Beating the Credit Crunch – one summer party: two stories to share
It was summer 2008.
Alice ran a graphics studio. She employed 12 young artists and turned over a tad under £1m. Lovely lady. Lovely business.
Jason ran a web design company. He employed 4 webbies and turned over a tad under £350k. Lovely man. Lovely business.
And then came the recession.
At a summer barbeque, Alice openly confessed to me “We don’t do all that marketing stuff. We hate it, all that asking for the business that you reckon small businesses should do. People know how good we are and that’s an end to it!” She wouldn’t listen to me.
At the Christmas party she confided, “Time’s are hard. We’ve made all the designers redundant and moved out of our lovely offices. It would have made no difference had we done all that selling stuff cos everyone knows it just doesn’t work. It’s all down to luck. We’ve still got a great business and things will get better”.
My throw-away line, “Hope is not a method” was not appreciated.
March 2009 and Alice is another statistic. She’s declared herself bankrupt, handed over the keys to her house, taken the kids out of private school and put herself on the council house list. What a difference six months can make.
Meanwhile let’s get back to Jason; he didn’t hang around when the recession-mongers were getting their act together back in the summer. He took radical and evasive action.
“I’ve made some tough decisions” he told me. “I‘ve read all your stuff and I am going to go for it. Starting on Monday, we will put prices up 10%, sack the bottom 20% of our customers and focus exclusively on the small number of high spenders we know. We are creating a new product/service which existing customers should love and we are creating a £100 website health-check with a money-back guarantee which should increase sales. I am going on a sales training course and I am committing to speak to 10 potential clients every single day. I am going to employ a business development manager for three months, three days a week. And if that doesn’t work then I can’t say I didn’t try.”
By Christmas, Jason’s plan was paying off. While all his competitors were taking their foot off the gas he was visibly stepping up to the mark. And the result…?
Revenues went up by 20% compared with the same period in the previous year. Net profit margin was up 25%. They had fewer, but better clients.
March sees Jason breaking the £600k pa turnover barrier, taking £100k out of the business as net profit. He’s taking on three new coders over the next six months and the business development manager is now with him full-time. Well done, Jason!
Moral of the story: are you a lion or a lamb?
What did Alice do wrong? She can put ticks next to virtually all the reasons why people go bust:
- 1. Not behaving like the Boss
- 2. Ignoring the Customers
- 3. Ignoring the Competition
- 4. Ignoring the Numbers
- 5. Having no vision/passion/purpose/strategy
- 6. Employing the Wrong People
- 7. Selling the Wrong Product
- 8. Having the Wrong Proposition
- 9. Spending Too Much
- 10. Not Charging Enough
Shame, shame, shame.
Look at the list. Are you guilty of any of these failings? If so, what are you going to do about it?
Robert Craven
rc@directorscentre.com
01225 851 044
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