Don’t Just Survive … Dominate in a Recession By John L. Mariotti 2008
People behave in contradictory ways during times of stress – like during a recession. Too many managers in too many companies become paralyzed by fear or indecision. Recessions are part of business cycles, just like growth periods. Thus, managing during a recession is part of a manager’s job— perhaps the most important part.
But what should managers do differently? The answer is “a lot,” but not “everything.” If as a manager, you have managed through recessions before, you may remember what to do, assuming you did the right things. If not, consider this short story:
A man was walking along the street and as he passed a construction zone, he fell in a deep hole, one with walls so steep, he could not get out. He yelled for help.
The first passerby was a doctor, who asked if he was injured. After answering that nothing was broken but he hurt all over, he saw a prescription float into the hole and the doctor was gone.
The next passerby was a minister. The minister asked if the man was all right, and when the answer was a reluctant yes, a prayer on a slip of paper came floating into the hole.
The third passerby was the man's best friend—and the man in the hole was jubilant—until his friend jumped into the hole with him.
The startled man asked his friend, "Why did you do that? Now we're both in the hole.”
The friend answered, "Yes, but I've been down here before and I know the way out!”
The man in the hole felt frightened because he hadn’t been through the experience before, and didn’t know how to get out – fear of the unknown was natural. If you haven’t been through a weakening economy before, you may think of yourself as the man in the hole.
The mere word “recession” triggers fear of the unknown. How bad will it get? How long with it last? What should we do? If these are your reactions, don’t feel bad. These fears are normal when facing unpleasant events of unknown severity and duration.
The biggest mistake you can make is to act too slowly, but it’s also important to act with carefully considered intent. The second biggest mistake is denial: “This can’t be happening; it can’t get any worse.” Yes, it is, it can and it probably will. The third biggest mistake is to become defensive and reactive. When that happens, you will always be a step behind the competition—and a step late in meeting your customers’ needs.
The secret is not to concentrate on “survival.” Instead, concentrate on taking steps to dominate the competition. When the recession ends and recovery comes, you’ll be on top. Coincidentally, those same steps are the right moves to survive the recession, too.
Here are the seven most important steps to take when “preparing to dominate” the competition:
1. ‘ATTACK!”— By definition, a “recession” means negative growth, but that doesn’t mean there’s NO business. There’s just less, and it takes more, better effort to capture it. That’s when “dominate” comes into play. If you read further down this list, you will know to choose the right customers, and push the right products. Get out there and get a larger share of the remaining business. Attack; don’t defend! Be proactive, not reactive!
2. CUSTOMERS: Sort customers in descending order of your annual revenues and profits—also consider their potential. Get closer to the top customers and sell them more. Eliminate complexity added by bottom-dwelling customers; they cost more to keep than they yield in profits. There are some winners in the middle who need attention, and losers who need to go—now! Firing customers is always hard, but when the cost to serve them exceeds the profit they generate, money and time that could be used on better customers is wasted.
3. PRODUCTS: Sort your products the same way, in descending order of annual revenue and profit. First, consider the items at the top. Where are they on the “product life cycle”? New and still growing, or old and declining? Which have plateaued (neither growing nor declining)? Those will decline next. Now is the time to “rejuvenate” them or drop them. Reduce the complexity drain of old, tired products – dump them – and make room for new ones.
4. EXPENSES: Quit spending! Cut all but truly essential expenses, but don’t cut spending on new products and marketing; those are your future. Get rid of ALL the nice-but-not-necessary things – temps, contract services, memberships, dues, subscriptions, high-priced travel, conventions, parties, FedEx, premium flights, expensive limos, hotels, and meals out – at the company’s expense.
5. CASH FLOW: Watch cash flow like a hawk. Make a spreadsheet (you should already have one) projecting cash flow 13+ weeks out, in detail. Collect fast, pay slow; take only the big cash discounts. Use checkbook-style, open-to-spend processes, starting with how much you have and then deducting items as you spend. Stop spending before cash runs out.
6. HEADCOUNT: People are usually the largest cost (after purchased materials) in a business. People don’t just cost wages and benefits; they spend money and consume resources. Carefully evaluate your people. Sort them into four groups: A – Great – these are the keepers, and tell them so; B – Good – you want to keep them, and tell them, too; C – Fair – questionable; D – Weak – under-performing or unnecessary, and you should cut them now! Find the ones in the “Fair” group who can grow into “Good,” and work with them. Dump those who can’t grow, or won’t grow, along with the “Weak” ones.
NOTE: These groupings have nothing to do with organizational rank—a “Great” customer service rep might be far more valuable than a “Fair” senior executive. Weak or unnecessary people in high paying positions should be cut first. Also, combine jobs to remove highly paid positions—CFO, Treasurer and Controller can often be combined into two jobs by reallocating work. Next, cut excess people added in “good times.”
7. LOWER THE BREAKEVEN: Classify expenses as “Fixed” or “Variable.” Variable costs (expenses) go into every product or service. Fixed costs are determined by decisions about the business’ structure and size. In a weak economy, expect volume to drop – this means you must cut fixed costs fast, and resize the business to the market. Pricing must recover variable costs, and contribute to covering fixed costs, S. G. & A (sales, general and administrative costs), interest, and hopefully yield a profit. (Note: Using EBITDA as a metric is dangerous; it excludes interest—a cash outlay.)
Getting through a recession is like getting in shape after gaining weight. Exercise—make the right moves. Eat properly – “feast on competitors” – by selling the best products, to the best customers. And don’t quit when the going gets hard. Running a business is supposed to be hard; if it weren’t, everybody would be doing it. Now get out there and don’t just survive, attack and dominate! It’s a lot more fun than the alternative.
John L. Mariotti’s new book “THE COMPLEXITY CRISIS—Why Too Many Products, Markets & Customers Are Crippling Your Company – And What To Do About It” is available at www.amazon.com,www.800ceoread.com and most leading bookstores. Mariotti, former President of Huffy Bicycles and Rubbermaid Office Products Group, is President & CEO of The Enterprise Group, and author of eight books business books and hundreds of articles and columns. He serves on several corporate boards, advises companies and does public speaking. He can be reached at www.mariotti.net
Catching Up With... J.R. Shaw, Executive Director of the Washington County Tourism Promotion Agency,Washington, PA
J. R. spent 7 years as the Group & International Sales Director for VisitPittsburgh before taking the reins as Executive Director of the Washington County Tourism Promotion Agency in Washington, PA last fall. He is originally from Louisiana, but has adjusted to life in Western Pennsylvania with more seasons and fewer bugs.
1. Why/ How did you become involved in the tourism industry?
I returned to college in 1993 to complete my degree, and wanted to be a part of an industry that would always be in demand, so I chose the hospitality business. After cutting my teeth in the hotel business, I crossed over to “the Dark Side” and the world of destination marketing. Eventually I was fortunate enough to become the Executive Director here in Washington County.
2. What advice would you give to a group travel organizer to help them recruit travelers who have never traveled with a group before?
Throw the old models and paradigms out the window, and listen to travelers to determine what motivates and excites them. Develop products around what they tell you, not what you think they should buy.
3. What are the most pressing tourism development issues facing the industry? The group tour industry still has not figured out who the next generation of group travelers will be. Industry awareness may be the key, which I am happy to say is improving due to many initiatives brought forth by industry associations. But the song has to be sung from all corners, by operators, DMOs, suppliers and all industry segments. The next generation has to know that group travel is a great experience.
4. What is your most sought after group travel market at this time?
Washington County is undergoing a tourism boom right now, so we have lots of folks we need to talk to. The Meadows Racetrack & Casino will be one year old this summer, so the gaming market is important to us. Plus, Tanger Outlets Center Washington will open this Labor Day Weekend, so shoppers will be much sought after. Finally, Washington County has received a Preserve America Heritage Tourism grant for 2008-09 to promote and celebrate our rich heritage and history, and we want to make sure the group heritage market is part of our audience.
5. Technology is changing the business of group travel. What do you expect to see new and exciting in terms of travel technology?
I think the whole realm of social media has yet to be fully explored by the travel industry. I can see some elements of travel promotion becoming a “travel conversation” with real experiences and adventures being shared and featured with audiences from around the world. Is there anything in the spectrum of online travel that you feel technology has yet to improve on? Eventually the entire online world needs to become more user friendly – again, focus on the customer and their needs.
6. The group travel industry is a very people-oriented industry. How do you see technology affecting the personal nature of travel?
I heard someone once say “travel marketing is all about showing pretty pictures of places people want to go.” That’s partly true. No matter how technologically advanced we may become, nothing will ever take the place of pretty pictures and a personal testimonial. That’s the ultimate personal touch.
7. When you’re not in the office, where will we find you?
Probably in the kitchen. I’m the one either preparing, consuming or cleaning up!
Amarnath caves is one of the most legendary of Hindu temples, dedicated to Lord Shiva, located in Sonmarg, Jammu and Kashmir. It is at a height of about 4000 metres. Because of this height, the cave is covered with snow for most of the year. Still devotees from all over the country go for a spiritual yatra to Amarnathji cave. This time the journey to faith commence on 20th June 2008.
The cave is a holy place for Hindu pilgrims, because of its ice content. One very characteristic pillar of ice is believed to be an ice lingam, the phallic symbol of Lord Shiva. Two smaller ice stalagmites represent Parvati, his wife, and Ganesha, his son. The Hindu pilgrims also believe, that the height of the lingam increases and decreases with the phases of the moon. In the month of Shravan, on the full moon in August, thousands of Hindus go on a pilgrimage up to the cave. At this time the lingam reaches its biggest size.
The pilgrimage begins from Srinagar, the capital city of Kashmir, 140 kilometers from the shrine. One can reach the spiritual cave via Baltal or via Phalgam. The route passes through Pahalgam, Chandanwari, Sheshnag and Panchtarni, each of these places being intricately woven in the legend that signifies the importance of this shrine. Helicopter rental service is also provided for the devotees to reach amarnathji cave.
To be a part of this spiritual pilgrimage, visit http://www.kashmirhotravel.com for more information and tour to the holy cave.
Posted by: kashmir
on May 07, 08 | 1:06 am | Profile
The Padre Island Business Association (PIBA) is bringing a live music festival to North Padre Island for the first time. The first ever celebration is set for Saturday, August 9, 2008 in collaboration with the Texas Jazz Festival Society (TJFS). The 2008 festival will be a one-day affair from 12noon until midnight at the newly renovated R. Briscoe King Pavilion at Padre Bali Park.
According to PIBA officials, this event has been in the works for some time now. The members have been looking for innovative ways to bring visitors to North Padre Island to enjoy the natural wonders and receive economic support for local businesses. The TJFS was also searching for a way to promote the musical art of Jazz and their three-day Texas Jazz Festival, held each year in October that will be celebrating 50 years in 2008. With the partnership born, talks of hosting a three-day celebration in mid-June are already in the works.
The Padre Island Beach Party & Music Festival will feature six back-to-back bands, an 80 x 80 ft Budweiser tent, food vendors and arts and craft vendors. There will be ice cold Budweiser in 20oz insulated cans for just $4 and the Official Pardre Island Beach Party & Music Festival label red and white wine for purchase. The festival features souvenir logo bottles that may be signed by the vintner.
The PIBA and TJFS are currently seeking sponsors, food vendors, arts and craft vendors and lots of music-loving island goers for the first ever celebration.
AWESOME MUSIC LINE-UP -
Duke E. Brown, a great local seven-piece blues group with lots of local following. Cat's Don't Sleep, a San Antonio based six-piece group that plays lots of blues and oldies. Lyrical Bynge, local group plays different styles including Janis Joplin, Santana, Eagles, Cheryl Crow, Led Zepplen, Shakira, The Cure, Journey and much more. Ritmo Caribe, a fantastic Corpus Christi 12-piece Salsa group- one of the biggest draws at the Texas Jazz Festival. Europa, an eight-piece group from San Antonio known for their Jazz and other tunes that have traveled Europe and enterained our troops overseas. Norma Zentana, a fantastic Latin Jazz group that hails from Houston and is another favorite of Texas Jazz Festival attendees each year.
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