Survivng a Recession

Surviving a Recession

By Marty McGhie

During tough times, much of the focus is automatically directed to cutting expenses and improving cash. Too often, management ignores the sales side of the equation. As sales begin to flatten out or decline we merely blame the current business environment. We tend to justify to ourselves, as well as others, that the drop in sales is a natural circumstance of a lousy economy. However, the fact is, people still do business!

Let’s take the advertising segment of our industry as an example. Recently I have had several conversations with various advertising executives within our market. Undoubtedly, the fallout of the dot-com business has dramatically affected the advertising industry. Layoffs have occurred and some agencies have gone under. Nevertheless, advertising still happens. A retail marketing campaign may run four to five weeks instead of six to eight weeks, but the campaign will still run and someone must produce it. Don’t just assume that your customers are calling less because they have no business. There may be other reasons.

What then is our approach to the customers? We give them the best service ever, the fastest turnaround possible and the highest quality product we can produce. We fight for each job even if it means getting mean and nasty on price. Let’s revert back to the comment about the break-even level of each business. Assume that your customer tells you that you can have a large job, if you match your competitor’s price. After analyzing the job, it becomes apparent that you will basically break even at the price being discussed. Should you do the job? If you have the capacity, do it. Even if the absolute best-case scenario is that you break dead even, the cash flow it generates will likely cover some of the fixed costs associated with the project in the first place. This is the type of mentality we may have to adopt during the rough times. Hopefully, this is the exception.

Excessive price-cutting can become a two-edged sword. A company can price cut itself right out of business. Make sure this is done carefully, with the survival of the business in mind.

So take the opportunity to re-familiarize yourself with your customers. While your competitors are bemoaning the challenges of a tough economy, you should be out working to increase your sales and invigorate your business.

Focus on all aspects of your business, not just cash flow.