7 Lessons We Learned From The Recession

Marketing Ideas - Penny for your Thoughts

Those who lived through the Great Depression were a changed generation. They changed their thinking, learned to get by on almost nothing and found ways to stretch a buck that would put today’s superstar coupon clippers to shame.

The recent recession has had a similar effect on companies and organizations. Those who survived learned some painful lessons, but the experience no doubt made us tougher, more creative and showed how resilient we could be.

I recently spoke with a few business owners to learn the biggest lessons the recession taught them.

Lesson No. 1: There are things we can live without, and still be okay.
Jeff Lederer, president of Prime Resources Corp., says he learned there’s a lot of creativity with cost savings. For example, the company used to spend $12,000 a year for coffee and employee perks. He found he could spend half and still keep employees happy. The company also used to spend $15,000 a year to have a landscaper cut the grass in their office park. He now pays an employee a fraction of that to do the job—and the employee is delighted with the extra income. Russ Mogell of supplier Seven Sourcing says that during a recession cash is king and time is queen, so he analyzed all spending including discretionary spending, utilities and marketing expenses. He closed early on Fridays during the summer to save on utilities, trimmed tradeshow exposure and shifted those marketing dollars to product development and social media. But, most importantly, he didn’t cut morale-boosting expenses such as filling the fridge with drinks, the occasional gift cards and lunches for employees, and treating the team to ice cream on hot summer days. These are relatively small expenses where the benefits of the extra productivity outweigh the costs. Recession Busting Marketing Ideas

Lesson No. 2: The tough decisions are often the better decisions in the long run.
Do you have employees who are nice people but are not really pulling their weight? In good times, you overlook it. In tough times, you are forced to evaluate them more closely. Lederer’s company went through this experience, took a closer look and made the needed staffing cuts. As a result, overall employee attitudes improved, services got better, remaining employees were happier—and the company’s financial picture was strengthened, too.

Lesson No. 3: Even when the economy is strong, remember to practice the lessons learned during the tough times and stick with them.
In October 2008, Prime Resources was forced to take a look at its product line and cut those SKUs that were barely performing. As a result, 50 percent of the line now consists of new products. Lederer says the recession forced them to take a fresh look, and although it was painful, it was worth it.

Lesson No. 4: Assume it’s always going to get worse (because it usually does).Mogell says optimism may get you through the day but realism gets you through a recession. He took measures to improve his receivables, which allowed him to reward his best customers with better terms resulting in additional sales from those accounts. Helen Huang, president at supplier Minya International Corp., learned the demand for high-priced products is greatly reduced during a recession and that variable shipping costs will cause product margins to fluctuate more than usual, so she had to price her products accordingly.

Lesson No. 5: Spend time nurturing your current customers.Mogell spent more time on his larger, existing customers and new customers who showed the best opportunity for growth, and less time on those only concerned with the lowest price.

Lesson No. 6: A recession is a great time to hire.Mike Emoff, owner of distributor Shumsky, says looking for gifted and highly experienced people during a recession has paid off significantly for the company. He was able to lure talent when no one else was hiring.

Lesson No. 7: Excess inventory will kill you.For distributors, this is true, but maintaining high inventory is an advantage for suppliers (Prime maintained its highest inventory levels in 2011). Emoff says having excess inventory was like having money on his shelves at a time when products can be very slow moving. It was better for him to align with a large supplier who could fill the big orders.

As they say, a word to the wise is sufficient.

Gallant, Inc.
800-330-1343

Take Actions To Increase Business Performance

Increase Sales and Business Performance

Business leaders are hiding in their bunkers while economic havoc rages across the globe. Rollercoaster stock markets, financial debacles, political gridlock and global tensions have created a shock and awe factor, leaving many corporate leaders immobile while they wait it out. But riding the economic squall is no strategy at all. It’s a surefire recipe for collapse. (Remember what Netflix did to Blockbuster and how Amazon annihilated Borders?)

Now is the time for action. This volatile business climate is actually the perfect setting against which you can capture market share, improve shareholder value and increase revenue. Align your team and establish an action plan to deliver what this new era mandates: next practices and improved performance.

The New Leadership Team: Aligned Action, Not Analysis Paralysis
We’re poised at the tipping point of a new generation of business. Companies’ survival will depend upon their ability to align their teams, with every member of the staff acutely aware of their roles in the big picture. It’s time to work on business, not in business. Gathering the team for a strategic planning session garners alignment from the executive level and can be the basis for creating unique strategies and plans to share with the entire company. A finely executed collaboration unearths insights, tactics and techniques to rally the troops around the highest-worth activities. After working with hundreds of executives, we’ve developed Six Actions to Alignment as the key to successful executive team collaborations.

Six Actions To Alignment

1. Select Strong Team Players: Selection is critical; collective intelligence is vital. Evaluate all players for potential contributions and ensure they are capable of pulling their weight, not just pontificating. Contribution inconsistency is detrimental to the team. As a leader, be prepared to give the team what they need to be successful: vision, autonomy, data, technology, training and coaching.

Tip: There’s no room for those who don’t ultimately buy in or share the vision. Encourage challenges to the status quo; but at the end of the day, invest in those who will contribute to a common purpose. Bring in new talent where necessary. Replace those who are not pulling more than their weight. Make the decision quickly—supported by key metrics, not opinion, for objective and irrefutable proof.

2. Create A Collaborative Culture Of Aligned Thinking: Planning efforts should establish a context and common frame of reference for the entire organization. Everyone should have a reason to commit to the corporate plan, and each should have a personal stake in the outcome. Remember, no one person or sub-group can drive a company to the level of success required to overcome the negative forces beating outside the door. The executive team’s higher vision is a map that employees must consult time and again to check their position and stay the course.

Tip: Tap the collective IQ and energy of your entire organization by having a system of measurable, two-way review, input and recognition. Consistently deliver the higher vision and receive constant buy-in.

3. Chart The Course: Planning sessions must articulate measurable business outcomes and clear accountabilities for success. What is the business impact? Are the measurements embraceable? In other words, are they understandable and do they relate to everyone’s roles, both as a team and as individual contributors? Measurement is the navigational tool that leads to sustainable outcomes.

Tip: Post and discuss a “scoreboard” that charts progress—daily, weekly and monthly. Feedback is a real-time guide to reinforce success.

4. Prepare Your Team For Orchestrated Action: Ninety percent of organizations neglect or never implement their plans, according to a recent Harvard Business Review study. Execution must be the primary strength of company culture. Don’t rely on individuals from singularly focused silos to carry out plans. This leads to myopic actions rather than smooth, coordinated and accelerated results. Instead, orchestrate a system to launch cross-functional action teams throughout the company. True execution comes from the ability to assemble and focus diverse people and perspectives into single-minded actions.

Tip: Outside coaching may be necessary for successful launch, execution and follow-through. No pair of eyes is more potent in seeing through human dynamics, nuances and idiosyncrasies than that of an external advisor.

5. Play Out The Possibilities: It’s not in stone, just in play. Possibilities are designed to open creative channels and foster new opportunities. List “what ifs” and specific outcomes (possibilities) expected from customers, the industry and from within the organization. Next, craft aligned initiatives that direct the organization to meet these challenges and opportunities head-on. Make sure the initiatives realistically reflect internal capabilities and constraints, as well as which market forces to leverage.
Tip: Having defined contingency plan(s) in hand for best- and worst-case scenarios can mitigate the paralysis that often foreshadows a potentially disastrous event. Confront the down side head on. Role-play responses with the team before the worst happens, and subsequent actions will be far more precise and effective.

6. Look, Listen And Adapt: Regularly assemble the leadership team to monitor overall progress. Check measurements, solicit qualitative feedback from customers and the workforce, and lay bare the positive and negative impressions. Then consider the implications of the various actions: Are the strategies put in place leading to the ideal vision for your business? If not, what shifts are necessary? Brought to you by  Business Gifts by Gallant

Tip: Engage in a higher-level “gut check.” Do the results feel right? Are momentum and motivation levels still high? Are you listening? Have you reality-checked the big-picture messages against both internal results and changes in the marketplace/customers?

Strategize And Collaborate To Align Your Workforce
Development of “next practice” initiatives and strategies through peer-to-peer relationships is a potent weapon for weathering today’s storm. Connecting with other business leaders at the executive level is an excellent way to uncover new solutions that you may not discover otherwise. Collaboration is key when aligning a workforce. Find out what works and what doesn’t from people who have been there before and whom you can trust.

Focus the executive team on well thought-out and agreed-upon courses of action, and you can rally a workforce that is disoriented, distracted or frozen in place, driving your business to grow and prosper.

Gallant, Inc.
800-330-1343

Custom Business Gifts

Business Tips by Gallant

In these uncertain economic times cash flow is more important than ever. Whether you’re a self-employed promotional products sales professional or own a small business, you’ll want to be aware of key drivers of cash flow. Good cash flow directly impacts your income.

Today’s blog post will give you 9 proven strategies to get paid faster:

Be aware. Good cash flow starts with awareness. Be pro-active. Know your cash position at all times. Print weekly and monthly profit and loss statements. Know your bank balance, what you owe and what is owed to you. Once you know where your company stands, take steps to speed up cash flow by the following the tips below.

#1 – Clearly communicate credit terms. Let all new accounts know your terms of sale before you process their orders. Check with their accounts payable department to find out what their normal turn-around time is for paying invoices.

#2 - Get a deposit. These days getting a deposit (that covers your cost of goods) on all orders makes sense. Many clients will readily give you a deposit if you just take the time to ask. Make it a habit to ask all new accounts for a deposit when the order is placed.

#3 - Make it easy to pay. Accept all major credit cards and PayPal. When clients have the option of using their credit card, especially those cards that have a rewards program connected with them, you’ll have an easier time collecting. Make all your clients aware that you have many payment options.

#4 - Give a small discount for early payment. Many of our suppliers do this. Offering a one percent discount for paying within 10 days may speed up payment.

#5 - Check credit references. Do this for all new accounts and periodically check on existing accounts. A little investigative work goes a long way in knowing who you should be extending credit.

#6 - Stay on top of past-due accounts. Regularly send statements. Your clients are busy, and your invoice may have “fallen through the cracks.” A friendly reminder may get the check in the mail. Follow up at least weekly on past due accounts.

#7 - Make friends with the people in accounts payable. A small promotional gift, a friendly phone call and a polite manner can go a long way in speeding up your payment.

#8 – Reward your clients. Send a letter thanking all your accounts that pay within a certain time frame. Let your accounts know they can use you as a credit reference. Consider occasionally offering a free setup or next-quantity pricing as a thank-you for early payment.

I would like to hear from you. What have you tried to speed up cash flow? Have you used any of these strategies? What has worked in your small business?

Custom Business Gifts
Gallant, Inc.
800-330-1343

What is your Business worth

What color of car would you rather buy? Based on your personal preference, the answer to this question will affect how much you are willing to pay for a vehicle that is identical in all aspects other than color. What has this got to do with the market value of your business, you might ask? Well, simply put, traditional valuation techniques generally ignore one important factor in their calculation—the buyer.

Don’t get me wrong, a traditional valuation certainly has its uses, particularly for IRS and litigation cases—such as determining value for a divorce settlement. However, they usually all assume a willing buyer exists and that this buyer doesn’t have any personal preferences outside of the normal industry standards.

Let’s just go back to the car example, assuming a dealer has two used cars that are the same make, model, year, etc., but one is blue and the other is silver. They will almost certainly be priced exactly the same. However, if your preference is for a blue car, you would no doubt buy the blue car. In fact, the dealer would have to discount the silver car for you to consider that as an option. Therefore, your preference has effectively determined a higher value for the blue car over the silver one, despite the market suggesting that they are both worth the same.

So, how do you apply this logic to the value of your business? If you’re thinking about selling your business sometime in the future, you probably have no idea who will buy it and what their preferences are. What can you do now to position your company to maximize value from an exit, and where do you start?

In terms of business acquisitions, there are generally two main buyer groups, each with very different views of what is important to them. These groups consist of financial buyers and strategic buyers. Financial buyers generally consist of individuals or groups of individuals looking to invest in a business, whereas strategic buyers are normally companies looking to add to existing operations.

As an example, let’s assume that after some initial research you determine that the most logical and likely buyer type is a strategic buyer. You then determine, based on other acquisitions in your industry, that the primary focus of most buyers is the quality of the customer base being acquired, rather than, say, the management team, who will most likely be surplus to requirements after the deal. Therefore, if the past five years have been spent investing and training a good management team, then these efforts could be ignored by the buyer who will discount this aspect of the business. However, if those efforts had been channeled into increasing and maintaining quality customers over the same time frame, the buyer would most likely pay a higher price for the business.

The above example highlights the impact of focusing attention on the right aspects, which we call “value drivers,” of the business to make it the most attractive to likely buyers when it comes time to sell in the future. Value drivers can include, among other things:

• Customer base
• Management team
• Products and services
• Competitive advantages
• Location
• Quality of financial reports
• Financial performance

While you can control and manage most of the value drivers of your business, other aspects specific to a buyer will also determine the potential value that they can justify paying, including:

• Risk tolerance
• Required rate of return on investment
• Ratio of equity and debt used to purchase the business
• Cost of debt

The impact of these factors is not possible to plan for but is buyer specific and will result in different values being placed on exactly the same business by different buyers. They should be considered when negotiating an actual sale with actual buyers. In order to position your business to maximize value when the time is right, go through the following exercises:

1. Undertake a market analysis of who is buying similar businesses to determine the most likely buyer type for your business.
2. Review recent transactions to determine what values are being achieved.
3. If possible, contact ‘typical’ buyers anonymously to understand the value drivers they are primarily looking for in an acquisition target.
4. Understand the level and source of debt that could reasonably be secured to finance an acquisition of your business so that you can estimate the likely ratio of debt and equity.
5. Perform a strategic planning session for your business to ensure the long term goals of the company are focused on growing the right value drivers based on your analysis above.
6. Create Key Performance Indicators (KPI) in order to track specific value drivers on a monthly basis and include as part of your monthly financial package to ensure efforts are maintained over time.
7. Review the process on an annual basis to ensure any changes in buyer types and value drivers are known and addressed in a timely manner.

Gaining a better understanding of how different buyers might view the value of your business can benefit you, if you’re looking to sell, and help you build a more valuable company.

Promotional Products by Gallant
800-GALLANT ( 330-1343)