Whenever your recession (and your customers’) started and regardless of whether your business is a leading or lagging indicator of a recession, it doesn’t matter when you’re in the middle of one. For many of us coping with this recession has been a lot like going through the four phases of loss namely denial, anger, self pity and acceptance. In this era, many of us are moving into acceptance of our new reality and are ready to take steps to make the best of our gifts and blessings. The more we reflect on the last few decades, the more we realize how much better and smarter we could have been when times were easier and now know that getting ever better and smarter is the difference between success and failure. In our recession there seems to be a fine line between success and failure. Success may be defined as not failing. And failure can come from simply or deviating from success. As we consider our circumstances and recognize that our business lives must go on, what can we do to grow and save our businesses during these times?

In this article, I will lay out three areas you need to triage, four areas where you should respond and three strategies on how to profit during these times.

Three Areas You Need To Triage.
Triage, when ER doctors and nurses determine who lives, who dies and who will be healed later, is exactly the right approach to take in your business as do in their jobs. Instead of patients you will be triaging your customers, projects and cash.

1. Triage your customer relationships.
   • It’s going to be critical to decide which customers you can keep, which ones you need to renegotiate terms with.
   • Fire your unprofitable or difficult customers now and use great discretion in choosing the prospects to pursue. Someone else may have fired them first.
   • Most companies start first by providing extra value and service to their incumbent customers. During these times, their loyalty and fear of switching will keep them close to you if you stay close to them.
2. Reevaluate ongoing projects.
   • Take a hard look at what you’re working on. Kill any project with an unclear payback or one, which will consume more resources than will plausibly make in the next 36 months.
   • Restructure any project that’s critical but has no clear payback, accountabilities or resources.
   • Prioritize and focus on completing any project with the ability to enhance revenue, reduce costs or protect wealth.
3. Manage your cash.
   • With liquidity likely to be scarce at best, hoard what you have. Use cash as a reward for vendors, employees and others who are sacrificing for you or your goals.
   • Use your cash or lack of it as a weapon in dealing with companies and customers who rely on you and previously expected you to finance receivables.

Four areas where you should respond.
Once you have triaged your customers, projects and cash, look to four areas where you can respond to your new reality. These are:

1. Price for profit and to avoid loss.
   • Price your products and services in terms of the value they not only provide to your customers but how they help your customer’s customers profit. Learn where and how your products make others money and align your pricing with theirs.
   • Where you must make sizable investments in raw materials, ensure your pricing terms allow you to recoup your investment as soon as you’ve made it.
   • Reward your customer’s liquidity with favorable pricing. Those who can pay you up front deserve discounts.
   • Finally, use your pricing to protect yourself from those who exploit you. Immediately raise prices on customers who pay slowly. Create collection terms for poor payment just as you would offer good terms for fast payment.
2. Manage your credit furiously.
   • Do what you can to get more credit. If you can open a second line or other source of credit, do so even at a price you would not normally pay, especially if these are from confidential or “angel” sources.
   • Use your credit prudently. Don’t assume you need to finance everything yourself. Get creative and aggressive in what you ask others to carry and fund.
   • Thirdly, use other people’s money wherever possible. Many aggressive sellers and bargain hunters may have credit you can use in the course of doing business with them.
3. Lead decisively.
   • Show your confidence in all you say and do. While you may not feel it, your optimism, confidence and conviction will be a beacon of hope for those who are more scared than you are.
   • Motivate your vendors, staff and customers to stay committed, keep their promises and take the same risks you are in an anticipation of better times and the promise of deferred rewards.
   • When times are tough, show your stoicism in the face of bad news and inevitable hiccups.
   • Demonstrate balance in your short-term pursuit of survival and your long-term perspective for better times and deferred rewards.
4. Reinforce your Best and Highest Use®.
   • Ensure that you and your company are focused on what you like doing, you are good at doing and your marketplace values you for doing.
   • Bring as much value and enthusiasm to getting better and doing better at what you focus on.
   • Take heart in knowing you are very good at what you do and this is a true advantage in these times where impostors are exposed, pretenders prove incapable and amateurs just give up.

Three strategies on how to profit.
After you have triaged your business and responded in four areas, turn your focus to new strategies to profit now and over time:

1. Take market share.
   • Understand switching costs for the prospects you are trying to close. Make it easy for them to move their business to you and your superior value.
   • Buy up your rivals for pennies on the dollar. Many companies today do not have enough sales to cover their overhead. Better yet, just buy the companies’ customers without the overhead of their failed companies.
   • Grow your share of your existing customers. If you are trusted and invaluable, then ask for more of their business. Be quick to respond if another supplier stumbles, or is on the ropes.
2. Sell new value.
   • Instead of selling just your product or service, take responsibility for your customer’s success and outcomes. Offer to warranty or insure that their success will come from your product or service.
   • Recast your value proposition if your customers’ needs are changing. If so, rethink how you get paid, how you package your services and how you price your products.
   • Realize you are going to work harder, spend more time, and possibly get paid less for serving the same customers. Consider it an investment in the future.
3. Invest for the recovery.
   • Now is a great time for buying services and raw materials at a discount. If you can, invest now at a fraction of what it may cost to buy what you need when the economy picks up.
   • With sales down, you probably can find extra time to work on the future. Take advantage of not being busy and get busy building your next success.
   • Finally, as you come out of denial and self pity, push yourself into actions that will ensure your success and preserve your survival. Work harder and more decisively while your competitors are whining and paralyzed.

Our next year will continue to be hard as credit remains tight, new sectors of the economy are impacted, and the country adjusts to our new reality. You can grow your business during this recession if you triage, respond and develop strategies to profit. As the small guys in a world of goliaths, the recovery is largely in our hands as it always has been and will surely be again.

Need assistance growing your business during recession or difficult economic times. Contact Andy Birol below for more help.

No simpler words have ever hurt an owner more. Despite all your messaging, marketing, selling, and posturing, you learn it’s all for naught when:

• At a networking event, you overhear a colleague refer an ideal prospect to a competitor of yours. When you ask your colleague why he referred your competitor and not you, he says, “I didn’t know you did that.”
• Worse, even, you learn your customer just suggested his friend call an unqualified competitor instead of automatically pushing the work your way. And, when confronted, your client says, “You do that? I had no idea!”
• Your own employee hears and ignores your client drop multiple buying signals. As gently as you can, you point this out and your employee responds, “Oh that’s right, I guess we do that.”

This is painful for three reasons:

1. Your marketing and sales messaging is ineffective
2. You have no idea how much business you are losing every day
3. Your colleagues, customers and employees feel sheepish for not knowing better

But what can and should you do? Keep refining and simplifying your message. Look at it through the eyes of your colleagues, clients and staff. Have you really made it simple?

Who do you refer and why is it easy to refer those you can? Make it as easy for your supporters as you want them to do unto you. Are you able to refer your closest clients and colleagues to their prospects? Where you have done so, isn’t it because your clients and colleagues:

1. Communicate a clear, current and simple grasp of how their best and highest use is purchased and referred
2. Know how their message is understood and repeated by others
3. Track how and who is referring them and conversely who and how they are referring others

Hearing the damning words, “I didn’t know you do that,” is most painful when your own customers or clients are hiring others to do work you could be doing. Ask yourself, “Do you have a 100% share of your customer’s business?”

If not, then start uncovering and gaining these opportunities so your clients will see, first-hand, what you do!

In the last few weeks, three businesses I know well—all with good gross margins, well managed expenses and overhead, but growing accounts receivable and inventory costs—have had a shock to their systems. Their banks cut or closed their lines of credit. In “normal times,” or at least the past twenty years, a few phone calls to their banks’ competitors would have generated better alternatives from hungry bankers.

Credit and capital for most our business lives has been close to free and abundant. But alas! While rates are still low, cash is no longer abundant. With the current credit crunch, many perfectly acceptable credit-worthy companies are seeing their lifeblood of liquidity dry up. What can you do to stay liquid in a financial desert?

1. Don’t be a bank to your own bank.
   Reject any bank’s requirement that you must deposit money with them on order to borrow from them. If a bank can’t lend you money, don’t let their mismanagement of sub-prime mortgages become your problem. Don’t be there for them if they aren’t there for you.
2. Don’t be a bank to customers or anyone.
   Many companies, especially large ones, string vendors along as a matter of policy. If large companies were forced to pay smaller vendors on time, our economy would run much better. Do your part by just saying “no” to this kind of business. Remember that you don’t have a customer until their check clears your bank. Build in price-escalation clauses into your contracts for the materials and services you need to buy to meet your customer’s needs.
3. Barter for what you need to buy.
   It is remarkable how far a bit of creativity will take you! I had a client who provides professional services and swapped for office equipment. Once you are sure you need to buy something, shop around and ask. You will be amazed who else is in your situation and might traded with you.
4. Cut down on your credit addiction.
   It is said that in good times, the average American is two paychecks away from being homeless. How dependent is your business on credit? If you don’t like what you see, change it. Pay down those lines and learn to pay as you go instead of borrow what you can. Borrow only for inventory or services that you can convert and sell to someone else right away. Remember, the lower your credit line the more your business is worth.
5. Entice your customers to finance your growth.
   Give your customers generous discounts for prepaying their bills. Ask them to cover your costs of buying special inventory or equipment up front. Hold them accountable for promises they make. Take aggressive actions against those who won’t pay for commitments they make.

My friend and client Joe Pease, says during this environment, it is a great time to buy companies because:

• Valuations assume liquidity. If you can buy a company with cash, you will get a bargain.
• Poorly performing companies can be purchased for the price of their sales, as they cannot afford their overhead.
• Tuck-in acquisitions where smaller companies are being purchased by larger ones with more efficient infrastructures.

The old adage, “Cash is King” is as true as ever. Manage yours as if you were a banker. Actually, manage it better than that!

I’m back from a twenty day cruise on the Holland America Line’s Rotterdam (HAL) where my family sailed by Antarctic glaciers, explorer’s outposts and penguin colonies. Besides the hazardous grandeurs deftly navigated by our ice pilot, I saw a fascinating contradiction. The crew and staff of HAL worked nonstop to create a consistent onboard experience while the Antarctic researchers we saw spent all their time adapting to survive as they studied how the climate, nature and animals themselves are adapting. In watching this, it occurred to me how often we entrepreneurs struggle with these same conflicting forces of the need for consistency vs. the need to adapt.

First let’s look at Antarctica versus our ship. Despite its inhospitable and dangerous climate, Antarctica has drawn explorers, heroes and fools to its shores for centuries. Ernest Shackleton, the most famous, survived over 130 days under a rowboat eating blubber ultimately only to earn a $20,000 fee for the film rights. After Shackleton, thousands of explorers have adapted their lives, dreams, and studies to explore and learn about Antarctica. Their success demonstrates the very human spirit to innovate and adapt as much to survive and learn.

Compare this to the centuries old tradition-bound Holland America Cruise Lines whose consistency and standardization are keys to their success. As the oldest premium brand, HAL appeals mostly to the 60+ market offering a consistent experience delivered over seventeen ships. From the centralization of decision and policy making to the tight allocation of human resources, HAL runs cost centers with legendary attention to detail and tradition. My only big beef is the lack of contemporary music or other progressive entertainment for the still-rocking crowd. Still it seemed bizarre to watch the ship’s Hotel Manager chastise our waiter for a crooked place setting while we passed the spot where another cruise ship sank last month!

So as an entrepreneur, how do you reconciling consistency with the need to adapt? Unlike the explorers or the cruise ships, you really don’t have the luxury of choosing one.

One of my close colleagues, and a national manufacturing expert, Becky Morgan, helped me with this.  She, along with Carmella Calta, CEO of multiple process-driven companies, pointed out that without first creating consistency in your business, progress cannot be made let alone innovation.

For both consistency and innovation to work, my colleagues recommended that autonomous employees must take responsibility for creating and embracing process. Only with clear standards in place, can innovation turn into practical results. The challenge of a company adapting to progressive innovation and demonstrating “out of the box thinking” relates more to business strategy. To create strategic change, leaders of organizations must define themselves as innovative by allowing “out of the box thinking”. Most companies don’t gamble on their proven successes despite indications that their marketplace is moving and changing. As Becky says, “If you don’t move with your customer base and change your business strategy your operations strategy and what you measure in the form of standardization won’t change either.”

In Shackleton’s case, his ability to adapt and survive led him on to be refinanced for future expeditions to both Antarctica and elsewhere in the world.

And Holland America has the choice of reinforcing its traditional appeal to its aging customer base or innovating more to appeal to its younger, non-retired clientele like me. Only time will tell which is the right bet as with increasing life spans and sellout cruise ships, Holland’s core market shows no signs of declining.

Here are some key guidelines for managing your way to consistency and adaptation.

1. Don’t use innovation or anything else as an excuse not to create consistency and standardization.
2. Empower your employees throughout your firm to create better ways to get work done and hold them responsible for results.
3. Don’t use standardization and consistency as an excuse for not creating a clear business strategy that recognizes shifts in your marketplace and their preferences.
What does this mean for your business?

Years ago, I wrote an article encouraging business owners to confront their options to do or not do business with China and every other low cost producer.  Now, I encourage every owner to rethink the following.  If you are a small business who cannot be the low cost provider, what can you do to leverage the quality, safety, and reliability of your products to win back accounts, higher margins and customer loyalty?  For every purchasing agent who loves buying products at the lowest cost, there is an insecure employee hiding inside worried that they will get exposed and fired for buying low cost goods that don’t work or worse are unsafe.

There is no time like the present to beef up your product’s safety, reliability, and performance.  How can you sell FUD (Fear Uncertainty and Doubt) to overcome the very pricing concerns you have fallen victim to in the past?   What better time than now to promote the upside of doing business with your company and the downside of taking chances with vendors’ products whose necks your customers cannot choke across an acean.  Try it out.  Even if you don’t move mountains, you can feel really good about standing tall for your value.  And if you need to look at all all the places you can add value, please take at my concept of Best and Highest Use and think about all the ways you and your business really are superior!  There really is no time like the present!

With the recent woes in the mortgage business and the huge hit the economy is taking, it occurs to me that if you don’t manage your customers, your business could follow the same path of peril and pain.  Everyone has heard the old adage, get rid of your worst customers, but how do you manage the ones you need to keep?   Almost any relationship can be improved if both parties see more value in doing so, then they do in letting sleeping dogs lie, so here is a good and easy way to make things better.

1. Reach out and set a new expectation of both your role and responsibilities as well as theirs

2. Agree with the party on these new expectations (win-win of course)

3.  Strive to meet this expectation and set a good example for your customer.

4. End the relationship if there is no reciprocity or rejoice in the valuable improvement you both have created.

The biggest threat to any relationship is the decay and ultimate end of communication.  And the hardest part is finding the time for the people, customers, and prospects that matter.  Reach out to those who do because the best relationships are often those that have been damaged and repaired through reversing the decay and confronting the differences. What do you think?

Read:  Managing Customers From Hell: How to Keep Your Nose Clean!