: the ‘batten down the hatches’ approach and the ‘now is the time to stand out from the rest’ approach. Each seems to appeal to a different style of owner when there may actually be a more sensible middle path.

Batten Down the Hatches

The typical survival approach is like a doom and gloom monster feeding itself on itself: all new purchase decisions are put on hold; training, consultancy, advertising and sales budgets are frozen; all debtors are chased unreasonably; creditors are kept waiting; prices are reduced to ‘be more competitive’. It is all a bit of a slippery slope. Competitors, suppliers, staff and customers all smell the panic in your behaviour. The bank gets nervous; the vultures get excited. Everyone starts asking about how long you think you might be able to survive. Someone kindly gives you name of a friendly insolvency practitioner who can make things easier for you. And even if you survive the downturn, your miserly approach to anything that might help you to grow the business means that you no longer have the resources or deep pockets to invest and be ready when the recession is over and the new world of opportunity finally appears.

Recession, what recession?

Now is the time to stand out. A more contrary view is to see the downturn as the time to stand out from the rest by investing in your people, new products, business promotion and generally shout from the rooftops that you’ve never had it so good. By implication you are saying that you are better/safer/more reliable/successful than your competitors who are clearly struggling.

This high risk strategy will get you talked about but the real concern may be about your stamina to survive the prospect of literally haemorrhaging cash should your cunning plan not pay off.

The truth probably lies somewhere in the middle. Don’t talk your business into receivership (reducing prices may well be the first nail in your coffin) but don’t be stupid (spending money unnecessarily). A systematic, structured approach to your business should get you through the bloody battlefield ahead.  The first thing you need to do is assess your current business performance. Realistically look at your current activities and make some sense of what is going on. There is no shortage of profit improvement checklists to survive the recession (eg www.directorscentre.com/profit-improvement.php). In reality, there are some tough questions you need to ask yourself. You need to answer the questions honestly and take massive action. That is the only way to make sure that you don’t become another statistic.

Do not wallow in the mess of trying to make sense of it all but make some clear decisions based on some simple criteria. Do not get over-emotional and do not get over-complicated. All you are trying to do is run a business, ie buy stuff that people want at one price and sell it for another and make a profit in the meantime.  How difficult can it be? So ask yourself the following tough questions:

For each question there should be an action point answering the question. Actions can be generated by asking “What are we going to do about it? What are we going to stop doing? Or start doing… continue doing… do more of… do less of…?”

Some Crunch Questions

• Where do you make the money?
• Where are the Quick Wins?
• What are the Long Shots?
• What are your Top Five Products/Services?
  How can you sell more of them? How can you getter better prices?
• What are the current ‘opportunities’?
  If you could only focus on three of them then what would they be?
• Where are you currently wasting time and money?
  Which suppliers/customers/staff/products are unprofitable? Which ones should you fire?
• When will you do it?

And if the poo is about to hit the fan...

When you are eight weeks away from bankruptcy then it may well be too late. You owe too much and can’t see a way back, you are under-resourced and you are under-delivering and it feels like you’ve run out of time. You are probably being dishonest with suppliers, customers, staff, the bank, yourself and your husband/wife/partner. The only answer seems to be to borrow more money. The reality is that you may be clutching at straws. So, at least be honest with yourself and your partner. Be warned, most bankrupt people live on their own; their partner and children have long since gone because they can’t cope with the deceit and lies (or delusion and illusions).

There is no shame in bankruptcy. In fact it may be better to go bust now than to try and keep the business limping on for another few months. The relief is immense – you hand over all your debts and your assets to someone else to manage. No more bailiffs or irate customers or staff. No more debts. It ceases to be your problem. And you can go and get a no-brainer job like stacking shelves in a supermarket and you will receive all that you earn (after tax and National Insurance). No more worries at night – you can spend time with the kids or do all things you’ve not got round to for years: paint the spare room, walk the dog, visit your mum. Sounds pretty good to me. Of course we are back to the old 'survivorship bias' – we don’t hear much from the ‘failures’ and when we do they deliver a message that has been skewed by their justification of what has happened.

The Actions

Now is the time to step back and review the business (performance to date, the potential to grow) and put together a simple plan (one page maximum) to get you onwards and upwards. Stop procrastinating. Decide what you are going to do and do it, but do it properly. Stop playing around the edges… be decisive and take action. 

 

 

 

about the author

 Robert Craven is the keynote speaker and author of the best-selling business book 'Bright Marketing - why should people bother to buy from you?'. As MD of The Directors’ Centre www.directorscentre.com, the consultancy for growing businesses, he works with ambitious owner-managers to break through constraints on business growth. He can be contacted at rc@directorscentre.com +44 (0)1225 851044.

Robert Craven©2008

publication details

First published in Start Your Business Magazine - May 2008