As I sat down to write this column, I struggled as I usually do to find a theme and message that would be pertinent to our readers. I considered our current economy and how many floor covering dealers have contacted me about how they are struggling to stay in business. I quote from a couple of my friends concerning their businesses:
“Hanging in is hard. Let go all installers and now subbing everything. Cut the girl from my other store. Have cut overhead overall by 20% (rent reduction, salary, gas, etc.), but retail sales are just so slow... networking my butt off... just trying to stay alive but it is a constant challenge.”
“Business is really tough as you know. My partner and I are barely hanging on. Need an average fall to not lose some money ...hopefully we will get out of this soon.”
Also, having just read a book about those that survive major calamities or horrific events, I thought I would write about surviving in this recession. But then I was reminded of what a Great Depression survivor said: “Today’s Americans will make it through, whether you call it a recession or a depression.”
Yes, we will all survive. Will our lives be different? Probably. Some of us may lose our businesses, some may have to postpone their retirement, others may have to downsize, still others may leave our industry altogether. But the fact is, we will survive. And as others have written, there will be a new norm. The much deeper question is will we have learned? What has the recession taught us?
For many of us the experience has been difficult. I hope we all will personally learn something from these stressful times. I believe if we don’t learn the lessons in life that life teaches, life will continue to send those same lessons until we learn. Life will keep hitting our heads with a 2 by 4 until the lesson sinks in.
What will we do differently in our lives and our businesses? What will we have gained from this experience? Here are some lessons that I have learned that everyone should consider.
Lesson #1: Plan for the unexpected.Good times don’t last forever, neither do bad times. If it can go wrong, it most likely will. Expect change. Always have contingency plans.
Do you have life insurance for your family if something happens to you? What about a succession agreement with your partner if something happens to either of you? What if you lost your #1 client? What if your accounts receivable became uncollectable? Have you arranged for a line of credit, even if you don’t need it?
What would happen if you became disabled and unable to work? What would happen if your 401(k) became a 101(k)? What if your house or business burnt down and the insurance company wouldn’t pay fair market value? What plans do you need to put in place?
Lesson #2: Manage your cash with frugality.Cash is king. Without cash you are out of business. What if your cash cow dried up? Do you have reserves? Are they easily accessible? Is too much of your net worth tied up in long-term assets? How fast could you turn assets to cash if you needed to?
There was a time when a person who was frugal was looked upon with esteem rather than someone without the means to buy more. Do you remember Sam Walton? He was at one time one of the richest men in the world yet still driving around in his pickup truck in coveralls. Many people seem to equate frugality with cheapness, but that couldn’t be further from the truth. Being frugal is simply getting the most out of what you have and purchase, and not purchasing things that you really don’t need. I’m not saying it isn’t okay to indulge once in a while; just be wise.
My father and mother learned frugality during the Great Depression. Learning to be frugal could help a lot of us who haven’t learned to live within our means or plan for our futures.
Lesson #3: Avoid debt.In the age of credit cards, where spending what you don’t have now is encouraged, it’s hard to believe that people actually believed debt was to be avoided. Those are the words that my parents lived by. If they didn’t have the money, then they would figure out a different plan on how to get what they needed. I do believe that borrowing to make a great business investment - as part of a sound business plan - can be wise, but the long-term consequences ought to be considered. Are there alternative ways to raise the capital?
Lesson #4: Save for emergencies or other opportunities.As many people are finding out, emergencies eventually come. My grandparents were well aware of this and specifically put aside money for these rainy days. It’s now what is commonly referred to as an emergency fund and something that comes in quite handy.
Lesson #5: Always deliver good value.In good times, when demand is high, it is easy to deliver a little less than optimal value. You can allow your prices to move up, because to lose a few jobs means little. There is plenty of work.
When times are lean, those customers to whom you increased your pricing and profit may spend more time searching for better value. You may be hurt even more because those customers do not come back. Value is the emphasis you deliver on the customer experience. If your customers are not talking about you, you better work on delivering more value. In good or bad times value is in the mind of the customer.
Paraphrasing Warren Buffet, “Price is what they pay and value is what they get.” Deliver more than the customer expects. Value is getting more than what you paid for. Customers are no longer interested in an even exchange. Good value will insulate you more in bad times.
I know there are many other lessons that can be learned from the recession. I have only shared five of mine. I would love to hear the lessons you have learned and what you will do differently in future good times. Please email the lessons you have learned to me (firstname.lastname@example.org), so I can share them with our readers. All submitting lessons will receive a gift. We can learn much from each other, in both our successes and our struggles.