Yes - the downturn might affect your business dramatically
Yes - that just might be terminal
BUT remember:
“Pessimism is a totally useless philosophy since it probably won't work any way.”
Our job as business leaders is surely to win through a downturn like this and set the strategy and the tactics to do so.
So let's start by examining the problem:
Following the credit crunch finance is tight in the West and the prices of oil, steel and food have all increased dramatically wordwide. We have significant inflation being posted in a number of developing countries and finally we have an increasing number of profits warning from public companies in the West.
So how should we respond to this?
Firstly as far as your business is concerned you should be seeking to harvest cash and be really hard-nosed about any investment. It must generate an adequate and expeditious return. My advice is be super cautious with the banks – they caused a good deal of the problem and I don't think we can assume we can trust them at this time.
Next, now must be the time for you to work hard at improving your business efficiencies - and by that I mean not just your "shop floor" operations but wall-to-wall. To me the best measure of efficiency or productivity is simply added value per employee and you should be seeking to improve that continuously so that you are both lean and mean and fleet of foot.
If you are in an industry where you buy basic materials that are not fashion influenced and is worth helping to protect your margins by considering investing some of your cash in additional stocks at today's prices - that you can subsequently add value to and sell at tomorrow's inflated prices.
Finally in this area I would recommend that each and every time you think about recruiting question whether you could outsource that activity as an alternative.
You need to be tough but fair with your suppliers --negotiate simply everything and share with them your future plans and your confidence going forward. Never pay them late, however, no matter what the accountants might say, it will cost you in the end.
What about your markets?
If you look around there are a many markets for you to target that are thriving and will continue to do well. Obviously the oil rich countries of the Middle East and elsewhere are thriving and the so-called BRIC countries (Brazil, Russia, India and China) continue to do well and are expected to be the leading economies of the world in the foreseeable future. Target them.
Some of the industry sectors that are thriving are all forms of mining - giving a particular boost to the economies of Australia and Canada (Canada is now referred to as the Saudi Arabia of phosphate -- it has one third of the world's supplies) and food production.
The energy industry - from oil and gas extraction through to sustainable, fossil fuels and nuclear power are all set to continue to thrive into the near future. The Aviation industry (but not western airlines) is thriving with record order books at both Boeing and Airbus (over six years of production with only 10% from the US). These companies increasingly outsource globally – target these suppliers like Meggitt in the UK who have just announced record results.
There are more billionaires in the world now than ever before - with large numbers in India, Russia and China as well as the West. Any industry or service sector where they spend their money will continue to thrive - be it super yachts or super hotels or super fashion. Can you sell to them?
Looking at customers generally you need to exploit your strengths mercilessly, you need to be seen to get in the shoes of your customers more, to customise and be creative. You should be moving your mindset from "sell" to "help" and focusing on a getting a "wow” from them each and every time they do business with you.
You need to bring out exceptional new products and you need to focus strongly on giving perceived added value to counter any suggestion that may be coming from customers that you might be inclined to lower prices - don't do it!
I'm sure it does not need saying that you must be very tough indeed on receivables in these times – that hard fought order, that great sale is worth nothing unless you get paid. It's probably prudent to assume a percentage of your customers will go bust in the next 12 months - and you don't want to be left with a big hit.
A word about your team.
Each and every one of your employees (and their partners) are reading and hearing a constant stream of bad news and depressing projections about the future and it is you that they are looking to for a lead. Despite what you might be feeling you need to exhibit a positive attitude at all times, you need to communicate and listen more than ever before and you need to demonstrate that you have the situation under control.
Research has shown that people follow leaders who are decisive, passionate and have fun – and that's what you need to exhibit.
Particularly in these times we need to challenge our paradigms, ramp up our creativity, and look to the big picture.
Otherwise known as:
Helicopters and Boxes!
(Staying in the Helicopter® and Thinking outside the Box)
- why not set up a helicopters & boxes team now?
Finally, for UK readers, I have just read that Goldman Sachs predicts that by 2020 the UK will have the highest the income per person in the world – we will be more prosperous than anybody!
– so all you’ve got to do is to get through ‘till then!
Enjoy!
© 2008 www.rogerharrop.com
