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RECESSION: A TIME OF OPPORTUNITY FOR BUSINESSES
By Dr. Wayne Eisenhart
 

This article is written for those business owners or managers whose businesses are struggling with an economic recession or who are attempting to successfully compete in an economy recovering from an economic recession. During the early 1990s the United States, and in particular my home state of California, suffered through a serious recession. In the course of my work during this period I was struck by the fact that in almost every industry there were some businesses that handled the challenges of an economic recession better than others. It was highly interesting to me to note which businesses survived, which didn't, and why. Further, I was pleasantly surprised to observe that some businesses not only survived, but actually increased their profits in the face of a stagnant economy. These businesses used the significant challenges at hand to reinvent themselves, to compete more effectively, and to lay the foundation for their continued success in the increasingly competitive global marketplace. This article aims to summarize the lessons that I learned while advising those businesses that successfully met the challenges of surviving and prospering in a recession or recovering economy.
 

Attitude

The single most important factor is attitude. The issue is whether one has a defensive or an offensive mindset. The defensive mindset is one in which all decisions are based on fear and insecurity. In difficult economic times it is not surprising that most entrepreneurs adopt a defensive mindset; times are tough, don't take risks, cut back, lay off wherever possible, "ride-it out" the tough times, are the operative concepts. Typically, overhead reductions are made in all areas including (erroneously) sales, marketing and advertising. Many times the classic error of cutting prices is made. In order to maintain profits this requires a greater volume of gross sales which is often impossible to achieve in a down economy. Entrepreneurs act out an attitude of no longer "playing to win"; instead they "play not to lose."
 

Playing to Win

Those entrepreneurs who survived and prospered through hard times had a distinctly offensive mindset, or a "go for it," attitude. This is classic entrepreneurialism at its best; let us move boldly forward in ambiguous situations. We will play to win, not to lose. What this type of entrepreneur sees in a down economy is two things. First, a recession is not really a problem, but instead is seen as an opportunity to out-compete and bypass more fearful, passive competitors and subsequently gain greater market share. Second, they used difficult economic times as a means to assist them in making the difficult decisions necessary in order to reinvent themselves, restructure the business, and lay the foundation for a dynamic profitable future in whatever competitive situation they find themselves. This "go for it" attitude leads entrepreneurs to restructure their business to gain greater productivity, to develop new products and services, to find ways to serve their customers better, and to more aggressively sell.
 

Strategies for Success

Some things that entrepreneurs will want to do when in or recovering from a recession: analyze the business; restructure/re-invent the business; strengthen marketing and sales; educate employees; and improve morale and productivity.

When analyzing the business, talk to your employees, suppliers, and customers. Ask yourself where the weak spots are or what areas need improvement within the business. Don't look so much at symptoms, but at root causes. Think about people versus system/procedures. Are the systems and procedures in the business weak and in need of improvement, or are they just fine and employees aren't following through properly? Conduct a survey of your customers. Get feedback from them. Ask how you can serve them better.
 

Restructuring

Look for opportunities to restructure the business. Perhaps the key for many businesses is to be highly leery of rigid hierarchy. Reduce levels of bureaucracy whenever possible and reduce overhead by laying off employees wherever possible. In particular look for opportunities to "trim the fat" in middle management. Strenuously seek to reduce costs and overhead in all ways. Something to consider is forming or participating in "buyer's clubs" to reduce costs. Form alliances with similar businesses and "bid out" the various services and products that your business requires. Reduce your overhead, and aggressively and creatively reduce prices from your various vendors.
 

Instilling Entrepreneurialism

Larger businesses should look to re-energize themselves by breaking up into smaller units, thereby reducing bureaucracy and increasing through creative compensation, and entrepreneurial incentives. Review and improve accountability and communication where necessary. The business needs to be tightly disciplined and responsive to rapidly shifting markets. Do this by reviewing all job descriptions and tightening accountability. Make sure all employees know exactly what is expected of them. Review the chain of command. Make sure that everyone knows who to go to for what type of question. Finally, maximize delegation across the board. Everyone, especially management, should delegate simple tasks to the lowest possible level. Once this is done you should have a leaner, lower cost and a more responsive work force. When the economy improves and you need to add staff, always hire from the bottom of the infrastructure at the lowest rate of cost.
 

Creative Marketing

It is critical to get creative with marketing. In addition to the previously mentioned customer survey as a means to find ways to improve your product/service, an innovative idea to consider is to identify businesses who are similar to you but because of geography or other factors do not feel competitive with you. Identify – countrywide -- within your industry who are the leading thinkers or most innovative entrepreneurs. Develop a network of such individuals. Ask for their advice on how they are handling the challenges at hand. Generally people are rather free when giving advice to others. Why struggle to meet the difficulties you are facing alone and in a vacuum?

It is very important to take the time to develop a "hook," an "angle," or a "unique selling proposition." Create a unique identity for yourself in the marketplace. Get creative! Do something different in how you provide your service, how you sell, your method of service delivery, pricing or guarantees.  In my experience, most industries sell, promote and price themselves much the same way. Do something different.

The fastest way to increase sales in most industries is an upsell campaign. This means selling more of your product or service to the customers that you already have and at the same time asking for referrals from them to help you acquire new customers.
 

Employee Education

In my experience I was surprised at the degree of education that employees required concerning what was expected of them. Many times they did not grasp the basic concepts involved. What I mean by this is what I refer to as "team pocketbook." It is in the best mutual interest of owners, managers and employees for the business to change, improve and grow. Too often there is an "us vs. them" attitude from employees to management. Employees need to be told in terms that they understand that their performance and productivity will need to improve and that it is in their best interest to do so if they wish to maintain their employment. Worker complacency even in the face of a recession is a very striking phenomenon. In my belief, fear is what often led to increased worker productivity, business competitiveness and profitability. In the U.S. we tried MBO, TQM, Open Book and Mission Statements. As the recession loomed we saw no significant acceptance of the challenges ahead by employees. Only when the layoffs, plant closings and bankruptcies began did workers and managers "get it"!  I feel that this is the key factor in the turnaround of the American economy and the significant increase in worker productivity. "Necessity is the mother of invention." Do not be afraid to terminate poor performers, those with bad attitudes. Give someone else a chance to compete for the job. Create a team of motivated winners. Cut the rest. Install bonus and incentive programs that reward superior performance. Hire people who accept and thrive under this type of accountability.  This will improve morale, competitiveness and profits.

I hope this article has provided some direction to those entrepreneurs who are facing the challenges of difficult economic times. The Strategic Management Skills for Growth and Increased Profits  Program discusses all these issues in much more in detail. This exciting program pays for itself by using simple means that are specific to each participant. Each participant leaves with an action plan.
 

This article was published in the Philippines and Hong Kong.
 

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Dr. Wayne Eisenhart
Professional Keynote Business Speaker & Trainer
Entrepreneurial Development Group(EDG)
Dr. Eisenhart may be contacted initially by email.
E-mail: wayne@futuremaker.biz
Web: www.futuremaker.biz

Dr. Wayne Eisenhart is a dynamic international keynote speaker, public speaker, professional speaker, business speaker, management speaker, and business consultant on today's most critical business issues. He specializes in entrepreneurial development, business development & business management, globalization issues, leadership training & leadership development, management training & management development, organizational development, customer service, hiring, training, and supervision, building profits in any economy, and more. He is available to speak at conferences, conventions, public speaking events, seminars, meetings, custom programs, in-house presentations, organizations, shows, speaker bureaus, and special events.