If a rising tides lift all boats, what happens when the tide goes out?
The recession is only a convenient excuse for losing business
Whether you like it or not, the recession is here. That isn't an excuse; it is simply a fact. A fact that doesn't have to apply to your company. You can still grow!
Over the past ten to fifteen years, many companies have grown despite how poorly they operate. There was simply more demand out there than supply. Since the definition of a recession in the simplest terms are; more supply than demand, what will the defining factor be in the near future?
It is possible to grow during a recession
"Only when the tide goes out do you discover who's been swimming naked" - Warren Buffett
As of August 5th, 70% of S&P 500 firms reported revenue and earnings growth during the last quarter.
The US Bureau of Economic Analysis reported a contraction of -1% in the overall economy during that quarter.
Both of these statistics are true. How could 70% of these businesses grow?
Some sectors get hit harder than others. And even within the industries that get hit the hardest, you will still find success stories of companies that defied the trends and grew. So don't use it as an excuse. Don't be one of the firms that are swimming naked. Instead, be a firm that is the exception!
Your company will grow if you continue focusing on the formula for success. Remember that customers can choose when and where they spend their time or money. You can and will continue to grow if you have a product in demand, an efficient process, and motivated people.
People, Product, Process
During economic slowdowns, your customers may go shopping to save costs. They have the same formula for success as you do. The variables in that formula are always; people, product, and process. Looking for the most efficient combination of those variables gives them their lowest cost of doing business, and highest operating margins.
It is natural for your customers to review their processes during a recession. You may be a raw materials supplier or a service enabling their products to go to market. You have some threats if they can save money by using your competitor. Yes, threats, but not excuses for losing their business. Your value proposition is still the same in a growing economy as in a contracting economy.
Ask yourself this; why did your customer choose you first? This question is the one to focus on right now. At some point in the past, your customer decided to do business with your organization. There were competitors out there when they made those decisions. If your unique selling position (USP) was significant enough for them to choose you over the competitor, it's your job to remind them why you went into business together.
Were you swimming naked?
Why are your customers doing business with you? We ask the question for many reasons. The first reason is so we can understand it ourselves and reinforce it to our customers. It is okay to remind them that you are the best in these areas, and those benefits have value. Should your client come knocking and looking for a cost reduction, tell them what your company offers that no one else does? It is okay to price them as they compare your products and services to your nearest competitors. If those benefits and features are still important to them, then your threats are reduced.
Another reason to prepare is for the new clients that will come calling looking for a new supplier. Unless you have 100% market share, many prospects are still out there. Your customers aren't the only ones trying to pinch pennies or find better solutions during this contraction. The prospects on your list may give you a second look. Your company's advantages may not have had the same impact on value in the past, but they may be enough in the future to give you an edge. For example, your inventory levels guarantee them same-day deliveries. That is a lower cost of goods sold for them if you hold their inventory instead of them. It might not have mattered in the past with low costs of money (interest rates).
A final reason for knowing your unique selling position is for you not to make the foolish mistake of cutting those costs. Using the inventory issue as an example, your finance department might recommend that you reduce inventories. Lowering your holding costs might look like a cost savings measure, but it could also risk why people do business with you. Offering three different colors instead of six improves your manufacturing efficiency and removes the options your customers enjoy. Closing your doors at 8 pm instead of 10 saves energy costs, but you may lose those customers.
Are you still naked?
If you do not have a competitive advantage, it's time to find one. As that tide rolls out, you want to ensure you have something on, or your business may be unprotected (pun intended). Where can you offer benefits to your target customers that have more meaning during this slowdown? You can’t just hang a sign up on the door and say we are open. That may have worked over the past decade, but it won’t in a slump. We don’t know how long it will last, our concern is for you to last!
It is usual for you and your customers to be concerned about the economy's future. It’s not time to hunker down and just hope for the best. Remember, hope is never a good strategy.
A slowdown in the economy poses a problem for you and your clients. It also provides you with an opportunity to emphasize to your clients and prospects what the benefits of doing business with you are. We say this often at Kole Performance Group, 'it is the job of your sales team to take problems off their desks’. It is hard work today, but it will improve your tomorrow.