There are some actions we take as individuals that can never end. When we quit doing any of these actions, we will soon die. I am talking about eating, sleeping, breathing and exercising. As long as we want to live, we must continue these life-sustaining activities.
Likewise, in business, there are life-sustaining activities that must be perpetually attended to. Business survival is hard enough even when these actions are conscientiously taken. What I worry about is that many business owners may have ceased or are ceasing to do some of these things in the guise of cutting back.
Cutting back is what you do during a recessionary economy. And it appears our weak economy will continue for the next several years. Though the U.S. leading economic indicators rose 0.2 % in September, existing home sales fell 3% in September, according to the National Association of Realtors. Harvard University reported that the sluggish economy and housing market will continue to hamper home improvement spending well into next year with a modest decline over the next several quarters.
So that news, coupled with their own sluggish sales, has caused some flooring manufacturers to cut back by closing some facilities. Lowe’s announced they were closing some 20 under-performing store locations. Cutting back is what many businesses are doing now to survive the next several years. It’s all about making the business a lean profit-producing machine. It’s about cutting the fat; those unnecessary expenses and time wasters that do not, directly or indirectly, produce sales and profits.
Cutting back is driven by the understanding that every dollar saved from current operating expenses goes directly to the bottom line. That’s why you must justify every expense – every day, every month, and every year. You must eliminate nonessential expenses as soon as you identify them. When you misspend a dollar you have really wasted two – the dollar misspent and the dollar you could have spent well.
Ideally, cutting the fat, as opposed to cutting back, is the first thing you should never stop doing. You should do it in good and bad times. Always look for ways to eliminate waste to make your profit-making machine run more efficiently. That being said, you also have to be very careful about cutting muscle or those life-sustaining activities critical to the survival of your business.
Besides cutting the fat, marketing is the second activity that should never be stopped. Marketing is muscle, not fat. You must be careful about cutting it. Peter Drucker has said “the purpose of a business is to create a customer; therefore one of the functions of a business is marketing. How can a vital function be cut? A business building its brand must get its message out to create customers. It is a myth that if you build a better mousetrap, customers will beat a path to your store. If they don’t know about you or can’t find you, what good is a better mouse trap?
Your marketing message must be controlled and supported by the customer’s experience. The key to building sales in hard times is a strong marketing communications program. Research by McGraw-Hill, of 600 companies from 1980 to 1985, found those businesses which chose to maintain or raise their level of advertising expenditures during the 1981-82 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.
You have to market your businesses smarter these days. Today, every single penny counts. Don’t cut out marketing; you just have to do it in different ways. We must use low-cost or no-cost methods to communicate to our customers and potential customers-through email and social media, such as Twitter and Facebook.
There are many low-cost and unconventional alternatives to communicating your message. Do research, study and be aware what others are doing to attract customers. Consider joint advertising with a non–competitor. Networking, creating a referral system and being involved in our communities are ways to build and market your brands. Never stop marketing and telling your story…it is a life-sustaining activity.
Don’t cut back on service to the customer. The best marketing message is the one customers share with each other. Increase the level of attention your customers receive. Don’t accept disengaged or ornery employees who do not treat your customers like the most important people-because they are.
Ask yourself this question: What are our customers feeling after they leave? If their experience wasn’t memorable, or as author Seth Godin says, remarkable (the willingness to tell others), we have not done our jobs. Make the experience so good that the customer gives their permission for us to maintain contact by giving us their email address. Remember, staying in touch through email is free marketing.
Never stop improving the productivity of your people. Just because business is slow, don’t quit monitoring their performance. When performance is measured, performance improves. Not only should performance be monitored, you should have sales meetings on improving key performance measures (sales, margins, closing rate, average ticket and credit sales).
Small changes in your sales teams’ behaviors can make dramatic changes in your business. For instance, if a salesperson closes just one more customer out of 10 (10% increase in closing rate), he/she will have at least a 33% increase in sales.
Additionally, when each salesperson has a quota/ personal goal for each measure, productivity also improves. And when the sales manager sits down in a PPI (Personal Performance Interview) to discuss a salesperson’s performance, performance accelerates. If you cut out monitoring these key measures, you communicate their performance is not important. Working to improve productivity is a vital activity.
Think long-term. With every action taken consider what the potential consequences may be on the future of your business. We can only act and live in the moment, but research has confirmed that the most successful are those who think, plan and act with the future in mind. We must have vision of a future desired result. Have you decided what kind of future you want for your business? It’s a life-sustaining activity.
The near future may look like the present. However, we can’t cut out those activities that sustain business life. If we do, it may not matter anyway, because the odds are, our businesses will not make it into the future.