By Gerard Burke, Founder And MD, Your Business Your Future
In 2009, at the height (or should that be depth?) of the most challenging recession in most of our lifetimes, I observed that in any economic downturn, in every sector of the economy, there are winners as well as losers. And, based on my work with thousands of ambitious owner managers, many of whom have survived more than one recession, I identified six habits of those who emerge as winners whatever the economic conditions.
With the continuing uncertainty (some might say, chaos) in the Eurozone, these observations remain true and, arguably, even more apt today.
In last month’s newsletter, I introduced the first two Habits: Be in Control and Be Confident. This month we move on to Habits 3 and 4.
Habit #3: Be Distinctive
In tough economic times, some owner managers will scrap and scrabble for any business they can get their hands on just to stay in the game. The danger of this is that you lose sight of the distinctive benefits that your products/services deliver to your customers and you can end up having to compete solely on price.
Winning owner managers can clearly articulate the distinctive benefits their products and services deliver to their target market and what sets them apart from the competition in the eyes of their customers. They know what's great about their business, what they're really good at and what their customers value.
Being distinctive doesn’t necessarily mean being unique. Being distinctive can mean having expertise in a specialist area, being more responsive, more flexible, offering a 24 hour turnaround where your competitors don't, or even just being more friendly and approachable.
Whatever it is that makes your products/services distinctive, the key criteria is whether your customers are prepared to pay for it. If they are, then it’s a benefit to them and they value it. If they’re not prepared to pay for it, then it’s not sufficiently valuable to them.
Once you've found your distinctiveness, hold fast to it and communicate it at every possible opportunity. If you lose your distinctiveness, or if your customers aren’t prepared to pay for what you believe is distinctive, then your offering could end up being treated as a commodity and you’ll come under severe price pressure.
If you succumb to this pressure and reduce prices, you’re actually giving away profit and it’s very difficult to make up for that lost profit in increased sales. In fact, if you’re clear about your distinctive benefits, then, although it sounds counter-intuitive, you’re probably better off increasing prices rather than reducing them even if it means losing some customers. They’re probably the customers that don’t truly value your distinctiveness and it may actually be costing you money to service them!
If you’re not sure about what makes you distinctive, ask your customers! Identify your top customers and go and talk to them about why they buy from you. You can also take this opportunity to tell them more about what you do and ask them whether they might need any more of anything from you and whether they know anyone else who might want your products/services.
Habit #4: Be strong
Whilst some owner managers may get away with sloppy business management during good times, the current climate is less forgiving. Winners are absolutely rigorous in managing their business and are strong enough to take tough decisions quickly when necessary.
Focus on the things that really matter in your business, manage cash religiously and challenge costs and waste at every opportunity. Make immediate savings by negotiating supplier discounts and reducing fixed costs. Drive down debtor days by making friends with your customers' accounts payable teams and being fastidious about cash collection.
Maintain your margins by insisting sales staff adhere to a tight pricing policy and shedding unprofitable customers.
As the owner manager, it's unrealistic to think you can have your hands on all these areas all of the time. So, you need a business plan that is robust enough to survive variances and incorporates measures that act as early warning signals and tell you at a glance how the business is faring.
If these indicators show that things aren't going as well as planned, you may have to make some tough decisions. Be strong and don't shy away from unpleasant decisions. If you put them off they will go from being difficult decisions to serious issues that threaten the very survival of your business. Unpleasant matters are always better dealt with sooner rather than later.
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