How To

Thrive in a Recession

As a fellow entrepreneur, you are probably wrestling with the challenges of the current business climate. Your customers have postponed projects. Your hot leads are less plentiful. Your bank account is strained. You are not alone. But what differentiates you from others is your ability to make smart choices, prudent decisions, and cost effective initiatives. Some of my colleagues and I have shared a few ideas on how to thrive during a recession. So I thought I would pass on some simple ideas on how to succeed.

STICK WITH YOUR CORE OFFERING

When business wanes, it is tempting to try something else, to introduce a new service or offering that is markedly different from your core business. But consider this. Would it really be any easier to convince someone to purchase your new product or service than it is to convince them to buy what you already offer? Probably not. You have a strong reputation; you have a unique offering that is valuable to your customers. You have spent years perfecting your business model. So stay on course. You provide great value – you just have to be patient while your prospects come around to realizing the same thing. If your customers are planning to go bankrupt, then drop them. But most aren’t. Most plan to grow sometime soon. Then be there for them when they do.

TAKE TIME TO PLAN

Time study research we have done on entrepreneurs shows they spend nine hours per week on forward-thinking activities such as market research, new product development, marketing planning, and team coordination. Also included in this is time spent each day planning their schedule, updating appointments, and figuring out whom to call. Invest the time to look towards the future, and the future will arrive with success. Make a to-do list each day consisting of items you can actually complete, not just stuff you will “work on.”

INVEST IN YOUR BUSINESS

At any time during the business cycle, growth-oriented companies should invest in three major areas; a) research and development, b) marketing, and c) human resources. As an entrepreneur, you should do the same, but without spending massive amounts of money.

To get into R & D mode, conduct some customer research; or complete a survey of current practices so that you can write an article. Meanwhile, create a price list for new services that you have always wanted to offer and that are consistent with your mission.

Then, invest in marketing. This starts with understanding what drives your marketing machine, whether trade shows, demonstrations, centers of influence, referrals, or pay-perclick advertising. Know what works, and do more of it, not less. Spend on marketing. Update your web site. Send out a newsletter. Attend a trade show. Just don’t cut back.

As for HR, how about upgrading your own skills? Or developing strategic partnerships? Become a virtual company – don’t hire staff, hire team members on contract. And bring on a virtual assistant to let you focus on the most important aspects of your business. Preciosa Leal, who leads Alliance Business Solutions says, “A resourceful virtual assistant can cost effectively provide an instant boost to your productivity.”

STAY IN TOUCH

Find ways to stay in touch with your customers and prospects. Be empathetic, not pushy. They have enough people chasing them for their business. As Scott Worsley, owner of The Film Buff says, “We are constantly being marketed to.” The world doesn’t need another blog, another announcement that you have updated your web site, or another offer to send an information kit. On the other hand, what they would appreciate from you is your expertise and the good value you offer. To stay in touch, you can:

• Make copies of relevant articles, or write your own. Mail them to your best customers. (Yes, try real mail once in a while. It might just stand out.)
• Suggest a value-added service that you can offer over the phone at no charge. For instance, conduct a “check up” after a seminar, offer to review a marketing plan, or provide a coaching tip.
  
• Visit your customers. Print broker Jeff Biggs of Inkwell Marketing delivers materials to his customers, giving him another opportunity for contact.
  
• Offer creative financing for projects they would like to do now but cannot afford. Invoice them later. Or charge the full price for one part of the project, while offering the other part at no charge.
  
• Call to offer congratulations, birthday greetings, or best wishes for an upcoming holiday. If there isn’t one coming, make one up. Everyone appreciates a smile.

Business coach Warren Coughlin says, “A recession simply means that supply exceeds demand. People are still buying, you just have to stand out from the crowd and find those who are ready to make a purchase decision.”

WATCH YOUR CASH FLOW

Any business can run out of cash, even a profitable one. As an example, says marketing expert Ian Mishkel, small retailers can get pinched when they have to buy inventory that does not turn into cash for a while. Cash is king, so plan your cash flow. Start with a simple spreadsheet. In columns across the top, enter the months of the year. In the rows down the side enter your sources of revenue. Below these, list all your major expenses into the future. Be sure to include your own salary, plus a provision for taxes, as well as reserve funds. At the bottom subtract expenses from revenues each month to obtain your month-end balance. This becomes your opening amount for the next month. It sounds basic, but few entrepreneurs do it.

Under normal conditions, you might estimate about three months out. In tougher times, consider projecting your cash for up to a year. At some point during this period, expenses will continue, but revenues will stop. Your projection will show a shortfall. That’s where you will need to dip into your savings, or take advantage of a line of credit. Include those in your cash flow. Then, any new business that comes in will be a bonus, and will reduce the need to dip into savings.

Here is what is important about this approach. By making a decision now that you will borrow six months from now, you remove the pressure of having to make a sale this month. The result is that you can remain cool and calm, knowing that your cash flow plan will sustain you through the year. This minimizes short term worrying. As Toronto based chartered accountant Rubin Cohen says, “When you maintain your composure, you are more successful than when you are desperate.”

BEWARE OF EXPENSE LEAKAGE

Financial planners such as Michael Chow from Stonehaven Financial Group and Derrick Lahey from RBC Dominion Securities warn about expense leakage. All the minor daily expenses that we pay little attention to create leakage. Together they can be a real burden, because nothing adds up to much, but everything adds up to a lot. Consider how much you spend on coffee, cigarettes, chocolate bars, muffins, road tolls, cell phone calls, your Blackberry, coffee, your cable bill, credit card interest, coffee, and newspapers. Oh, and did I mention coffee? When you track your expenses for a month, you will be surprised at the impact of small expenses. Cut out the things you thought were essential, but really aren’t.

There is a different kind of leakage at the other end of the financial scale – big expenses for the cottage, private school education, a second car, the kitchen renovation, membership dues at the club you rarely use, outstanding credit card debt, a home theatre, and many others. These are the big-ticket items that are harder to cut in the short term, but also create a financial strain.

The minor daily expenses are mostly just stuff. The big expenses are mostly just possessions. But what many people really want are the things that cost somewhere in the middle. They want more experiences in their lives. They want dinner dates, trips to the zoo, vacations, lunch with a friend, a day at the spa, and theatre tickets. Creating experiences is also about purchasing time for them by hiring others to free up time. Someone to clean the house, a virtual assistant to conduct clerical tasks, baby sitters, and handymen. By controlling the big expenses and the small ones, you’ll have more money for the medium-sized expenses that pay for great experiences. Do what you do best, and delegate the rest.

Another aspect to money management is saving. Are you having trouble putting money aside? Dump your coins into a jar at the end of each day. They will add up fast and you can use what accumulates for “mad money” – a special treat or a night out once in a while to celebrate.

SMILE AND BE GRATEFUL

When you look back at the past, there is often temptation to be regretful or wish longingly that things had turned out differently. Unfortunately, you create negative energy when you use phrases like these:

• “I should have cashed my stocks…”
  
• “I missed a chance to buy that house…”
• “If only I had followed his advice…”,
  

Regret drags you down. You should learn from you mistakes, not dwell on them.

Looking in the other direction towards the future, anxiety can be just as much of an energy drain:

• “I’m worried I won’t have enough money”
• “My health might not last.”
  
• “I might lose my job.”
  

Gratitude on the other hand, is appreciating what you have right here and right now. If you are healthy, if you have a family, if you have customers, and if you have friends, then you have everything to feel good about. Gratitude trumps regret and anxiety any time. So pause, reflect, and find joy in all that you have. The moment you are in now is pretty special. Remember – some day, these will be the good old days. Celebrate your success. Thriving in business is about getting sales, but it is also about having a positive outlook. We are entrepreneurs. We make choices for ourselves. We choose our own path. We succeed where others can only wish. So go out and thrive. Do the things that are nourishing, productive and positive. And keep smiling. After all, your time is worth it.

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