Recent economic reports mostly are showing signs of improvement, largely due to the improving housing market. Without a doubt, this is good news with many business owners finally finding light at the end of the tunnel.
After many years of day-to-day and hand-to-mouth survival, will you execute successful business strategies after the Great Recession?
In this Members Only post, let's look at what success might look like in the post-recession economy.
To Look Forward, It Helps to Look Back
Looking forward, it's sometimes helpful to understand the journey that got you to this point. For this article, I want to first focus on the "when" and then the "why" of the Great Recession.
I see the beginnings of the Great Recession rooted in the early to mid-1990's. Throughout that decade, and into the early 2000's, I observed many companies choosing to grow through hiring instead of implementing technology or improved processes. Sure, at first the internet's infrastructure was limited (remember dial-up) with technology solutions growing, but by 2007, when the recession began, most companies were finally forced to face that they really could do more with fewer workers.
Bubble, Ponzi scheme, whatever you want to call it; the economic reality of "why" the Great Recession happened is that EVERYTHING was unrealistically overvalued and loans were too easily obtained. This lack of reality led EVERYONE to incorrectly believe they, and everything they owned, was valued at more than it really was. Then, the tide went out, and the naked swimmers became clear.
Value, it turns out, is not built and capitalized upon as if every day you've won the lottery.
Crazy Valuations and "Easy" Money - A Recipe For Disaster
Take a look at the "when" and the "why, and you'll see that because of the overvalued businesses and the economy, flush with "easy" money, very few companies realized they had invested too heavily in people. All the while, at the same time borrowing more than their real worth, and cash flow, would support. In fact, many relied on borrowed money to keep the payroll funded, and not investing that money into building a better business. Then, when the crap hit the fan, their cash flow died because new loans could not be had and sales hit the dumper, as the economy shrank, the housing market tanked and consumers pulled back on spending.
Finally, unfortunately due to hard times, businesses figured out that to survive they had to creatively increase productivity using fewer workers. And, luckily, now there are top-notch technology solutions available with an amazing internet infrastructure. As such, workers were let go for immediate business survival reasons, but are not being re-employed because the workplace has shifted. I would also add, that employers were reluctant to re-hire, because it was a painful process letting them go, and few bosses want to experience that again.
The other thing to consider is this: The scale of the internet delivers ever-increasing technological solutions at lower prices, if not altogether free. Consumers, therefore, expect either more for less, or more for free. This does not bode well for our industry.
Productivity, Execution and Profitability For Post-Recession Success
Looking ahead, I think there's a new economy that few of you are ready for. You certainly can use your old pre-recession business model, but I believe that you'll find limited success, if not complete failure. Your post-recession success strategy, in my opinion, should focus on these three areas:
Increasing productivity with fewer workers is your challenge. First, you'll need to hire only the minimum of the best skilled professional geo-workers you can afford. You then need to assure that everything they do is productive. By the way, this goes for you too. No longer can the business owner not contribute skilled, billable effort, nor can he or she waste hours per day working on (or not) unproductive tasks.
You and your organization also need to execute on your business plan, business goals, technical skills, and professional competencies. Henry Ford once famously said, “Vision without execution is just hallucination.” Stop fooling yourself and deliver on execution. This requires honesty, hard work and a passion for doing what's right for your business.
Lastly, at the end of the day, it's profitability that matters. However, I would argue that to survive you can't just break even, or even show small profits. To be successful and grow your business - and to make up for lost ground over the last five years, you need high profits. How high, you ask? I think 20% profit is too little, 30% profit is the new "breaking even" and 40% profit margins should be your goal.
To get to profitable, regardless of the percentage, requires that your company is a fine tuned, well oiled machine. In addition to executing and being productive, you'll need to keep cost very low, while significantly increasing your sales. Being a more customer-centric company - rising above the technical - is also critical. It's a challenge, and it isn't easy, but I know that with some effort, you'll be successful in the new economy.
Working To Improve Your Business