Red Zebra Business Centre -Management Memos
November, 2008. Making Measurably More For Your Business Since 1985!


In Uncertain Times, There is Even More Need to Plan

Max Williams, Principal Consultant

All through November, the financial outlook kept changing. Each day we came to publish Management Memos, it seemed there was something fundamental had changed, and a rewrite was needed. As a result, this edition now appears at the beginning of December! For the sake of history, we will still call it the November edition, because the Christmas Edition is still to appear!

At this time, we are beginning to see some consistency in comment -  so here we go.

Government stimulus to the economies of the world will have some effect in reducing the depths to which the whole financial system might otherwise have plunged. Some commentators suggest that we are now at the bottom of the market, in financial markets.

In Australia, the Government appears to be ready with a whole echelon of stimulus packages, and the day after this publication, the Reserve Bank of Australia is tipped to reduce the official cash t\rate by 75 basis points.

That is certainly no bad thing. But what this really means is that the effects of whatever recession we do have, will be ameliorated.

We should not conclude that there will not be a recession. It is simply impossible to take out the world economy as much money as has been destroyed by this upheaval, and not see a reduction in demand, reduction in stock value and prices, and generally slowed activity.

Tim Colebatch, economics writer for the Melbourne Age, put it this way .....

"The OECD forecast that Australia's economy would experience modest but continued growth. Treasury agreed: there will be no recession, it said. And private forecasters agreed: the economy would slow but wouldn't stop. The time was 1990. In fact, Australia was already in a recession. Yet the authorities told us we would escape it."

Three months ago, 'Management Memos' described the way recessions 'roll through' an economy, hitting different sectors at different times, depending on the place they hold in the investment cycle. In November, some of those things have begun to appear in the Australian economy, and similarly in New Zealand.

On the one hand, no-one likes to 'talk down' the future, and many have been accused of that. On the other hand, however, it is necessary to take the situation as it can most clearly be seen, if we are to make wise management decisions.

In this issue we describe a useful approach to adopt, so that in whatever circumstances  might prevail, you will have a plan in place. You will be acting 'proactively', rather than 'reactively'.

And when the market for your goods and services gets up to full speed once more, you will be in a stronger position, both absolutely, and in relation to others in your market or industry.

Just because now, in these uncertain times, you took the trouble, and had the courage, to plan.

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"Building a Battle Plan for the Recession"

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Maintaining the growth

Australia's Prime Minister Rudd has canonised the current economic turmoil as the "GFC". The Global Financial Crisis. We should call it the "GNO" - the Great New Opportunity. This is a 'once in a business life-time opportunity' to build new strengths into our businesses. It's a great chance to position ourselves for strong future growth. Let's take this opportunity in both hands, and wring everything out of it we can!

Recessions Burn Businesses

Confidence is the great driver for all economies. That is one thing the economic conservatives of the US Congress forgot when they decided to let Lehmann Brothers bank fail. That step really killed confidence - and thousands of other, smaller businesses along with it!

When there is little confidence that there will be money in the future - whether by loss of value in what we have, or loss of sales, or loss of employment - purchasing is savagely curtailed in the present, even thought there might be money now.

So even if there is money now, sales drop and businesses fail - burnt by the recession brought on by a lack of confidence. We can't change the overall level of 'market confidence' but we can generate the internal confidence we need to make sure that it's not our business that fails this time round!

Build Confidence - Develop a plan

No doubt about it. People like to shop in pleasant surroundings. We often hear of customers saying how lovely it is to shop in a certain store. It's not just the fit-out, although that certainly helps, but it's mainly the people.

In tough times, a business with staff that exude confidence is a reassuring, and a pleasant place to be. So, to make sure your staff exude the confidence your customers will feel good to be around. Let them know how you plan to make the most out of the hard times ahead. Show them how you plan to grow out of it.

Use this plan to really enthuse your team. The fact that you have taken the trouble to plan, shows your staff that you at least, can see the way to profit from what's going on. Strong, positive leadership is needed now, more than ever! Think of the opportunities for growth that strong leadership will provide.

Along with a good plan!

Battle Plan for the Recession

To build a plan for anything, you need to know where you want to finish up. In this case, let's assume that you want to use the recession to build your business.

Why? Every year you don't build your business is one year you can never make up. Just because there is a recession coming, is no reason to stop 'business building'! Quite the reverse. Build now, and prosper later. Research repeated many times consistently shows that businesses that build in a recession - instead of just surviving - come out the other end much stronger, and with a more dominating market position. Isn't that you?

You are forewarned, and that makes you forearmed.

To make use of this forewarning get your planning into operation now. You will need three things - Means, Marketing, and Management.

Make the Means You need

If you are going to have a "battle plan" you will need a war chest! Now that you are forewarned, and recession is not actually here yet, make as much money as you need for the battle, by improving your gross profit like never before! At first sight, that looks like a price hike as far as you can.

Generally, that's true - but be careful. We have lots of 'war-stories' of companies that have had great gross margins, but at the expense of sales. On the other hand, we have some examples of people who traded hard, and with a little sacrifice in margins, added 60% or 70% to their gross profit.

Remember, "You can't bank percents". Instead, get into the habit of actively building gross profit dollars right now. Urgently!

Market Like Fury

If your market is still holding up, go hard and go now. Get market share while it's still on.

If, regrettably, you are amongst those sectors first hit, go hard and go now - so you can get your unfair share of what's about.

When we say 'market like fury', many will think we mean 'advertise like fury'. Remember, marketing involves advertising, but marketing is much, much, more!

No, we don't mean advertise at a rate you can't afford, or can't justify. Your advertising is expensive - so make sure you market in a way which uses your advertising dollar productively. You probably need good marketing advice to make sure you get the most for the least.

But make sure you keep marketing. Get good marketing now. Real marketing, not just advertising. With good marketing, you can get ahead in the slowdown, and do it at the expense of your competitors!

Manage Like There's No Tomorrow

Manage the money. Manage the marketing. And manage your people.
  • Get your people 'wired' so they motivate the customers who venture in.
  • Get your people selling.-  not just helping people buy, but really selling
  • Get them so that no-one walks out without buying.

Mostly these are things we know about at a 'head' level, but because times are OK, we don't have to really take them on board and actually do something. That's not how it is now. Get the  good management habit now, and it will make you stronger for when your market returns to full speed.

Too Busy?

If you are too busy to think about this now - be careful.

You will have plenty of time later on, when it's too late. Don't get caught. Act now!

This is the time for bold action! Many years ago, a well paid, highly regarded, and very effective manager was working with us to improve the business performance. He understood all the advice and recommendations. Finally he leaned across the desk, and said in a very faint whisper, "Yes. But I don't know how!" They were his most liberating words. From then on, we made massive progress. Perhaps you feel like this man. Just click the link below.

If you'd like to find out more about developing your 'Battle Plan for the Recession', talk to us, or ask us a question here! Remember, there's no charge or obligation.

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