Are you Affected by these Tough Times?
So, are you Affected by these Tough Times? Try to Respond instead of React during Economical Hard Times.
Coaches often talk about the need to remain calm and aware under duress. Instead of simply reacting in a random and haphazard fashion one can respond with more levelheaded and effective behaviors. If you have adequately trained and sufficiently practiced to meet a set of challenges, responding to adverse conditions is often relatively easy and successful. But reacting to situations you are not prepared for or accustomed to can frequently lead to knee-jerk actions that are neither thoughtfully conceived nor efficiently executed.
The difference between response and reaction generally boils down to deliberate preparation, prior planning, and intentional action – versus simply doing something from a place of fear or panic. Emergency response organizations, for example, drill and train for the inevitable. When a fire erupts or a traffic accident happens, firefighters and police officers typically view the situation as another day at the office. They have planned in advance to react in an intelligent, effective and professional manner. They have the resources on hand, they understand how to best deliver them, and they confront the situation from a position of strength, not in a weakened state of distress.
So how do businesses stay profitable during hard times? Even brilliant business strategists will fail without profit during a recession. But if you adhere to the “4M’s of Profit”, this can help guarantee success even when times are tough.
1st M for Management
Profitable companies are well managed. To manage a business effectively requires a blueprint for employee and team training, a current and useful database of contacts, leads, and customers, a good budget and strong accounting practices, and skillful use of time and resources.
Intelligent managers know how to systemize routine procedures to streamline them, while humanizing the exceptions. That means that, for example, while customer service systems should be consistent and follow written guidelines and rules. Customer service also depends upon well-trained humans to spontaneously solve the problems that are unexpected or out of the ordinary. They do so by understanding the core values of the company and internalizing those to beneficially represent the business under all circumstances. Effect of downtime is magnified when the business is still fire-fighting, and does not have a plan to deliver results to its clients consistently.
Employees can spur you forward or weigh the business down, depending on whether they are the right fit, in the right position, doing the right job. Tracking every employee’s performance will align everyone toward performance, and create a common goal toward making sure the organization weathers through. The first step coaches take in assessing management strength of a business, is to determine how much of the business can run if we remove the business owners out of the picture from day-to-day operations. This assessment gives a true picture of how effective the organization runs, and whether employees are in the right place. How to motivated and equipped the team to bring the organization to a new level.
2nd M for Money
Strategies for dealing with money will make or break profitability. A successful approach to managing money will involve several key components. Those include auditing costs and setting budgets that are understood and followed by everyone in the business. Next, margins need to be increased – even if only gradually – in order to fatten profits.
By keeping prices stagnant the average business will begin to lose money automatically, just because of the demands placed on money by ordinary annual inflation. A better approach is to proactively raise prices, concentrate on enhanced customer service to justify the increases, and in that way dramatically boost net profits without alienating customers. Easy discounts and giveaways should be discontinued, but replaced with profitable programs such as in-house financing and credit card acceptance to make it easier for customers to buy and pay for their purchases. We helped a furniture retailer reduce customer discounts through putting a sale financing system in place. The Business Diagnostic we conducted for him, helped highlight the weak points in his financials.
To deflate the effects of high fixed overheads and costs, businesses should start exploring outsourcing specific functions or carefully consider some redundant functions as part-time rather than full time. Outsourcing is a brilliant strategy when the function and performance can be ring-fenced clearly, and faces less staff turnover, as well. Some administrative functions, office management or writing functions, can be freelance or part-time once the full scope is considered. This can enable the company to save money, instead of spend unnecessarily just for convenience. Convenience is good, but perhaps something to consider during better times, when projects and clientele growth are robust.
3rd M stands for Marketing
Marketing should be not so much about selling, but more about buying. Marketing of products and services is too often done solely from the perspective of the seller, rather than the buyer or customer, and those marketing campaigns seldom work. Those businesses that focus on marketing as a form of customer service will tap into the needs and desires of their targeted audience in a way that translates more easily into increased business and revenue.
Customer-centric marketing revolves around offering real value and it also involves such strategies as “upselling” to customers. They buy a deluxe model versus a standard model, for instance, and pay a premium in order to enjoy bigger benefits from the upgrade. “Cross-selling” – where a company sells other products to enhance the primary purchase, is also effective. Rather than just buying the burger, for example, the customer also buys fries and a soft drink to go with it. “Down-selling” works well when a customer might otherwise not buy anything. Accommodate their budgetary demands and make a customer for life, rather than trying to sell them what they can’t afford and losing them to a competitor.
Most businesses focus on marketing as acquiring new leads and new customers. The cheaper alternative to this is retaining current customers, getting current customers to buy more, and making sure they buy more frequently. It costs 5 times less to get an existing customer to buy from us. Businesses have more to gain by creating a stronger pipeline of products and services that provide variety and increase each customer’s wallet share (ability to spend on different services) with us.
4th M stands for Merchandise
Taking a top-down or macro view of business merchandise can be a valuable exercise for a business owner. This is because the products and services sold help define the entire business model and guide the direction of sales and revenue.
First of all, when given a choice between one item of merchandise and another, look at the potential profit margins and choose the one that delivers the most bang for the buck. Sales of computer printers, for example, peaked and then slowed down after most consumers bought one because they do not need to be replaced very often. But ink has to be replaced continually; so most manufacturers focus on selling ink rather than printers. They will practically give away a printer just to snag a customer who will then have to return again and again to buy ink refills. In other words, these printer manufacturers used to be in the printer business and sold ink to promote that product. Now they are in the ink business and sell printers in order to support their new business model. But all the while they are making profit by knowing where it comes from and how to nab it.
Identify which products are profitable, and focus on selling those. Other ways to manage merchandise include stocking only higher priced and faster-moving items in the inventory, selling exclusive lines that others don’t offer, and carrying private label merchandise. Selling only quality merchandise – and making that part of an overall brand identity – is always a wise approach and can generally deliver higher margins because people pay more for prestige, status, and excellence.
Our team of Business Coaches and Growth Experts will help you address the business fundamentals needed to sail this storm. Having been around for over 20 years, we, together with our clients have experienced many recessionary cycles, and would like to share our formula with you. Our Business Diagnostics can assist you to move FORWARD despite the present looming environment, and in the very least, you will gain some critical insight and learn something new about your business.
If you know of anyone else who is staying up at night, and worries with the uncertainty, do them a favor and forward this article to them. It’s the least you can do, to help a dear friend’s business stay afloat if the recession is already impacting them.
Asia’s Top Business Growth Specialist – Maresa Ng
Maresa Ng is a Passionate Entrepreneur who helps business owner grow their business to a stage where it is commercial and profitable and can continue to work without them. Maresa has worked with thousands of business owners and she has been turning around businesses since 2008. She was a corporate and investment banker, but now she is the leading Business Growth Specialist & Business Advisor in South East Asia. She always believes, as entrepreneurs, you can have Great Quality of Life through Great Business!