This blog is about helping businesses to market and survive in a difficult economy, once you’re open again. I don’t want to sound like a Cassandra, but things are going to be tough for a while. Disneyland is closed, and so are casinos in Vegas, which are two out of the four horsemen of the apocalypse (I am pretty sure oil going for $-37 a barrel is another sign). When these businesses do open up, they are not going to be filled to capacity; in fact, they may be rather empty for some time to come. They are going to lay off some employees permanently, and so will the suppliers and ancillary businesses that depend on them. So, don’t expect a quick turnaround just because everyone says it’s ok to go back to work.
There is No 90-Day Fix
Some businesses will hurt even longer. Airlines are going to be in bad shape, and while I feel bad for airline employees, airlines have spent the last five years making flying miserable for everyone but their own bottom lines. As businesses have learned to make due with Zoom and GotoMeeting — combined with our collective memory of horrible flights and nickel and dime airline fees — airlines will face headwinds for months, if not years. That means that airports, transportation companies and municipal governments will face challenges, too.
So what’s our point? The recession is here. Get ready for a long one. In January, we wrote a blog on preparing for a recession, not because we are brilliant, but because recessions always come when you least expect them. But you can get through this. 360 has been through the Great Recession and we — and most of our clients — made it out the other side and are still here today.
Just Remember Some Basic Rules
It isn’t going to be easy, and I’m not here to sell you snake oil and miracle cures. But if you hunker down and follow some of these rules, you stand a better chance.
Rule #1: Every Cloud has a Silver Lining
In a recession, the cloud is shrinking sales, unemployed people, and uncertainty. The latter is what makes things really hard. But don’t lose sight of the positives:
- This will end
- It is easier to find (and afford) qualified people during a recession
- Supplies, advertising, services all get cheaper
As your cost of business gets lower, you can look for ways to leverage that into ways to grow. Some of your competitors won’t make it (I’m not counting that as a silver lining), but that may be an opportunity for you to merge with them and capture more market share, or buy their book of business and gain more of a shrinking pie. Save every dollar you can, but be prepared to spend where it can grow your business, or save you money on things you have to buy anyway.
In marketing and technology — our area of expertise — you can make your dollars go further during a recession. Add the right functionality to your website, implement the most efficient marketing campaigns and you will see your business grow for less than what you would have spent just a few months ago.
And if the worst happens, don’t be afraid to consider bankruptcy. Not the first choice of course, and you will have tough times for many years with bad credit, but bankruptcy is a new start for many companies and individuals. Don’t let the stigma of it prevent you from investigating it with a qualified legal professional if there is no other choice.
Rule #2: You Are Not in This Alone
During a recession, many business owners and executives start to feel isolated. One of the reasons that some people buy franchises is to have a support group, and that makes sense. But there are other ways to gain security and confidence in numbers short of paying royalties.
Work With Your Vendors
During a downturn, many companies are tempted to beat up their vendors, knowing that sales are even more critical for some suppliers. I have a better idea: call up your key suppliers and ask how you can work together. Sometimes that means they extend better terms or lines of credits, and sometimes it means they actively help you gain new leads and accounts. But they are unlikely to help if you position this from the “I’m going to squeeze you for every dime” angle. We have helped a lot of companies look for ways to get more from their vendors that actually increase sales, instead of just beating down costs.
The Hispanic/Black/Asian/Export/Local Chamber of Commerce, an affinity group, a trade union, your competitors, et al. It doesn’t matter, but if all of you are rowing in the same direction, you will get there faster, together.
Lean on Your Family and Friends
In times of adversity, close-knit groups survive better. People with deep community, ethnic, family, religious, political — whatever — connections just do better. People refer business to each other, lend money and provide support. Get the theme here? Don’t do it alone. Wait, I think I may have said that already.
Rule #3: You May Have to go Into Debt
Many business owners avoid debt. As we mentioned in our get ready for a recession blog, try to get credit and avoid debt before it hits. Well, now is the time to get into debt if you need to. Debt is how companies tend to survive recessions. The best organizations are planning on how to pay it back even before they borrow the money. You may have to borrow for payroll, or to pay for supplies. It happens. Just remember that you are borrowing off of tomorrow’s profits. As long as you can plan to do that and still make a living, you are probably ok. If the amount you have in debt is going to eat up more of your future earnings than you had in earnings before the recession, you may want to rethink whether you are better off scaling back.
Banks are not the only place to turn to for credit during a recession; they generally are pathetically bad at extending it. Any business right now that is hurting and looking for support from its bank is likely getting a cold shoulder. Even with the government ponying up hundreds of billions in 100% guaranteed loans, many banks are looking to wet their beaks, rather than truly help struggling companies (that has been my experience with big banks).
Look for nontraditional lenders (no, not the mob). Vendors, associations, microlenders, family and friends and direct-to-investor lenders like Kabbage. Loans come in hidden packages like extended payment plans, low-cost leases, and rent-free months. Just remember that a bad loan is a bad loan. If you can’t afford it, you are just making things worse. Payday lenders trap their borrowers in vicious cycles of high-interest debt. There are plenty of those predators in the business world, too. If they are your only option, maybe you need another exit plan.
Rule #4: Find New Ways of Making Money
This rule is my favorite and the place where 360 has the most experience. It is also what got many of us out of the last recession. It starts with two questions: what can I sell today that replaces the revenue from the parts of my business that have fallen, and who (or what) can lower my costs of selling it?
During the last recession, we saw our Fortune 500 business fall by 30% for a period of a year or two. We survived, with no layoffs, because we looked hard for customers who were buying. In our case, it was the government. They needed websites, and we were used to building large ones, so we started responding to RFPs. It not only kept us afloat, today it is almost half our business. Right now, a sister company of ours is migrating from planning large tradeshows and conventions to doing exceptional online meetings. And when they get through this recession, my guess is they will have a profitable new line of business.
If you sell to restaurants, maybe you can sell direct to consumers, or to supermarkets. If you sell supplies to the automotive industry, perhaps it is time to try selling to aerospace or electronics. The market as a whole may be shrinking, but if you can find related and incremental business, your world will expand. Let us know if you need help finding and attracting new business opportunities.
You can also try non-traditional ways of promoting your products. Do trades, swap customer lists with related businesses, build email lists through your website and go after co-marketing dollars and in-kind dollars from every vendor you know. Lower your marketing costs so you can conserve cash and spend it places where you can’t save money.
Rule #5: Leverage What You Already Own
Whether it is your website, a piece of machinery or the people you employ, the assets you already have are the best place to find hidden opportunities. If you have underused assets, then finding ways to more fully utilize them increases profits. For example, a small company that makes potato chips was hurting in the last bad economy and was not keeping its kettles or employees fully employed. It reached out to other struggling (and even growing) competitors that could use its services at a discount during and after hours.
Another example: A manufacturer of electronics parts had a really good website, supply and logistics setup, but poor sales. They found a couple of companies that were still selling but paying a lot for distribution. We were able to customize their website infrastructures to support the other companies’ products. More revenue for our client, and good savings for two others.
If your employees are underworking, try having them assist with sales, marketing, promotion — anything that helps you grow.
Rule #6: Make a Plan
If you have been faithful about making business plans, don’t stop now. If you have avoided it in the past, start now. There is something about writing things down and taking some time just to think, that makes the scariest of situations seem more manageable. If you don’t know how to make a plan, or where to start, contact us and we will help.
It Is Not All Doom And Gloom
Things are bad, and that are likely going to get worse before they get better. PPP loans, and supplements to unemployment insurance are going to dry up before we get out of this. Those bills are going to come due, and we may even have another round of closings if the pandemic flares again. Nothing we can do about that. But if you stay focused, and plan for the long haul, you can get through this.
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