I have often been accused on optimism.
With that in mind, let me try and find the silver lining. Let me try and tell you a better story.
It’s a story about money.
Stop me if you’ve heard this before.
Revenue is not profit.
In a recession, any sale will be a good sale, right?
Some revenue is better than no revenue, right?
Not always. In an ideal world, would you rather run a business that turns over $10million and clears $2million, or a business that turns over $20million and clears $200,000?
I know it’s not an ideal world – when is it ever? – but the question remains.
How much does it cost you to serve the sale?
I love the old saying, “Profit is to business as bread is to life.”
You don’t live to eat bread, but you need bread to live.
Given what the coronavirus has done to margins and bank balances, the re-establishment of businesses in a re-vitalised market will see a huge spotlight shone onto the bread.
Starving businesses will want to eat. And fill their pantry.
Bank balances will be reduced. There will be a massive push to re-fill depleted coffers. Long term strategy will take a back seat to short term tactics. Every dollar spent will need to be justified.
Many business owners will assume that more customers equal more profits.
And, wandering up that garden path, the question then follows, “Which business function will get us more customers?”
Which function gets the budget?
In times like these it’s hard to remember the battle for the budget isn’t as important as the battle for cash.
It’s us versus them. Not us versus us.
Constrained times often see the emergence of siloes and siloed thinking.
Everyone will now be aware of how little money is available for them to do what they’ve always done and what they’d like to do.
Budget battles will see infighting and the erosion of trust across departments.
This, as much as anything, is as good a way to kill a great business as anything.
It becomes a cross between Shark Tank and Game of Thrones.
Marketing versus Sales versus HR versus Operations versus Distribution versus Sales.
No one wins in a race to the bottom.
There will be a massive temptation to reduce price to gain a quick revenue win.
Because “cheap” is the easiest lever to pull to gain volume. My guess is we’ll see a shipload of “Special Limited Offers” and “Once In A Lifetime Value” once shoppers are allowed back into stores.
Revenue does not equal profit.
There’s an old joke. How do you make a million bucks buying apples for $3 a kilo and selling them for $2 a kilo?
Start with ten million.
Remember, the aim of business is not to make money. Profit, like happiness, is best approached obliquely. The aim of business is not to make money, it’s to make something worth selling and make a profit from the sale.
What do you really make and what is it really worth?
The market will still be here in a year. Your challenge is to make sure you’re still in the market – and in a position to demand the margins you need to remain profitable.
It’s hard to climb out of the bargain basement. The market is littered with the corpses of businesses who thought volume was the doorway to margin.
Thinking, “We can deal with margin once we have market share” is not a can you want to start kicking down the road.
Compound this desire for quick sales with the hurricane of businesses all shouting, “Kick it to me” and you see why simply offering cheaper might not even get you noticed.
United we stand. Divided we are soon forgotten.
Very, very few people will make it through a bad time on their own.
And, while I’m hesitant to compare commerce to war, allow me a brief aside.
In the late 2000s early 2010s, the US was having its bum handed to it in the Middle East. They were fighting with old fashioned tactics in a world absolutely changed by technology and desperation. General Stanley McChrystal was part of the effort which saw the US Army redefine how it should compete against an enemy that had radically changed the rules. (The book – Team of Teams: New Rules of Engagement for a Complex World, is a very approachable read and, while the examples are military, the ideas have application across business.) The challenge for the army was to move away from a hierarchical line of command to a more flexible resilient structure that could adapt more effectively to a rapidly changing environment.
“The crew’s attachment to procedure instead of purpose offers a clear example of the dangers of prizing efficiency over adaptability.” General Stanley McChrystal
The point is not to redefine your hierarchical lines of command. The point is, we face our own rapidly changing environment. And, while market forces will remain the same, our reactions to that changing environment will determine how well we come through the coming recession.
In a recession, the team with a united purpose and smart tactics will beat the brilliant individual who just deals in tactics.
No one has all the answers.
But I do know there are some things which will work better than others.
If the ancient wisdom is true and you should only try and reach one strategic goal per year, have a defined strategic goal. One. Defined. Goal.
Preferably, one that aligns to the business goal for the year.
If the business strategy is “Maintain market share” – the brand goal might be “Increased preference by x%.”
The strategy might be “Exemplary service”. The brand strategy might be “To be the ______ they actually recommend to their friends.”
And the promise to the market might be “‘Premium’ is much more than ‘Product'”.
Forgive me, I’m making this up as I go.
Take stock. Re-set. Understanding where you are now is where you need to start, not where you used to be.
Trust market forces.
People who love premium will still want to buy premium.
Customers who love comfort will still assume comfort costs more.
Re-think your Chairman’s desire to get back on top as soon as possible.
Pick a different yardstick.
Make it clear to the whole business what your brand strategy is.
And how it supports the business.
You need to stay in business. But don’t lose sight of the big goals.
Stick with the strategy, but be tactical within that.
Make your communications worth the spend.
Be different. Be relevant. Be specific.
One of the few things we can control is how much energy we put into a project. Don’t be manic. You can’t yell energy into a meeting. But do have a controlled focused energy.
Know what you’re doing. Communicate it simply. Then get it done. And communicate your progress.
Still worry about margin.
Still demand accountability for every dollar spent.
But don’t suck the energy out of the sale.
You have a challenge. Isn’t that worth getting out of bed for? If you ever wanted a chance to prove you were smart enough to earn a seat at the big table, now’s that time.
Set up the frameworks you need.
Be rigorous. Ask for critiques. Demand better from yourself before you demand better from others.
Before you commit to a promise, try and find at least some proof it ‘s not just a wish.
Many assumptions were born in boom times. These assumptions may not stand up to a bear market.
Don’t try and beat your challenges on your own. Open up.
Who knows what answers might be found in the simplest conversations.
An interesting experiment.
Rather than lower your pants, hitch up your trousers and find the other way around the market. There is always another option.
Get everyone in a room and ask them two questions.
How should we, as a team, beat the competition?
How could we do it if we had no budget at all?
Force yourself into an uncomfortable space and you may just find a more interesting door opens up.
It is a battle. A battle for purpose and survival and self-realisation. It will take focus and energy and grit and resilience and being able to hold both traditional and non-traditional ideas in your mind at the same time.
It’s a battle you can win.
Think of the stories you’ll be able to tell your grandkids when you do.