In my `Restructuring Your Business – The DIY Approach Series’ I discussed the issue of how you can review your options out of the recession. One of the problems an entrepreneur faces in times of a recession is how to handle credit squeeze and remain in business. But if you cannot manage your household in times of credit squeeze, it may also be difficult to guide your business out of a recession.For many of us that have not been involved in any application for a loan or credit facility, `credit crunch’ is a term that emerged out of the blues. But as I write this article, lying in front of me is a letter from Argos turning down my friend Bobby’s application for an Argos Card. Their well-crafted letter attempted to explain the reason behind their decision. Like everyone else, my friend feels some resentment, has thought of calling them up or maybe write them back, but realised that much might not come out of that either. Of course, he wouldn’t know unless he tried, but this is a product of credit squeeze. Lenders introduce more stringent conditions and often would rather hold on to their cash than give it out to applicants whose repayment capability they are not nearly 100% certain. So how can an entrepreneur review his operations and guide his business out of a recession?
Indeed, it is not unusual for credit providers to make a wrong conclusion about an applicant’s ability and willingness to repay. My friend was able and willing to put down 40% of the cost and to repay the balance of 60% over a 3-month period, averaging 20% pay month. That would be 2 months earlier than he was supposed to pay back, which would have been 6 months had his application been approved.
Suggestions abound with respect to what an entrepreneur should do when faced with a credit squeeze situation. It must be borne in mind however that different organisations face their peculiar financial circumstances. And as a result entrepreneurs would be well advised to weight each suggestion against their peculiar condition and make a decision accordingly:
1. Marketing Intelligence: How much resources (effort, time, money) do you dedicate to market research? Market research is important for anyone wishing to succeed because it reveals information about:
· What competing products are available in the market.
· How customers perceive your competitor’s products.
· How many competitors have left the market and why.
· How many new competitors have entered the market.
· What your market share is and
. Whether your competitors are increasing or reducing their marketing spending.
2. In my earlier post “Reviewing Your Closing Down Options-The DIY approach”, I suggested that staff might be willing to help save the business rather than get fired and that in such instance, they may be involved in the distribution of flyers and some personal selling. This worked for Blackberry Global Limited and can work for anyone else willing to pursue survival options during an economic recession.
· Perhaps I must state that no period is better to enhance networking initiatives for the business than during a time of recession and credit squeeze. All partners must be involved in every effort to pull in more sales and save the company.
· Study the behaviour of your staff and other organisational members from their day one on duty. A manager who studies the behaviour of his staff is always in a better position to predict their future behaviour. Dr. Stephen P. Robbins once wrote about the importance of Organisational Behaviour as “that field of study which investigates the impact that individuals, groups, and structure have on behaviour within the organisation, for the purpose of applying such knowledge toward improving an organisation’s effectiveness.”
· Any initiatives that can enhance the relationships of the business must be pursued vigorously.
· No time wasting, please. Whatever has to be done must be done without delay. As an entrepreneur you are a leader upon whom the rest of the staff look. Therefore, when sales slow, and staff are less buzy you must think out ways to keep them busy.
· Ensure that your Pending and KIV issues are sorted out and cleared during a period of slow down.
· Never underestimate the power of `communal brainstorming’. Brain storming sessions often help the business owner unearth information that would otherwise never have been known. When I was in Alliance Technique Limited, communal brainstorming was used to exchange ideas and to discuss issues that affect the company. As the Admin./Operations Manager, my experiences and observations within the company and on the field mattered and laying them on the table during communal brainstorming sessions enabled them to be addressed and appropriate decisions made.
· Encourage your staff to come forth with any suggestions they think would benefit the business. My performance encouraged my former M.D. to introduce performance bonuses and profit sharing when all I was doing was simply advancing suggestions that I believed would help keep the business running, which later paid off. When a staff distinguishes himself, as a business owner, the onus is left on you to recognise and appreciate such staff.
3. Reduce your cost profile: Spiralling Costs are easily one of the reasons organisations go burst. When sales is down and costs continue to rise, the weight is soon felt by the business and unless savings and alternative sources of finance look good, collapse is the only imaginable route the business will head.
· Be vigilant and ensure that you have eagle eyes in time of a recession. Make sure you are on the alert to discover possible new markets for your business in the event that formal market research failed to bring in such information. Diversifying a bit won’t hurt your business and on the contrary may showcase your dynamism and ability to adapt.
· Ensure you retain your current and old customers by introducing measures that would make them come again. When last did you for example, give your regular customers `thank you gifts’? Ensure that measures that show you value them are put in place and pamper those of them that appear not to have absolute loyalty to your business. Time of recession is not a time to be carefree or indifferent to the feelings of your customers.
· Listen to your customers. Customers feel the pinch of the credit crunch as well and most of them may find in you someone they can open up to. Being attentive to them and listening to their complaints maybe the only price you will find you have to pay to win their continuous loyalty. Offer objective and honest opinion to their complaints, it may be the best suggestion they have heard in a long time.
· Ensure you have a good and vibrant relationship with your suppliers at all times, because when you are operation tight budgets, it may be all you need to go through a tough period. You may even find that they offer you credit facilities that would surprise you. My friend, Charles, inherited an Off Licence from his father. Before he took over, it had been badly run by his older siblings and shelves were going empty. Charles worked on his relationship with the existing and new customers from that moment and shortly after extended that warmth to his suppliers as well. As the days fly by the empty shelves were filling up and before long the of things convinced some of his suppliers to extend credit facilities to his business. Charles rebuilt the shop and even opened branches.
4. Think Big! It sounds strange but it is true. Thinking big differentiates you from the rest of the competition. Thinking big helps you to take advantage of integration opportunities. Has your intelligence brought in information about a competitor appearing to have a harder time than you? Is your competitor thinking of selling up or changing business? This may be an opportunity to expand, no matter the economic situation. Acquiring a business in time of economic recession may seem difficult but it is practicable. Less than a year ago Alhaji Ahmed and his two partners opened a grocery store. It was obvious that the shop needed filling up, but while the everybody else cried over credit crunch, Alhaji Ahmed has not only diversified the store – including a section for Mobile Phone and Accessories as well as a Chicken Roaster, but he has also already acquired another for which he had to make a down payment of £20.000 for the Lease.
· When a business looks prosperous securing a loan becomes a lot easier, even in time of credit squeeze. Banks simply tighten up the condition and service only those with greater chance of repayment, as my friend found out with Argos refusal.
2. In my earlier post “Reviewing Your Closing Down Options-The DIY approach”, I suggested that staff might be willing to help save the business rather than get fired and that in such instance, they may be involved in the distribution of flyers and some personal selling. This worked for Blackberry Global Limited and can work for anyone else willing to pursue survival options during an economic recession.
· Perhaps I must state that no period is better to enhance networking initiatives for the business than during a time of recession and credit squeeze. All partners must be involved in every effort to pull in more sales and save the company.
· Study the behaviour of your staff and other organisational members from their day one on duty. A manager who studies the behaviour of his staff is always in a better position to predict their future behaviour. Dr. Stephen P. Robbins once wrote about the importance of Organisational Behaviour as “that field of study which investigates the impact that individuals, groups, and structure have on behaviour within the organisation, for the purpose of applying such knowledge toward improving an organisation’s effectiveness.”
· Any initiatives that can enhance the relationships of the business must be pursued vigorously.
· No time wasting, please. Whatever has to be done must be done without delay. As an entrepreneur you are a leader upon whom the rest of the staff look. Therefore, when sales slow, and staff are less buzy you must think out ways to keep them busy.
· Ensure that your Pending and KIV issues are sorted out and cleared during a period of slow down.
· Never underestimate the power of `communal brainstorming’. Brain storming sessions often help the business owner unearth information that would otherwise never have been known. When I was in Alliance Technique Limited, communal brainstorming was used to exchange ideas and to discuss issues that affect the company. As the Admin./Operations Manager, my experiences and observations within the company and on the field mattered and laying them on the table during communal brainstorming sessions enabled them to be addressed and appropriate decisions made.
· Encourage your staff to come forth with any suggestions they think would benefit the business. My performance encouraged my former M.D. to introduce performance bonuses and profit sharing when all I was doing was simply advancing suggestions that I believed would help keep the business running, which later paid off. When a staff distinguishes himself, as a business owner, the onus is left on you to recognise and appreciate such staff.
3. Reduce your cost profile: Spiralling Costs are easily one of the reasons organisations go burst. When sales is down and costs continue to rise, the weight is soon felt by the business and unless savings and alternative sources of finance look good, collapse is the only imaginable route the business will head.
· Be vigilant and ensure that you have eagle eyes in time of a recession. Make sure you are on the alert to discover possible new markets for your business in the event that formal market research failed to bring in such information. Diversifying a bit won’t hurt your business and on the contrary may showcase your dynamism and ability to adapt.
· Ensure you retain your current and old customers by introducing measures that would make them come again. When last did you for example, give your regular customers `thank you gifts’? Ensure that measures that show you value them are put in place and pamper those of them that appear not to have absolute loyalty to your business. Time of recession is not a time to be carefree or indifferent to the feelings of your customers.
· Listen to your customers. Customers feel the pinch of the credit crunch as well and most of them may find in you someone they can open up to. Being attentive to them and listening to their complaints maybe the only price you will find you have to pay to win their continuous loyalty. Offer objective and honest opinion to their complaints, it may be the best suggestion they have heard in a long time.
· Ensure you have a good and vibrant relationship with your suppliers at all times, because when you are operation tight budgets, it may be all you need to go through a tough period. You may even find that they offer you credit facilities that would surprise you. My friend, Charles, inherited an Off Licence from his father. Before he took over, it had been badly run by his older siblings and shelves were going empty. Charles worked on his relationship with the existing and new customers from that moment and shortly after extended that warmth to his suppliers as well. As the days fly by the empty shelves were filling up and before long the of things convinced some of his suppliers to extend credit facilities to his business. Charles rebuilt the shop and even opened branches.
4. Think Big! It sounds strange but it is true. Thinking big differentiates you from the rest of the competition. Thinking big helps you to take advantage of integration opportunities. Has your intelligence brought in information about a competitor appearing to have a harder time than you? Is your competitor thinking of selling up or changing business? This may be an opportunity to expand, no matter the economic situation. Acquiring a business in time of economic recession may seem difficult but it is practicable. Less than a year ago Alhaji Ahmed and his two partners opened a grocery store. It was obvious that the shop needed filling up, but while the everybody else cried over credit crunch, Alhaji Ahmed has not only diversified the store – including a section for Mobile Phone and Accessories as well as a Chicken Roaster, but he has also already acquired another for which he had to make a down payment of £20.000 for the Lease.
· When a business looks prosperous securing a loan becomes a lot easier, even in time of credit squeeze. Banks simply tighten up the condition and service only those with greater chance of repayment, as my friend found out with Argos refusal.
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