By Antony Young
Holed up in your makeshift home office it’s not hard to sense the impact that Covid-19 is having on the country, but if you run or own a business right now, it’s harrowing.
There’s no denying we are heading into what will surely be the worst recession of our lifetime. And while the novelty of Zoom meetings wears thin, the reality of how your business is going to cope or survive is now what you need to turn your attention to.
A lot of people are counting on you.
Your staff, for their jobs. Your suppliers and partners, for the business you give them. It goes without saying your family don’t just need you to keep paying the bills, but as important is the reassurance that your heads in a good space on the work front.
So turn Netflix off and put away your phone for a few hours, and use this gift of enforced downtime to make a plan for your company or business. It certainly will be the most important thing you can do for yourself and crucial to your business’ future.
Talk to your team
Your staff aren’t stupid! They know the next six to twelve months will be tough going. Talk to them, particularly your managers. Reassure them if you can, but most importantly be honest.
Share with them what you’re thinking, and that you have a plan. They will be able to help you.
I recall early in the 2008 global financial crisis, I had a meeting with my management team. I had told them that we were going to have to reduce headcount. One of the managers asked, “how much do we need to save?” In that meeting, several managers offered up several solutions including sacrificing their own salaries that allowed them to keep their staff working and enabled us to make the numbers. The fact that they were part of the solution is what made it work. We were able to bounce back much faster when the market returned.
Re-set your business
want from your sector, and where are the new opportunities. If you are a business that has relied on overseas tourists, you’re going to have to re-purpose your business to attract New Zealanders?
Are there services or products that are going to be in less demand, and others that you can establish that will attract new revenue? In 2008 when it became clear things were getting worse, our ad agency made the decision to increase our resources in digital and social media services that was a growing area which had higher margins. What was tough was that it meant downsizing our traditional business of print and TV advertising team, many staff that had been with the company from the start. If we didn’t make the decision, our company would have floundered. Instead we grew revenue and margins at a time where other agencies were going backwards.
Or maybe there are just better ways to operate smarter.
A friend of mine is a clinical psychiatrist. Her husband had suggested earlier that she could work from home and do consultations on Skype. She told him that face to face meetings were essential. However, since the lockdown customers behaviours have shifted. About 70% of her clients are now okay meeting via video calls. Imagine how much more effective her practice could be by not having an office in the CBD, eliminate travel time to and from work and improved flexibility for her clients to schedule sessions on the days she’s normally not in town.
What can you do to reorganise the business to operate more efficiently?
Would it be better to outsource your payroll than manage that capability in-house.
Are you still getting the best terms from suppliers you’ve been loyal with and now seen your spend with them increase?
When’s the last time you did a proper review of your power, phone, internet, office services and insurance suppliers?
For purchasing large items, could you tap into specialists that buy those more efficiently?
If you do have capital, now is a great time to buy a complementary business or even a competitor. It could be a win – win.
What’s your path to growth
Harvard Business Review published research studying 4,700 companies over the course of the 1980-82 crisis, 1990-91 slowdown and 2000-02 recession, evaluating actions taken by management, and how they performed following the recession.
17% of the companies didn’t survive.
40% of them hadn’t managed to return to their prerecession sales and profits levels three years after the recession.
9% of the companies did better than they had before it and outperformed their industry by at least 10% in terms of sales and profits growth.
Those companies were the most likely to cut costs by improving operational efficiency rather than by slashing the number of employees relative to peers. In addition, they also invested ahead of their rivals in R&D and marketing to drive growth, and invested in assets such as plants and machinery.
During the 2000 recession, US office supplies retailer Staples closed down underperforming facilities but increased its workforce by 10%, mainly to support the high-end product categories and services it introduced. At the same time, the company contained its operating costs and came out of the recession stronger, bigger, and more profitable than it had been in 1999. Competitor Office Depot cut 6% of its workforce, but it couldn’t reduce operating costs significantly. Although the company created an incentive plan to boost sales, its sales growth fell from 19% before the recession to 8% after—five percentage points below Staples’ post-recession sales growth rate.
I’ve spent much of my career in the advertising industry. Clients will often cut marketing budgets quickly and I get that. It’s much easier to cut marketing expense than staff. But after the first couple of rounds of cuts, at some point you’ve got to stimulate growth. That means getting existing and past customers back, while attracting new customers.
Antony Young is co-founder and marketing barista for The Digital Cafe.
If you need advice on building that growth plan, contact him at email@example.com.