For many businesses this has been a tremendously difficult time since the 2008 crisis. Business fell off. Sales techniques that always worked, well… stopped working. Customers stopped coming through the door and when they did, they were much better informed and much more demanding.
This is my 3rd recession and each time I have observed that while many businesses fail miserably, a handful surge out of the recession. Some household names like Apple were founded during prior recessions.
Why did some businesses survive and thrive?
Kipling hit the matter squarely on the head with his poem:
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too
There are many answers to the challenge of surviving a crisis but at the core is “being nimble”. Don’t panic! Think! And change your business. What worked before no longer does, so find something that does work for you. In Kelowna, TruWood Custom Wood Works had always firmly dominated a special niche as producer of extra fine, real wood cabinets with unique, designer driven finishes. Of course, the buyers were well heeled and easy with their money. When that dried up, Andy Ingram, owner, went into action, finding markets outside the Okanagan Valley, as far away as Alberta and Vancouver Island. He is outsourcing unnecessary work to keep his fixed costs down. He changed the way he found clients using social media and working the phones. His new website www.truwood.ca, is loaded with pictures of past triumphs accurately reflecting the quality work and honest approach that he conveys in person.
More globally, you could look at Ford, Amazon, Lego and Intel, or even Domino's Pizza.
It's not easy to admit your product stinks on national TV, but Domino's Pizza did just that. Sparked by a consumer survey (with video clips on TV), the pizza overhauled its recipe, proving that change is good for business. Under the new campaign and new recipe, profit more than doubled in the fourth quarter of 2009, increasing sales for that quarter by $23.6 million.
The secret to Domino's turnaround was novelty: changing the self-proclaimed cardboard crust and ketchup sauce to a new, improved pizza brought people in the door. Time will tell if Domino's can keep these new customers, but for now, the pizza giant has turned this remake into a financial success. http://www.investopedia.com/financial-edge/0810/6-companies-thriving-in-the-recession.aspx
As in the above local and far away examples, the first requirement is honesty and willingness to junk old and established ways of doing business, recognizing that they no longer work and then seeking advice from colleagues, employees and professionals to help create a new company. We are again at the starting line but the speed limits have changed.
This column focuses on business problems and how to solve them. Andrew Gregson, BA, MA , M.Sc.Econ is an economist, author and a Senior Partner in iNTENT Financial Inc, a Kelowna based finance and consulting company. The 4 partners specialize in finance, pre-determined profitability, sales and marketing. If you need further information, please contact us through the website at www.intentfinancial.com.
All over North America and Britain, owners of small business are complaining that sources of credit, and especially banks, have dried up. In Canada it is worse than elsewhere because the choices are so limited. If you Google business loan Canada, the first few pages are the banks and then BDC and finally Community Futures. From there it is a long drop to the world of loan sharks. And if you are a small business looking for $300,000 to grow or help you out of a jam, then you are in no man’s land. That amount is still considered friend and family money.
In the US the evaporation of credit and family money has resulted in a dramatic drop in entrepreneurial activity.
Unfortunately, in BC the recession has hit thousands of companies really hard. Falling sales and profits have been paid for by hollowing out personal assets like homes, RRSPs and even children’s education funds. And the bank loans as above have been accompanied by General Security Agreements that put the banks in more secured positions while making it impossible to find more funding of any kind.
So how will this information help you? First, there is no financing so why waste your time applying? A much better use of your time is to prepare the business for sale. This means cleaning up the stupid things that have accreted to the balance sheet or the profit and loss statement. It also means streamlining your sales organization and collections. If you have the capacity and time, look for strategic partners who can help you grow. Look for partners in the same industry who can help you offer a wider line of products and services. Create a great exit strategy – growth or sales of assets – that you or a buyer or a lender might look favourably upon. Only the strong survive a recession. You need to be stronger, not weakened by further debt.
And after you have done all this, now is the time to snoop around for more money. Some people are wakening to the fact that small companies need money too and there is a gap in the market. So if you get more cash, what form should it take? Converting debt to equity makes you stronger. So the incoming money would buy up the bank loans or the GSAs. You must give up a share of the business, but the balance sheet is much stronger and without debt to service, you are more profitable.
If any of this resonates with you call me, I would love to talk about it and help.
This column focuses on business problems and how to solve them. Andrew Gregson, BA, MA , M.Sc.Econ is an economist, author and a Senior Partner in iNTENT Financial Inc, a Kelowna based finance and consulting company. The four partners specialize in finance, pre-determined profitability, sales and marketing. If you need further information, please contact us through the website at www.intentfinancial.com.
Do you remember Mitt Romney the governor of Massachusetts who ran for the US presidency? Straight out of Harvard Business School he joined Bain Consulting. The remit of Bain Consulting was to help businesses grow by offering them the specialized help they needed, that is, the consultant fee work. More importantly, Bain then offered them the money they needed to get back on track and grow.
So, I tried this approach in Kelowna. I found a business that had revenues of $1 million per year but where the profits were going to support debt and not financing growth. Where my team and I intervened was to provide the marketing skills to grow sales and the financial skills to improve profits, collections and the cash position. Then we found the funding to pay down debt and start growing the profits again.
When we entered the business, the owner was stressed out by the circumstances. And he was of that certain Okanagan age. Both factors drove him to want to exit the business as soon as he could afford to do so.
Therefore, along with the help and cash we provided, we also found a buyer to come to the table. After cleaning up the balance sheet and showing a steady growth in revenues, the new owner happily bought the business and the former owner went off to the golf course.
If you are a business owner, you are one of many. There are many businesses in the Interior of British Columbia that have faced falling sales and mounting debt since 2008. This has crushed the value of their business just at the point where they thought they might retire. With a short burst of energy and money, we carted a company worth buying.
Although I have made this appear to be child’s play, it is not. This process takes a year, is hard work on everyone’s part and demands a level of cooperation that most entrepreneurs find troublesome. But it can be done. And the rewards are spectacular.
This column will focus on business problems and how to solve them. Andrew Gregson, BA, MA , M.Sc.Econ is an economist, author and a Senior Partner in iNTENT Financial Inc, a Kelowna based finance and consulting company. The four partners specialize in finance, pre-determined profitability, sales and marketing. If you need further information, please contact us through the website at www.intentfinancial.com.
We should lament the passing of the Yellow Pages. Two decades ago, they were the only show in town and every small business had advertising in them. Every home had a copy. Every manager’s desk was within reach of a copy. Once a year, you spent 60 minutes deciding on the budget and the look of the advertising for the next entire year. Then you forgot about it and let the Yellow Pages do the work.
It is less simple now. There are SO.. many avenues of advertising to your customer base. My marketing colleagues tell me you need to make contact 7 times, using as many types of contact as possible. And there are many possible points of contact; from LinkedIn, Facebook and instagram, to email blasts, newsletters, flyers, radio and TV.
But in the choice lies the problem for many small businesses. The choice requires that small business owners now find the time each week to devote to advertising and marketing. And we all know what happens when you get busy, right?
When a small business is finding it slow, the marketing taps get turned on – FULL. When they get busy the taps are quickly shut off. And the result is that sales rocket and then collapse - rocket and collapse. And the impact of this cataclysmic cycle is that profits suffer. At the bottom of the cycle, we drop prices to get work in the door. At the top of the cycle, we never increase prices to recoup lost profit.
But what would happen if the marketing taps were ON, full time? Well, sales would increase. And at the top of the cycle the order books would be full. And when the workload becomes overwhelming and the orders are coming in thick and fast, what to do? We could hire more people, buy more resources. Or you could simply increase prices and make a lot more money.
So the question is: is it profitable to hire a permanent, if part time, marketing person to keep your company always in the face of your potential customers. Is there any choice?
Want to know more about how small businesses can cope with the social media octopus? Check out “5 Reasons Social Media is Easier For Small Business” from Frithjof Petscheleit http://tweet4ok.com/5-reasons-social-media-easier-small-business/.
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