Nine Steps to Nirvana - Profiting in Recession

Recession isn’t all bad news – it can be an opportunity.


Reading the business press these days is a really depressing practice. Banks are tightening up, fuel prices rocketing, housing market faltering, millions being wiped off stock market values, strikes, England lost to Wales at Twickenham and to top it all Fabio Capello still can’t speak English!

But it can’t all be bad news.

The trouble with bad news is that it often derives from a self fulfilling prophecy. Authoritively tell a normally healthy person that they have a hideous terminal disease and you will be able to see the colour drain from their face. Ultimately, their health will falter and they will become a shadow of their former self.

The same applies to business. Convince any normally rational businessman that they are likely to be heading for bankruptcy and they will begin to act irrationally slashing costs, cuts in marketing and promotion, tightening up all round.

The effect of all this ‘bad news’ and negative behaviour is that business suffers. Yet it has been proven time after time that recession, for want of a better word, makes the impossible dramatically possible. Rather than close markets down, recession opens up all manner of opportunities. Think about it.

What happens to your competitors when things get tight?

Some become more aggressive, scrabbling for every bit of business they can get – at any price. Others seem to disappear into the proverbial business woodwork, shedding staff and overhead as they dive headlong into terminal decline. But then there are those that seem to prosper and grow like a phoenix out of the fire – so what’s the secret?

The fact of the matter is that there is no secret, nor is there any great mystery or magic surrounding these businesses success – just good business sense and nine key areas to review – My Nine Steps to Nirvana.

Step 1 Define Value

At all times it is important to know what your customers want in terms of product, service, quality and delivery. In difficult times it is no less important but in addition you need to know how your customer defines value and what their perception of the economy is. The big question is how do you find out.

Well chances are that you already have at least some of the information hidden in your customer files; in the heads of those that deal with sales and others that maintain contact with the customer. Novel that this may seem you could also ask them. I have always found the easiest way to get any business person to talk to you at length is to ask them about one of their favourite subjects – their business. In that conversation you need to get the answer to four key questions: What do we do well, What do we do badly, What should we start doing to help you, and What should we stop doing. Then act on it.

Step 2 Stay in front of the customer

The typical reaction of many businesses in hard times is to slash advertising, withdraw exhibition support and cut marketing to the quick. That’s a desperate measure and if you think about it, it effectively cuts you off from many of your existing customers and almost totally from all potential customers. The last thing you want to let customers know is that you are so worried about the economy and the strength of your business that you are cutting back on anything. Your customers want to be sure of their supply chain and any indication that your business is shaky is likely to encourage them to seek alternative suppliers – just in case. Equally, and taking advantage of the fact that some competitors will be cutting everything, your advertising and promotion can increase your potential customer base significantly, particularly if you can show that working with you will result in them getting a better deal. But that doesn’t necessarily mean lower prices. Review your advertising and promotion by all means. Find out what does work and what does not. Build on what is profitable, cut what does not work and find new, low cost, ways to promote aggressively.

Step 3 Critically evaluate products and services

Now is the time to take a careful and critical look at products and services. What contribution to profit does each make? Are you really doing what your customers want you to do or are you forcing them to compromise on their needs? Are some uneconomical, tired or in need of some critical value analysis. Such an exercise also demands that you re-evaluate your sales forecast, revenue and expenditure to build a new budget particularly if the evaluation means you will be introducing new, revitalised products and services. Whatever the outcome the main feature to be stressed will always be value for money.

Step 4 Get your distribution working smarter

Distribution describes the systems and methods you employ to get your products and services to your customer. The normal reaction to recession is not to expand distribution but to drag it back to core processes. That may well be an appropriate tactic but it isn’t if it’s just a knee-jerk reaction. The time is now to evaluate the effectiveness of the coverage that exists and the individual performance of distribution methods. The results of such an evaluation may allow some rationalisation and will help identify areas that need attention. It may also help identify new opportunities not considered before.

Step 5 Review pricing

As times get tough it is normal for you to pay more attention to costs than you normally do. Guess what? Your customers will be doing the same thing. Such reviews from the suppliers perspective are not necessarily about cutting costs but more about ensuring that the price that you charge truly reflects the value of the product or service. Link this with the value analysis suggested in step 3 and it may be that significant savings can be made in ‘production’ costs that you may be able to share with your customers while still maintaining margin on the sale. Moreover price reviews coupled with value analysis and product reviews can lead to new developments and revitalisation of flagging markets.

Step 6 Focus on market share

Winning new customers, in most markets, means taking business from a competitor. Its extremely difficult to do that if you do not have an offer that is attractive to customers and which ultimately helps them build their businesses. But ‘buying business’ is suicide. You need full and clear cost information to enable you to maximise the savings possible and to cause the minimum negative impact on your customers. The information you need is always in your accounts but in all too many businesses is not readily available for managers to make rational decisions. Now could be the time to evaluate how you manage the financial information you hold and, perhaps more importantly, how it is presented to those who need it. Having good, reliable and timely financial information enables you to quickly evaluate the impact of changes in customer base, customer needs, price changes, expected levels of business and of course changes in the economy. Monthly management accounts are essential.

Step 7 Stick to the knitting

Few successful businesses make radical changes to market strategies when things get tough – they adapt to the changes demanded and develop market strategies accordingly.

Step 8 Keep faith with the people

Obviously there are times when significant changes need to take place in the way business is conducted and even the principle business model. One of the major traps that many businesses fall into, even when carefully planning the change is the belief that people will change and adapt to the new order. This may be true in some circumstances but all too often the change fails to live up to expectations because insufficient attention has been given to the need to keep them fully informed and involved in the process. People who are involved in developing changes are much more likely to take ownership of the developments than those who have change imposed upon them. Its their willing contribution that makes all the difference.

Step 9 Lean into the future

Whether recession materialises or not all businesses need to take a long-term view of the markets in which they operate. To maintain competitive advantage and be able to adapt to the needs of customers quickly we all need to be able to anticipate what will change and be ready for that change before anybody else. This demands the development of strategic thinking and planning even in the smallest business. To some strategic thinking is what big businesses do and its not for small ones. The fact is that almost all owners and directors of businesses engage in strategic thinking at some time, sometimes often. The problem is that in most cases it’s not captured in any useful or structured way so potential advantages can be lost.

So there are my nine steps to nirvana – obvious aren’t they? Now, just like a client of mine that built and ultimately sold a £10m business in the depths of the last major recession I hope to hear you say “Recession – what recession?”


I know from experience running my own businesses that most of your time is taken up fighting fires and that the above will be difficult to commit to. The question though, is not whether you can afford to do it but whether you can afford not to.