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.

Recently, a group of very successful partners of law, accounting, investment, and M&A firms met me for lunch and explained why their partnerships worked so well. I was most taken with how their success in partnerships contrasted with the partnership pain suffered by so many small businesses. Why do partnerships work so well with professional services firms and are so challenging for the rest of small business? Whether it is several individuals, a venture capital, private equity firm or an angel investor, small business partnerships just seem to struggle more and certainly make up a smaller proportion of successful entrepreneurships than do lawyers, CPAs or financial money managers.

Here are some Professional Services Lessons and Small Business Implications that I took away from the discussion:

Lesson I: Partners with the same professional degrees and training form tight, loyal and like-minded groups.
Implication: Small business partnerships are founded by experts with unique and complimentary skills. Don’t expect different owners to think or act similarly. It will be harder and take longer to achieve the same esprit d’corps among small business partnerships.

Lesson II: The real definition of any Partner is to be a Rainmaker, who can land and grow clients, regardless of whether they have managerial duties in the firm.
Implication: Small businesses require strong operations, finance and sales/marketing in equal measures, so different Partners proficient in different functions are needed.

Lesson III: Successful partnerships do not pay compensation to equity partners based solely on their shares but on their performance and contributions to their firm’s profits.
Implication: Regardless of ownership percentages, small business Partnerships would be well-served to set up compensation plans based on their partner’s job descriptions and performance

Lesson IV: Professional services firms make new partners, regardless of their experience or financial buy-in, work in their firm for a couple of years before bestowing formal partnership titles. This ensures they “fit” with the Partners regardless of how they “look on paper”
Implication: Small businesses would be well-served to similarly “date before marrying” instead of rushing into the arms of new partners, VC’s or private equity firms.

Lesson V: Professional services firms recruit talented individuals by offering partnerships, especially to those with books of business that can produce immediate revenues for the firm. Partnerships also provide the firms with the ability to institute and enforce non-competes’ on Rainmakers, protecting the firm’s long-term cash flow and revenue streams.
Implication: Small business partnerships are usually created when partners bring different resources to the table including technology/inventions, operating ability, money and sales/marketing. As a result of these divergent contributions, it is not as easy to protect the firm from the power or departure of any one Partner.

Lesson VI: Partners in professional services firms build long-term client relationships which are leveraged through having less experienced/expensive professionals perform most of the actual “work.” Having the right amount of these professionals is critical to the Partnerships’ profitability.
Implication: Despite the personal relationships small business Partners build with their customers, much of the actual delivery of their firm’s value cannot be done by the partner. Consequently, maintaining the same level of trusting relationships is difficult. So is the actual delivery of consistent “work” in the form of products, especially through distributors or inexperienced professionals.

Lesson VII: The recurring nature of relationship sales allows Partners in professional services firms to wield extraordinary marketplace power by closely managing their clients.
Implication: The transient nature of most buyers and customers makes building relationships much more difficult, especially since sales are usually more transactional than they are relationship-driven. Few Partners in small business know their customers as well as their counterparts in professional services do, despite spending more time and money on formal sales and marketing.

Partnerships in professional services firms have been around for centuries and laws and business practices ensure many of these will continue for decades and centuries to come. The goal of the small business Partnership should be to learn and apply the characteristics that can work in their businesses and not try to imitate what cannot be applied to their businesses.

If it is so wrong to stare at a car crash, then why are they so fascinating? And in these tough times, watching another crooked leader taking the “perp-walk of shame” brings a grin to even the most cordial of us. Leave it to the ever-precise Germans to define this feeling as “schottenfreud” or “the taking of pleasure in the misfortunes of others.” The more pompous or self righteous the civil servant, business titan, or do-gooder is, the more the French got it right, saying revenge is a dessert best enjoyed cold.

If schottenfreud is fun from a distance, why is it so painful to watch someone you care about become so impervious to their impact? It’s because we care. In my work, I have seen the following examples of owners breathing their own exhaust.

• After failing to eliminate his salesforce by going direct to customers, the leader invites the reps to “come back home as all is forgiven” by his marrying the youngest sales rep.
• Returning from France and bragging at work how much money he spent on wine, an owner cuts payroll and publicly borrows money from an employee.
• After kiting a client’s postal check and firing his partner’s son, the tables are turned when he alerts the sheriff who impounds the owner’s boat just as he’s skipping town on it.
• After showing off his new Ferrari, an owner takes me to his board room where he has taped (not framed) Penthouse centerfolds to the mahogany walls.  

While the stories are horrifying, I can vouch for the good intentions and years of sacrifice that preceded each owner’s fall from grace. But at some point a chip switched in the owner’s head and the disconnection from reality snowballed down a slippery slope of complete self-delusion.

How can you tell if an owner’s ego and braggadoccicio have overwhelmed their confidence and conviction? What kinds of brakes and controls can you hope they embrace? It is high time when an owner

• Dismisses ideas as being irrelevant to their business when the ideas would create accountability
• Responds to questions regarding how their business is doing, by insisting there is no way to better it. Period.
• Believes that luck or being in the right place at the right time played no role in their success.  

Business ownership has so little accountability and oversight that without devil’s advocates and contrarian data to strike a balance, dysfunction is likely. When owners start believing their destiny is assured, it’s more likely that things are never as good or as bad as they think they are.

Here are some simple questions to ask and assure their feet are on the ground and they are not breathing their own exhaust.

1. What is their true price of being wrong?
2. What is their true benefit of being right?
3. Where does their comfort zone really end?
4. Where does their dogma really begin?

In such crazy times, there seems to be a fine line between stoicism and irrationality. Help the owners you know to stay on the right side and remember my favorite quote, “We become what we tolerate!”

Last month I took a week off and went to Cancun. Unknowingly, I picked a resort favored by 20-24 year-olders down for Grad Week, a kind of post-college version of Spring Break. After watching them nearly get expelled from the resort on their first day, I gained their respect by winning the belly flop and dirty joke contests. Why? So this 50 year-old consultant could learn firsthand what makes 20-somethings tick.

Here is what I learned and some implications if you are employing and managing 20 Somethings (2OS’s)

Learning: 2OS’s make short term commitments called hookups which are made and broken quickly
Implication: Don’t expect commitment but hire for projects and structure them to achieve short term goals

Learning: 2OS’s draw great validation from the packs they create
Implication: Hire several people to do a job together or one job that can be shared by a pack

Learning: 2OS’s seek affirmation by their peers within their generation and are always taking pictures, dancing and dating in groups
Implication: Find ways of recognizing satisfactory performance through and by their peers

Learning: 2OS’s - This MTV generation parties and thinks in short bursts, multi-media and sound bytes
Implication: Structure their learning, work days and reward systems to favor bursts of frenetic productivity, not steady 8 hour days

Learning: 2OS’s look for direction from leaders and demonstrate conformity in their packs.
Implication: Pinpoint the leaders and create rewards for their constructive leadership and ability to get their packs to deliver.

Twenty-somethings lead a life and consciousness completely different than anyone older than them. Many live with their parents but probably will be the first generation not to live better than their parents. They have inherited a world of abundance both in lifestyle and problems they did not create and do not relate to.

Blind to what they see as old school and blissfully ignorant of time, longevity and investing for the future, they live in the present. And yes our future leaders will emerge from this group!

While downturns come and go, it can be hard to ignore a recession when the media puts in your face every day. So beyond living in complete denial, what’s a business owner to do? Why not recognize opportunities that recession can bring to your business?

Here are a few points to ponder:

• Despite everyone preaching to the contrary, demand for most products does not disappear or decline more than 10%. Demand simply morphs and transforms. Take a good look at what your customers are doing to cut back and recognize the choices they’re making and how you can exploit them.
  
  
• Identify what your customers want vs. what they need, as these change during a recession. Strangely, some wants actually grow during a recession as people compensate for sacrifice in the strangest ways.
  
  
• Fully understand the money vs. time paradigm. Your customers will always have more of one than the other, so figure out how you can exploit this.
  
  
• If business is slow, now’s the time to rebuild or extend your Best and Highest Use. It’s a great time to start initiatives and build for sunny days.
  
  
• Despite the credit crunch, money is much less expensive to borrow in a recession as the Federal Reserve Bank cuts interest rates. Hunt around, as money is there to borrow, and when you find it, it can be a bargain. Also negotiate aggressively with your service and resource providers. Many are much more flexible than you might expect.
  
  
• Find the underserved and neglected in your marketplace. There are many folks and businesses that are not being adequately provided because their suppliers have abandoned them for greener markets. How can you step in?
  
  
• Seek out and walk with winners. In any recession, there are many folks who actually do better. Find them, serve them and grow with them.
  
  

There is an old saying, “Things are never as good as you think they are or as bad as you think they are.” A recession is precisely so. Dont ignore it rather exploit it just as you would a growing economy. Doing so during a recession is a true test of your business mettle.

Rise up and seize it.

Recently, Kathryn Landers of Felber & Felber Marketing interviewed me on public relations and how knowledge businesses can best plan, use and profit from PR

Andy, how do you define public relations?

To me, PR is the promotion of one’s expertise and value through non-advertising traditional and electronic media and editorial outlets.  When your “smarts” are independently and objectively published by third parties, so your audiences can read and see your value endorsed by others; that is effective PR.  The best PR usually includes examples of how your clients have benefited from your value.

Andy, how do you look at PR?

I think of PR as falling into three categories: Reactive, Active and Proactive

• Reactive PR consists of responding to preexisting stories and inquiries from reporters who need experts.  Websites like www.prleads.com and responding to other’s blogs is a very low-commitment way to demonstrate your expertise
• Active PR is using the wire services like www.prnewswire.com or www.expertclick.com  to circulate press releases on your firm’s progress or value.  They work best when there is a direct “hook” between your news, a current trend/event and your unique spin on it.
• Proactive PR involves creating both the content and the venue to broadcast it.  Your own blog is a great way to start as I have on www.birolsblog.com. Traditional, Internet and satellite media tours, speaking at trade shows and press conferences and “dog and pony” all work if you have the right story to tell.

Andy, what advice would you give to a business owner just beginning to use PR??

• First determine your firm’s Best and Highest Use. 
• Second, define who is your target audience, and third what information they will value.
• Then determine which media and editorial resources they watch and read.

The final step is to continuously create valuable, unique information that provokes your target audience to contact you for more.  So you need to become disciplined and regularly:

• Develop content in the form of articles, write papers and ideas
• Create and use case studies, results statements, testimonials showing how others have benefited through content
• Any time you can involve your clients in the PR effort it is much better.  Reporters, and conferences just love it when a client stands beside you and talks about your value and how it helped them

What do you think of business owners hiring  PR firms?

Writing and self promotion doesn’t come naturally to many owners so there is a trade off of doing it yourself or hiring specialists like my firm of Felber & Felber Marketing.

• In my case, I develop the content myself. 
• Together we decide how much reactive, active, proactive PR I need to get my messages seen and heard. 
• Finally, I turn over the execution of proactive, active, reactive PR to Felber & Felber Marketing to efficiently deliver my message to the media. 
How each business owner should implement their PR is a function of their Best and Highest Use, time, budget and personal preferences

Conclusion
PR is the most efficient marketing any business can do.  When established third parties are publishing your expertise you earn a great payback on your investment of time and money. Start with your inherent value and figure out who needs learn about it and where they are.  Then go tell the world.  You will be glad you did!

Recently I was hosting a session of my Rainmaker Roundtable, a select group of entrepreneurs who sell services to other owners, on the topic of professional integrity and ethics. With their input and my further thinking, here are my three conclusions.

1. Know exactly who your client is and always serve them best. For example, if your client is the firm and the owner is a destructive influence as its president, you have the duty to do what is best for the company up to and including removing the president so the owner and the company will thrive.
2. Be true to how you make money and don’t compromise. For example, if you make money dispensing unbiased advice, don’t take a commission recommending a vendor who provides what you just prescribed
3. Always practice transparency unless it compromises confidentiality. For example, if you will make money, benefit, or be placed in a compromising position by learning or knowing some information, tell the person providing the information why, beware ,or to stop. And when the information comes from your client, (See #1 above) it is absolutely confidential.

What do you think?