Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.
It was Benjamin Franklin who said “In this world, nothing is certain but death and taxes”. More than two hundred years later, you can add at least one thing to Franklin’s list of inevitable occurrences, and it is not a pleasant thought either, it’s recession. Recession is always on its way, it is just a question of when. There has been a lot of talk lately about recession and whether or not various regions or the country as a whole will fall into a recession and how soon. But no matter what the answers, it is always best to be prepared and that is why this episode of the Business Coach Podcast is dedicated to recession proofing. Here is to share his tips and tactics for doing better through any downturn is Mark Wardell, the founder and president of Wardell Professional Development of Vancouver-based management consulting firm. Mark welcome to the Business Coach.
Mark: Pleasure to be here.
Ian: Now, you’re out there in Vancouver. How optimistic are the entrepreneurs that you’re dealing with?
Mark: Well, I am in Vancouver, so a little more optimistic perhaps than on the other side of the country. Now, the people I am worried about I guess are the ones that are less prepared for something like this.
Ian: So what’s the first step in successful recession proofing. Do you start with, say, streamlining operations, building your sales funnel, signing customers to long-term contracts? What.
Mark: Most important thing really is cash. We start with making sure the business is well-capitalized. You have to have enough cash to fight the potential storm coming your way. Typically, a recession is going to last between and historically let’s say, eight to eighteen months. You want to make sure that people have enough money to be able to get through that king of time period. So once we’ve maybe taken care of that, then we want to make sure we are maximizing our cash flow as well. Resolve overdue, receivable issues, shorten up receivables, push back the payables, that sort of thing. And often lots of opportunity for renegotiating with vendors as well making sure you get the best deal is really really important. Once thing we like to do with our clients is take a look at their chartered accounts, take a look at the expenses and it’s kind of a fun thing to just go through the list and see if you can pick one strategy for each one of the line items that is going to help you to reduce your expenses in that part of the company. You would be amazed actually at what people can pull out. You have utility bills reduced, phone bills reduced, all kinds of stuff. If you just think about it and give it a shot.
Ian: Now what about operational efficiencies. A lot of companies will try to tighten their belts and squeeze every possible cost out of the system and get every drop of productivity out of every dollar, is that high on the list of things you need to do to recession proof?
Mark: Sure, that is the next thing you want to begin to actually doing. The whole thing is trying to fight to protect and even if possible grow your margin. The margin is sacred, look at it from that perspective. So, if we can improve processes and workflow and eliminate bottle-necks, there is all kinds of experts out that can help you do that sort of thing. If you can afford it, that’s when the cash flow comes in, automation is a great tool. And often overlooked is people, I mean, getting the right people in the right positions is so critical. A good solid team with a really strong culture, people are going to go to the mat for you and help you when times get tough. And it really is, I think, an under-utilized strategy.
Ian: And it is probably a pretty bad thing to experience a lot of staff turnover during a downturn because that’s productivity you just can’t afford to loose.
Mark: Absolutely. And training your people, right. People love to be trained, they enjoy being trained, they want to be trained and the more you train them, the more they can understand the efficiencies of your company and help you to eliminate waste and improve your productivity. So it is a win-win situation when you focus on your people.
Ian: Let’s talk a bit about marketing. The first thing that many companies cut when a recession hits is their advertising and marketing budget. Is this a good idea?
Mark: It seems like an easy strategy but no. I mean, I typically think it is a bad strategy. What you do want to do is pay attention to the return on investment of your marketing dollar. So you want your marketing dollar to go far but you don’t want to market less. If anything in fact, you want to market more. Again, everything always flows back to cash flow and all flows back to efficiency. If you can have a very efficient, lean functioning machine, then you can invest and be more aggressive with your marketing efforts and that’s what you want to do during a downturn.
Ian: Now, I guess with the advent of the internet and the web and all other things related to it, it’s probably a lot easier to number one market your marketing efforts and measure your return on your marketing investment. Would you recommend that people explore more online marketing opportunities?
Mark: For sure. I mean, Google analytics for example is a great tool for finding out how effective your online advertising is working.
Ian: So the big question, when should someone start recession proofing? Is it too late for the average Canadian business owner right now?
Mark: Now that is a good question. First of all, they should start yesterday and they should never stop. The good news is that recession proofing is simply a great business strategy. I mean, we are calling it recession proofing but what we are really talking about is really solid business practices, right. Doing things well and doing things right. And so if we sort of look at recession proofing as an on-going method and something that we should always be doing and not be afraid to start or stop at any particular given time. Does it take time to recession proof a business? Absolutely. But can you get little things done? Sure you can. I mean if you can focus on your cash, maybe you don’t have a lot of money or a lot of time to aggressively buy automation or do major changes to your company, but you sure can improve your cash flow, you sure can work better with your people and those things can help. And you can come out the other side smelling like a rose.
Ian: Now a lot of entrepreneurs are going to be looking externally to answer the question “oh, am I going to survive this recession, how well am I going to do in this recession?” But from what you have been saying, it sounds like they really need to look internally to determine that. Now one thing you mentioned was capitalization a well capitalized company is more likely to survive a recession. What are some of the other signs of a recession proofed company?
Mark: Well, I talked about capitalization, I also talked a little bit about people and I can’t emphasize it I guess enough, I think people are such an under-looked, an under-utilized strength. Having a really strong infrastructure, in other words, having a well systemized business helps tremendously. Understanding and having a strong market position of course, being a dominant player in your industry, now that’s incredibly powerful, having a clear target market and I would say diversification. We have, you know, I have been taking a lot of our clients and having them look across North America, not just in Canada and other parts of the world, Europe, different markets for selling their products and services. We have one client now that sell to over fifty countries. It is quite a strong recession proofed company when you are selling to over fifty countries around the world.
Ian: Now what are some of the business opportunities in a recession, what are some of the countercyclical things that people can look at?
Mark: I mean, the strategy is to growth market share. Right, that is where you need to begin. Understanding that your goal is to grow market share now in a recession. That is the opportunity right there and then ride that wave back up when the economy returns to normal. So as you are saying, what you want to do is the opposite essentially of what everybody else is doing. So things like we talked about before, cranking up marketing machine is so important. Very often you can find vendor discounts. For example, a vendor may have excess supplies because other customers have been purchasing less. Now they’ve got excess supplies you can purchase the overstock at a discount. Sometimes, outsourcing is a tremendous opportunity because other shops have excess capacity, because their marketing has been diminishing, they have excess capacity, you can get in there for a discount and make use of that excess capacity. And one of my favorite strategies although it is certainly not for everyone, you have to be well positioned to do this, but acquisition is a tremendous opportunity for a business in a recession because not everybody is prepared for a recession and there are struggling competitors and people do drop off. And that does represent really strong opportunities for people who are properly prepared.
Ian: Mark, thanks very much for sharing your recession proofing tips and tactics and good luck to you in the recession when it hits.
Mark: Thanks a lot Ian.
Ian: Mark Wardell is the founder and president of Wardell Professional Development in Vancouver.
Well, that’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. If you have any comments or suggestions about the podcast, please send them to me at firstname.lastname@example.org.
Until next time, I am Ian Portsmouth, the Editor at PROFIT Magazine, wishing you continued success.