Mentoris writes: Recessionary mindset
We’re bombarded with advice, statistics, facts and fiction on how best to take our businesses forward. But, as was evident from the different professional bodies, there is a lot of contradictory advice out there and knowing what to listen to can be daunting. I will leave the clinical side of things to others, but what advice should you listen to regarding your business?
- Should you reduce marketing spend to conserve cash or increase to replace lost revenues?
- Should you reduce training to save money, or ramp it up to deliver an even better service?
- Should you decrease staff to save overheads or add to the team to increase capacity?
In a recent survey of 883 corporate executives, the Boston Consulting Group found that the three most popular actions for dealing with a recession were cutting back on recruitment, reducing company events and cutting back on performance-related bonuses. While this may be true for big business, the question remains; how does this play out for the smaller independent business owner?
Permanent drop in revenue
Clearly, if you are going to experience a permanent drop in revenue then to remain profitable you must reduce your expenditure without further damaging sales. This means looking at your business plan and your key ratios to decide where and how you can cut costs effectively, without causing even more damage.
This may involve finding innovative ways to do the same things in a different way or re-structuring your team to perhaps reduce your labour costs. This does not necessarily mean making people redundant; there are other ways of reducing labour costs temporarily and still maintain the trust and engagement with your team so that you do not have to go out and re-hire people later when the good times return.
Should I cut the marketing budget?
Cutting marketing or training budgets is often the first-place business owners will go; however, both strategies only protect profits in the short term. Assuming your marketing and training costs were delivering value for your business, cutting these may significantly weaken your brand presence and make it harder for you to retain and grow your patient base.
In order to maximise your marketing expenditure things to consider would be focusing on retaining your customers as well as recruiting new ones; using segmentation to ensure you get the right patients at the right time; adapting buying cycles and customer journeys according to the current situation.
Should I put training on the backburner?
Cutting training has two major risks associated with it. Firstly, assuming whatever you were doing was worthwhile in the first place, you risk falling behind in terms of the delivery of your service by not having your team trained in the right things. Secondly you also risk sending the message to your team that their future is not worthwhile investing in, which could lead to staff dis-engagement or even staff moving on.
Recovery and gain market share
What if, on the other hand, you take a more bullish approach and look for opportunities to grow your business? Whether this is from other practices closing, or perhaps merging with other businesses. In this scenario you must also carefully consider the people you have. If your current team does not have all the right skillsets to manage change successfully, you need to hire more people who do or consider re-training members of the team to match the skills needed.
One problem multiples have is that by being centralised, they are not agile or ‘local’. Smaller business can adapt to strategies that maximise impact from local knowledge. This could lead to opportunities.
While recessions have a destabilising impact on business, they also offer opportunities. Looking ahead and asking the questions about what success looks like in three or five years will help you to focus and make the right long-term decisions for your business.
You as a leader
As the leader of your business, your team will look to you. As a business owner I made plenty of mistakes, but I also had some great successes. I learned from both and here are my top tips:
• Develop yourself as a leader through training, membership organisations, peer groups or whatever works for you. In other words, put you own oxygen mask on before helping others.
- Have the courage to make decisions when you have enough information, even without the full facts.
- Hire people better than yourself at the skills your business needs.
- Have peers around you who will challenge you and stress-test your key decisions.
- Consider the rewards in moving away from traditional ways of doing things to a more adaptable recruitment and retention strategy.
- Set out a vision of what success looks like for you in five years’ time, then plan backwards from there.
- While we wait for brighter days, keep talking to your customers and community – finding ways to help and support them to earn their loyalty.