Winning in a recession

Looking back through history, some of the world’s greatest companies have launched in a recession. Brands like Procter & Gamble, Tesco, Microsoft, Hewlett Packard and General Electric were all launched when other businesses were struggling to survive.

The leaders of these businesses understood that, although fewer in number, business opportunities still exist. They appreciated that while the immediate outlook was grim, the future would bring an upturn for which they were determined to be prepared.

Preparation for the recovery

It is true to say that in the bad times clever people make more money because they understand that when the economic climate changes it heralds a new dawn for the way people conduct their business. Those who are prepared to respond imaginatively to the challenges ahead will prosper and emerge from the recession as stronger, healthier businesses. Companies who think commercial life will remain the same are in for a nasty shock.

David Blacher, a partner at Baker Tilly, said: “The world will be a different place when the recovery starts to get into full swing. The winners will be companies who have worked out a way to reach new customers with a product offering and pricing structure that applies to changing circumstances.

“But you can’t sit and wait for the recovery to begin. You must analyse what your competitors do well, expand your network of contacts and work them hard. Be creative about pricing, offer bulk discounts, incentives for cash or quick payments and be prepared to offer a kicker for referrals.”

Focus on growth

Focus relentlessly on growing your business and examine the opportunities available. In our recent survey of owner-managed businesses, we discovered almost three out of every four companies are planning to make an acquisition or establish a joint venture within the next three years as the downturn delivers some tantalising opportunities to expand.

Rob Donaldson, Head of M&A and Private Equity at Baker Tilly, believes: “This is a once-in-a-generation opportunity for mergers and acquisitions. There are lots of distressed vendors and banks are sitting on investments which they want to dispose of. Some deals may look cheap, but they are priced at that level for a good reason.”

“Attack can be the best form of defence,” says Simon Hart, partner at Baker Tilly. “If you have cash or access to private equity a lot of businesses are open to takeover, merger or buyout. Despite the news in the media, banks do have money to lend but it is best to speak to them early in the negotiations to gain agreement-in-principle on proceeding.”

New business

Make sure you have a proactive programme for reaching potential customers, charting your interaction with them and understanding how and why you win business.

Several fundamental rules of marketing are routinely ignored or leniently adhered to when business is easy to come by but getting these basic right in a recession can be the difference between failure and success.

Winning clients could involve a carefully targeted direct marketing campaign based on researching prospects within the market. Whatever your solution, ensure there is a regular plan of activity and make sure you keep accurate records of all activity and analyse your conversion rate.

David Blacher, said: “Examine the potential for a service differential to help you win business in sectors in which your competitors have been unsuccessful.”

“Go back over the potential clients you have spoken to in the last few years and re-contact them. Someone who was interested in your business before may be interested again, especially if they have been working with a competitor and now may be looking for a new supplier.

“Talk to your potential target customers to define their needs and the trends and industry developments taking place within their sector.”

Management information

Some companies had a laissez-faire attitude to preparing good quality management information when the economy was in a bull run. It’s now vital to have regular management accounts available on a monthly basis so you can make realistic decisions to improve your business. “If you improve your management information you will improve your business,” says David Blacher, partner at Baker Tilly.

Good management information will allow you to spot weaknesses before they become problems and potential sources of funding will look far more favourably at your business. It’s important to maintain your new standard of management information when the recession ends so you reap the benefits in the long term.

Innovation

Task your staff to think of new ways to grow your business. This type of thinking should not be confined to the board room but should involve everyone in the company. Make sure people open their minds to accepting new ideas rather than viewing anything new with suspicion.

Networking

Expand your network of contacts and start communicating with them. Go to industry events or get involved with the new breed of regular face-to-face networking events which happen all over the country. Also, think of using social media resources such as LinkedIn which are growing rapidly. Although a new forum and a new comfort zone for people to develop, there is an undeniably growing number of people who have taken the time to adapt to the format and win business as a result. By using LinkedIn effectively some people have been able prospect for new business leads, recruit new people, gather competitive intelligence and draw on the collective wisdom and expertise of an extended peer group.

Adding value and customer satisfaction

A lot of businesses we talk to believe riding out the current economic storm is all about retaining existing customers. We all need to focus on adding value to our customers, by offering the best service at a competitive price – remember they are looking for cost savings all the time.  When the money supply is tight, people shop around so you need to ensure that there are no gaps in your service standard. Ask your clients on a regular basis if they are happy with your work - is there any other work you can help them with? Examine whether or not there are new products and services that are appropriate to your clients’ businesses. Research the market, test your solution and then package it professionally.

Technology

Look at ways technology can make your business more efficient and save you money on fixed commitments. Companies which are able to streamline processes as well as bolster resources and infrastructure will have a critical advantage over their peers. Consider outsourcing services which can be completed more efficiently and cheaper elsewhere.

Invest in the brand

Brands can become weaker in a recession particularly as people scramble for value. Don’t cut back on marketing but think of new ways to ensure your customers see you as being a success story. If you have advertised in the past don’t cut it out all together but think of better ways to use your budget and re-examine your creative treatment. Try generating editorial coverage in your local and trade media; organise seminars for your clients; enter award schemes; conduct business surveys and disseminate the results to customers and the media. Make sure you track and measure the effectiveness of each method.

What people call “marketing” often isn't. It can mean paying for expensive events/corporate entertaining and inviting random guests! Key point is to carefully appraise effectiveness of spend to maximise the “bang for your buck.” If something isn’t performing, drop it for something else.

Business structure

Companies with group subsidiaries should look at their structure afresh. Examine if this is the right structure for tax and operational efficiency. If it can be improved to benefit both the competitiveness and profit level of the company then now is the time to make changes.

Cost cutting can be about process

Sensible cost cutting is a vital activity for any company at the moment, but not at the expense of growth and innovation. It need not necessarily be that cutting costs means doing less – rather, it can mean doing things differently.

There are several areas to examine that don’t naturally occur to business owners. For example, perhaps you can speak to your auditor about changing your year-end to when auditors are less busy, making it more likely you can secure a discount?

Doing this across the business can involve several areas we’ve mentioned already – from encouraging new ideas to listening to external consultants and outsourcing for cost and efficiency gains.