Sound Business Principles, Not Panic is the Key to Surviving this Economy

No doubt, the economy has changed, but sound business principles are still the key to surviving.

Written Jun 25, 2009, read 381 times since then.

Boy, when the economy is good, everybody is a marketing genius. Seems it is impossible to fail.

We even begin to believe in our own business acumen. So we expand, take unusual risks, borrow money for expansion, relax our credit terms and so on. Whatever it takes to grow, we do because, after all it’s grow or die. . . right?

Then there is what I call the Hamlet effect. To quote Hamlet “When sorrows come, they come not single spies, But in battalions:” – William Shakespere, Hamlet Prince of Denmark (Claudius, King of Denmark at IV, V)

Well now careless optimism has come home to roost. What was once a stroke of marketing genius may be starting to look more like reckless gambling. And rest assured, the carpet baggers have shined their shoes, put on a new face and now stand outside the door offering their help.

Since the turn in the economy, has your phone been ringing off the wall or your email filled up with “free advice” to help you succeed? At every turn is there someone telling you that if only you did better SEO, made a video, had a website makeover, bought this marketing plan, or whatever, you will win over your competition?

Stop. Take a breath, slow down and think for a minute. If you had the money, and time, to take advantage of everyone of these offers, would the added success even cover the cost of the services? Somethings obviously will improve your business more than others and some are probably just a waste of money.

No amount of marketing, SEO or website improvements are going to save a company that is not running on sound business principles. We had a joke at one company that seemed to engage in endless price wars. The joke was; “who cares if we sell at a loss, we will make it up on volume.”

Here are some solid strategies that you must implement if you are going to survive:

Get your Cash Flow In Order. Bill Douglas, CEO of EssentiaLink, has a saying “Cash Flow is Oxygen” and boy truer words were never spoken. Bill’s careful and incessant attention to cash flow has helped EssentiaLink survive and grow.
You have to understand and adhere to basic financial principles. For example, a $1000 expense is far more than a $1000 burden on your company. If your margins are 10%, you have to boost sales by $10,000 just to recover the $1000 spent and who wants to just break even. Not to mention an extra $10,000 in additional sales also puts an extra burden on cash flow. And when that happens, the cost of money comes into play. Things can get very expensive.
Not all customers are worth keeping. Some customers just don’t quite fit into the niche of what you are offering. Maybe you can never quite keep them happy, or maybe they never embrace all that you can do for them. These customers can bring down your business and image and they often consume far more of your resources than they are worth. Do some research, find a company that can serve them better and bring the two together. Your reputation will rise as a result.
Stop stepping over dollars to save dimes. In light of point 2 this might seem counter intuitive, but it’s not. If you are the main mover and shaker in your company and you are wasting time fiddling with IT, or spending 15 minutes to save a few bucks on a box of paper, the little you save can never make up for your lost time. The same is true if you are paying for a purchasing staff. If they are wasting time pricing pencils when they should be tracking down better prices on raw materials, you are losing money.
Technology is a tool to use, not the object of the game. If your technology is getting the job done and not incurring excessive maintenance cost, let it ride. Remember, every dollar you spend on technology will cost you $1 / margin rate.
Focus on your core competencies. If you are an Engineering or Legal firm for example, your efforts should be to increase billable hours. So if billable people are working on IT problems, marketing, buying office supplies, consider outsourcing the non-core tasks and put people back to work on core projects. Having them do busy work while waiting for business to come in is draining your cash flow and hurting your business. Notably, sometimes this leads to a tough decision.
Get close to your customers. Before you spend a fortune on SEO or website overhauls, make sure you are speaking to your customer’s current needs. The reason they signed up a year ago, may not be the reason they are staying with you or would sign up with you today. Marketing is like fishing, if you use the wrong bait, you will get the wrong fish or nothing at all.
A million hits means nothing if you are not converting. Wouldn’t 500 highly motiveted buyers be better than 1,000,000 drive bys? Focus on revenue per hit, not hits per day.
Running a business is like writing good documentation. You want exactly enough to cover the topic, and not a word more.
Document, document, document. If you do not document your processes and business, you can suffer from the effects of vanishing technology. What do you do when your star worker leaves for another opportunity? You have a great sales proces that works, but does it stop working when you go on vacation? Document everything, so you can remain successful even when good people leave or you go on vacation. Try selling a business for what it is worth if it is not documented.

At the end of the day, good busienss practices go a long way towards securing your survival. And yes, you must market and sell. But if your house is not in order, throwing a lot of money and time at marketing will do little to help you survive in the long run.

Learn more about the author, Dave Hayden.

Comment on this article

Posted by Bill Bradfield, EA, Blaine, Washington | Jun 27, 2009

Dave,

Great article. We tend to lose sight of the basics when the economy is in full gear. I fear it will be a while before we see that again, so your article is timely and well worth reading and heading.

I love doing what everyone else hates to do!
Posted by Maria Pruitt, Morrison, Colorado | Jun 28, 2009

Dave, the impact of our economy is a gamble for all including our businesses and all that we have invested. Let's look at what we have to do moving forward and not look back. Let's take action and be held accountable. Documenting is very important in several aspects. For example, setting your goals for your business (or your personal life)- without an action your plan is a daydream. Write things down, document. You talk about free advice, that is great and wonderful- pay it forward. However, when you are educating yourself to improve, be better, more knowledgable there is investment whether it be money or time. Document your finances or your budget. Do you know exactly how much debt your have (keep your business expenses seperate if you are a home based Entrepreneur)? Do you know exactly how much interest you owe? How much time this will take to pay this ALL off? Do you want to be debt free (including your mortgage) and still have a thriving business? These are key questions you need to ask yourself, "knowledge kills fear".
Posted by Dave Hayden, Burleson, Texas | Jun 29, 2009

Great comments and suggestions Maria, thanks for taking the time to add so much more.
Posted by J G Fernandez, Bangalore, Karnataka India | Jun 29, 2009

Dave Great article... I am learn lot of things from your strategies.
Posted by Shannon Evans, Bainbridge Island, Washington | Jun 29, 2009

Your article is right on target! One thing that more and more businesses - both brick and mortar as well as online businesses - are discovering is the importance of an online marketing presence. You can't throw a website up and people will just come to you. You have to make a real marketing plan that includes social media and a search engine optimized site for people to find you, begin to like and trust you, and then to find an affinity with your goods/services/products. It is nuts to throw tons and tons of money into push marketing that just gets tossed in the trash...invest in a marketing plan that is sustainable financially and time management-wise.
Posted by Brad Rodgers, Seattle, Washington | Jun 29, 2009

Good thoughts all around. I agree with Shannon about a marketing plan. I'm learning the hard way. My website has been up for three years and I get tons of complements but in reality it has only brought in one phone call that ultimately didn't result in landing a contract. Lots of people kicking the tires and just looking at it after they got a business card or met me personally. But only one person has found me via a google search. BjR
Posted by Maria Pruitt, Morrison, Colorado | Jun 29, 2009

Talk about Marketing- My mentor is coaching a 5 week FREE class on how to build a blog, integrate social networking, and use your blog to generate free leads which will lead to new customers and sales for you. It starts Tuesday (tomorrow) at 9pm Eastern. I know space is limited.

http://getresponse.com/click.html?x=a62a&lc=ozQu&mc=f&s=H1G0g&y=l&
Posted by Bill Bradfield, EA, Blaine, Washington | Jun 29, 2009

Brad,

Interesting about your website and lack of concrete response to it. I just recently shut my website down for that very reason and am in the process of redesigning one from the ground up. This time with expert help.

A plan is the first step

I love doing what everyone else hates to do!
Posted by Shannon Evans, Bainbridge Island, Washington | Jun 29, 2009

Bill...make sure it is interactive...something along the lines of a Wordpress site. Then make sure that the title tags are optimized as well as all photos have tags that are geo targeted and optimized for your business as well. Then get acquainted with Local Search and make sure you "own" your listing with Google, Bing, Yahoo, City Search, etc ad nauseum. That is a quick, easy and FREE way to rank in local search so you can be found. If you can't be found on the web via local search you lose out on 50% of searches by potential customers. We are holding another one of our local search workshops in the Seattle area free for Biznikers Tuesday (6/30) or you can check out our latest version of our step by step "how to" book on Amazon: http://www.amazon.com/Found-Local-Search-Secrets-Exposed/dp/1448614643/ref=sr_1_5?ie=UTF8&s=books&qid=1246289570&sr=8-5
Posted by Taylor Ellwood, Portland, Oregon | Jun 29, 2009

good suggestions. Good article.
Posted by Sam Wieder, Greensburg, Pennsylvania | Jul 02, 2009

Dave,

You provide a great outline of sound principles that businesses would do well to adhere to in any economy.

Your suggestions for businesses to dump their dud clients and speak to customer needs are especially important first steps to take before launching any new marketing initiative. After all, the foundation of any effective marketing effort is knowing who your best clients are and what are their most pressing needs.

Maybe one upside of a down economy is that it may motivate many business owners to revisit and find relevant answers the questions that must be addressed to drive successful marketing and maintain profitability.
Posted by Mike Hayden, Mountain View, California | Jul 02, 2009

Speaking of Vanishing Technology...

The fact is, most of a company's technology walks out the door with each employee every day because much too little of their technology is organized and written down.

So, without product documentation, without written standards, procedures, and technical processes -- without adequate documentation -- companies are faced with having to "reinvent their own wheel" when people leave for good!

More at: http://www.SeniorManagementServices.com/smsblog/2006/11/why-does-vanishing-technology-happen.html
Posted by Dave Hayden, Burleson, Texas | Jul 03, 2009

I learn so much from Biznik members. Thank you all so much for the feedback and additional comments.