Top Ten Businesses in a Bad Economy

According to One Coach the following businesses tend to succeed during a recession:

1. Business Coaching

2. Business Networking

3. Alternative Fuels

4. Environmental Services

5. Health Care

6. Nail Salons

7. Discount Retailers

8. Luxury Products

9. IT and Technology Services

10. Credit and Debt Management

It is debatable whether Nail Salons and Luxury products truly do succeed in a recession. Item #9 in my view should be ranked higher in the list as businesses utilize technology to become more efficient and profitable during tight, recessionary periods. #3 and 4 are great forward looking businesses, but they carry a premium and subject to positive government policy and regulations. Just know you need to be prepared for the long haul with Alternative Fuels and Environmental Services as demand will ebb and flow directly associated to the whims of the White House and Congress. In addition, during down economies, you will need to aggressively sell how much these businesses can save consumers and businesses money in a significant, quantifiable way, since the offering will be products and services that carry a price premium. Glad to see my business at the top of the list! Businesses find out they need a business consultant and coach during downtimes-the smart ones know this before they get in trouble!

Real World Business Recession Tactics and Strategies

Some areas which Sara Wilson keyed on in the December ’08 Entrepreneur Magazine Article, “Trend: Economy”, which makes a lot of sense in this Economy:

1. A Business Idea that is Working right now: CouponMom

a) Stephanie Nelson started a website that teaches consumers how to save money buying groceries using coupons.

b) 2008 Revenue has doubled and the site had over 1 million unique users in July.

2. Local Scope: Due to financial pressures and an uncertain economic outlook, consumers are spending more time at home and closer to home.

a) Consumers are frequenting local restaurants and entertainment establishments, which are more low key and less expensive.

b) Instead of traveling to Disneyworld, families are utilizing “staycations”, enjoying local area parks, lakes and beaches.

3. Green Business: Organics are and have been exploding in growth and the outlook is very good. People want to eat healthy and feed their family healthy food even when things are tight financially. Green conservation is another growing business niche.

4. Web Business: Why spend large start up dollars on a brick and mortar Business, when you can run the same or similar business from home, utilizing the internet?

a) Web businesses are very competitive and the learning curve is significant if you aren’t familiar with web marketing techniques.

Sara Wilson had another good article, “How are Franchisees Dealing?” in the January ’09 Entrepreneur Magazine that interviewed four different franchise business owners on how they were dealing with obstacles during this current economic slump:

1. Floyd’s 99 Barbershop: The franchisee, Jay Palmer, couldn’t find a loan for a new store. He tried using his home and his parent’s home as collateral and no luck with banks, including trying to obtain an SBA or Corporate loan.

a. The Solution: Mr. Palmer found a personal investor (Angel Investor). The investor came into the shop for a shave and a haircut when Mr. Palmer wasn’t around so he could get a good feel for the business. He ended up investing $150,000 after seeing a steady stream of happy customers and happy, energetic employees. This was a great move on Mr. Palmer’s part, using a track record of success and clearly showing a sharp investor the real deal behind the potential success of his future business opportunity: great service, great product, happy customers and content, energetic employees. In just one site visit and the positive experience with the business’ services, the investor was ready to supply the needed capital even after multiple bank turn-downs.

2. Kitchen Solvers: Franchisees, Carrie and John Borden Kircher, customer niche based changed. Their customer market became price orientated, and the business offers premium kitchen and bath remodeling. Leads dropped 19% and sales are down 25% over the last two years.

a. The Solution: Their solution is rebrand their vans, get new signs; increase letters to past customers; leave a gift with a customer after a job is complete; and working with their franchiser on the operational side of the business. Ok, as a Business Consultant I am going to give my two cents on the Borden Kircher’s proposed solutions:

i. Rebranding Vans and New Signage: In my experienced opinion, this is a waste of money. I would instead spend this money on a new Marketing Plan which concentrates on two areas:

a) How to target higher wealth clients in the market area.

b) How to sell price based customers on why premium services and products can save them money in the long run. Once the new Marketing Strategies bring in profits, then it is a good time to upgrade signs and re-brand with those growth dollars.

ii. Increase Letters to past clients: Ok, but what is the purpose of a letter? The time to ask for referrals is the day the job is completed. When the client is happy with their new Kitchen or Bath. A newsletter with examples of completed jobs and customer testimonials, along with a preferred customer discount coupon, may be more effective in obtaining an add-on sale with an existing customer. A newsletter can also be a forum to introduce other services to current customers which they may not be aware, such as, having an article on the Design Services that Kitchen Solvers offers. The most cost effective, normally highest bang for your marketing buck, are continuing sales to existing customers.

iii. Leaving a Gift Basket with a Customer Post Job Completion: The Borden Kircher’s are looking to implement better customer service and they believe customers are looking for the “Wow” factor. Leaving a gift is not customer service, and the wow factor should be as a result of a beautifully completed job. A Gift Basket will get neither. Customer Service starts at the Sales and Design Stage and continues throughout the job. The business owners showing up on the job to check on things and talk with the client is good customer service. Meeting with the customer in person after a job is completed to go over everything and ensure the client is happy is good customer service (and a great time to drop off the latest company newsletter and ask for several referrals). Customer Service is showing up on the job when the client is unhappy with the contractor’s work. This type of highly motivated customer service will create the Wow factor for Kitchen Solvers, along with a quality, premium, beautiful look in the finished kitchen or bathroom, leaving a lasting impression.

iv. Work on the Operational Side with the Franchisor: This is one of the fantastic advantages a Franchisee can leverage: utilizing the experience and resources of the Franchisor. Some Operational Tips I would make as a Business Consultant:

a) Analyze product costs and see where you can cut costs yet still retain a premium, high-end image with quality products and value added results.

b) Work on a Supplier Business Plan which strengthens your relationship with your suppliers, tapping their assistance, experience, resources and expertise to bring better product offerings to your customers.

c) As previously stated re-work the Marketing Plan, along with making the resulting key changes in the Strategic Plan to better anticipate future market trends and adapt operations more proactively to those indicating trends.

d) Examine the Operational Aspects of the Business Plan to see how you can better bridge the gap between the design sale stage and the install. Customers are more prone to pay a premium for a smooth, effective transition from concept and design to install and completion.

e) Incorporate add-on selling into your Strategic Sales Plan for existing customers. A happy customer is more apt to stick with the same company to continue remodeling, so be sure to have a built in process which engages customers and shows them other remodels you can accomplish for them. Add-on selling takes very little marketing cost for a big return and ties in well with solid customer service.

f) Have the Franchisor witness some sales and installs to see if areas for improvements can be identified. Incorporate these improvements into your Business Plan.

b. My Best Advice: Find a way to sell a premium product and service to higher wealth clientele and offer a product/ service which has a premium look and finish, yet appeals to price conscious customers. Search for innovative suppliers who can help accomplish this mix. Follow-up this new business model with strong customer service throughout all the sale and install stages. Concentrate on a post-completion walk-through which asks for referrals and start the add-on sale process. Follow up with a monthly newsletter which contains add-on ideas and offers a loyal customer discount. The Borken Kircher’s have a lot of challenges in this economy, and as they said, “you can’t just sit around waiting for people to call.” Use this rough patch as a learning experience in staying ahead of changing market trends, analyzing costs and making new plans for future success. A premium product + great customer service + a quality install + great value = a viable business model in any economy. Just don’t wait two years to make changes.

3. The Melting Pot Restaurant: The challenge Franchisee Michael Frampton was facing during the Real Estate Crash in California was establishing the restaurant in a new shopping center when 10 other centers in the area were all opening at the same time. On top of this significant challenge, property taxes went up from $500 a month to $2,500, which meant $2000 a month cost comes straight off the bottom-line, never being budgeted for.

a. Solutions: Mr. Frampton shows why he is going to be a successful business owner. Clear steps and strategies to overcome the current situation:

i. Loyalty Cards: This is a fantastic move. Appreciate your regular customers during the hard times, and they will keep your doors open.

ii. Mass Mailing: Targeted within a 10 mile radius as there are so many competing restaurants in the immediate area. Targeted mailing is measurable, which is key during tough times.

iii. Analyze where you are spending money and the areas which can be controlled (not necessarily cut): Mr. Frampton actually saved $500 a month in focusing on linen costs for towels used to clean the restaurant. He also analyzed energy cost: when they turn on equipment and the length of time it’s used. A third major cost area for restaurants is staffing, which Frampton cost analyzed as well.

iv. New Business Opportunity: He started opening for lunch on Sundays. Why? Probably because customers come after church with their families to enjoy an upscale meal, as do the late weekend risers searching for a good brunch close to home. One of the best analyses a restaurant can perform is looking at the average customer flow, food sales, alcohol sales and costs for each day of the week it is open to determine what days are best to be open and the reasons why. Armed with that information, you can adjust staff schedules, open hours and food prep costs much more strategically. Mr. Frampton apparently thinks the added costs of being open for lunch on Sunday is worth it, based on good cost analysis.

4. EmbroidMe: Wendy and Todd Diskin own a franchise that specializes in promotional solutions for businesses, which includes decorating apparel and screen printing. Their challenge has been rising costs from their suppliers. They have experienced a 5% increase in the Cost of Goods over the last year.

a. Solutions:

i. Competitive Pricing vs. Solution Based: The custom product industry is price competitive. With rising costs, the Diskin’s have provided a more solution based approach so the buying decision isn’t just made on the quote. For instance, if one of their customers is trying to increase readership, they figure out how EmbroidMe products or services can help the client achieve that goal and come up with a program to do so. Then the decision becomes one of “risk and reward and ROI instead of price…” Selling solutions alongside your product and service offerings is a way you can separate your company from the competition and still retain premium pricing in a price based market.

ii. Continuous Marketing Software: This program sends letters and emails so the Diskin’s can “stay in front of their customers on a regular basis without a ton of effort….” This software program keeps the company engaged with customers, giving EmbroidMe first opportunity to make another value added sale or track how customer market trends may be changing.

iii. Vendor Relations: Leveraging a strong advantage franchises have, EmbroidMe Corporate negotiates the best pricing and strategic relationships with suppliers for their franchises. This is a huge advantage as it is a time consuming task and volume pricing from a Global Corporate level is much more advantageous than negotiating on your own as a single business unit. So it is apparent that although COGs has risen, EmbroidMe is still very competitive and successful, even in a recession.

Conclusion:

This article used real world examples and combined it with the business experience of a 20 year veteran Business Consultant to provide you with real world examples and strategies to use in order to start, run or adjust a new or existing business in a struggling economy. In a recent article I discussed Recession Survival Planning, and how it is a must and utilizes good Strategic Planning, Diversification Techniques, Contingency Planning and Cost Management. In another article I discussed various Recession Finance Techniques for your business which are particularly good during a Recession, which include Networking, Supplier Finance, Lease Finance and Local Business Loans. To conclude in this article, I identified certain types of businesses which excel in an Economic Downturn and why they are successful. My best advice for starting or operating a business during Recessionary times is as follows:

1. This Recession will have an impact for at least 3 years. So keep that in mind when planning for your business.

2. Track record, Experience, Niche Market Identification and Cash Flow are keys in raising funds for your business.

3. Solid, Comprehensive Business Planning, along with realistic, accurate Market Planning and Financial Forecasts are very critical during challenging economic times. An effective Strategic Plan is integrally important in bridging the gap between a Marketing Strategy and Realistic Financial Forecasting.

4. Out of the box thinking: For Brick and Mortar Companies, key on strong local areas and/or utilize the web to efficiently bring a product or service to the market.

5. Price Competitiveness becomes less important if you sell value-added business solutions to your customers and have tight controls on costs.

The strategy cycle is a simple tool that will help you to achieve the goals of your organisation. Consisting of four main phases, the cycle is an iterative process that you can use to build and improve your business year after year.

Research

Successful business relies on informed decision making. Managers with access to information on the market, competitors and their own business will be better placed to set goals and devise strategies, than those who are less well informed.

Larger organisations often have business intelligence units, specifically tasked with the collection and analysis of data, but there is nothing to stop managers from smaller businesses from spending a couple of hours each month collecting their own business intelligence.

Often a manager’s personal knowledge and experience of the market can be just as effective as expensive research studies and decisions are made through ‘market sensing’ as opposed to ‘market research’.

As the strategy cycle is an iterative process, the results of previous strategies should feed into the business intelligence, along with any important experiences or key learning’s gained.

Planning

After analysing the business intelligence to identify the most important internal and external factors affecting the organisation, managers can begin to formulate appropriate strategies for meeting their goals.

Organisational goals are the aspirations that the business seeks to achieve. These generally revolve around growing the business and increasing profitability, but can also be industry specific, such as a technology company wanting to become the leading innovator.

To make these goals possible, managers set objectives which provide a more tangible destination for the business to move towards.

For example, a business seeking market leadership would probably set objectives around increasing sales and reducing costs. It would then be up to the heads of finance, marketing, HR, R&D and production to develop strategies to achieve these objectives.

A strategy can be described as a collection of activities that will enable the organisation to reach it’s objective. A cost reduction strategy may involve staff redundancies, renegotiation of contractual terms with suppliers and the development of more efficient supply chains.

Throughout the planning process, managers should constantly consult with other heads of department and with employees further down the line who will be responsible for implementing the strategy activities.

Without suitable levels of communication, the different parts of the business will not be able to take an integrated approach towards the objectives, often resulting in duplication of effort or inability to deliver to customers.

A good example of this would be the marketing department implementing a campaign to increase sales, without informing the production department, who will not have had enough time to prepare for the increased level of demand.

Other important factors to consider during the planning process include:

– Determining how the success of the strategy will be measured

– Outlining the key milestones and stating when these will be achieved

– Financial planning to agree appropriate budgets for each activity within the strategy

– Undertaking a risk assessment and identifying ways to mitigate major risks

– Establishing an approval and sign-off process for each activity

Implementation

Strategy implementation involves the delivery of a number of inter-related activities to an agreed standard and schedule. This is often referred to as project management.

To successfully deliver projects, managers need to have good communication, financial and time management skills, so that they can liaise with staff, contractors and customers (both internal and external), whilst ensuring the project remains on schedule and within budget.

In larger organisations there may be a number of inter-related projects taking place in order to meet an objective. This is often referred to as programme management, with a programme board regularly monitoring each project to ensure it is delivering.

As each milestone activity in the strategy is completed, it should be reviewed and signed-off by designated managers. Activities that are not delivered to time or quality should be reviewed to understand why and corrective action undertaken to try and get the delivery of the strategy back on track.

Measurement

Once implementation of the strategy is complete, it is important to assess the degree to which it enabled the objective to be achieved. Without proper measurement it will be difficult to accurately understand what worked and what improvements might be needed for future strategies.

The method of measuring the strategy should be closely related to the objective that was set. Therefore an organisation whose objective was to increase sales turnover, would use the increase (or decrease) in actual sales as one of its measurements.

On some occasions it will not always be possible to use internal data to measure strategy success, especially for less tangible factors such as brand awareness. In these cases it will be necessary to seek external data in the form of market research surveys and opinion polls.