Why you need to AMP up your business during a recession

Why should you vamp up your business during a recession? The easy answer - because your competition is slowing down and cutting back. It will cost you less money to take a piece of their market share.

Look at it this way.... If your competition spends 100K on advertising and 50K expanding or improving their services when the economy is good to compete you will need to spend the same, to take a piece of their market share you'll need to spend more.

If your competition has cut back to 25K on advertising and $0.00 on expanding or improving their services then it will cost you 50K in advertising to have a dominate presence in the market place and an image of being the leader in your area. Your competition will loose top of mind awareness and may have the image of being in financial trouble.

The other plus is that it will cost less for the same ad size or radio spot. Supplies and labour will cost less. Even if the market share has shrunk by 30%, there are still customers who need your business - will they find you? Even if you just maintain your profits from the previous years, you have taken some of your competition's market share and by the time they figure out the market share is growing again you will have secured it.

For example lets say the market share started shrinking in August 2008 and your competitor started reducing their advertising, marketing, and services to save money on November 2008. You continue to advertise and invest in your business during this time, your profits go down in the short term but as you stay at top of mind in the market place you start getting new customers. In February 2009 the market place starts to recover and more people start looking for your services and your advertising is everywhere. In June 2009 the media finally says the market is recovering and your competitor starts to sign advertising contracts but these ads don't hit the market place until July 2009. Those customers who started buying your products or services from February to July will have seen you as the dominant player in the market place and your competition has lost opportunities.

Does this make sense? Let me know what you think about what businesses should be doing during a recession.

What the markting guru's say about 2009
Articles on Saving Money for Your Business in 2009
Should you Cut Back on Advertising during a recession?

Is the Newspaper a Thing of the Past??

I received a call from a telemarketer selling subscriptions to the Calgary Herald for $12.00 a month. Since I need to be aware of what is going on in Calgary for work I signed up, after 1 week the papers were piling up and I just wanted it to stop! Internet Marketing Guru Seth Godin claims papers are no longer necessary as we have the internet, and many technology venture capitalists are funding new technology in hopes the old ways of information will go away for good.

This turn in economic conditions has caused some newspapers to close their doors, the Halifax Daily News, the Rocky Mountain News, and Seattle's Post-Intelligencer. Are these closures a result of economic times and bad business decisions or are newspapers becoming a thing of the past?

I believe that newspapers still have a market but they need to become more efficient and flexible. The newspaper industry has survived the invention of tv and the broadcasting of CNN, but will it survive the onset of the internet?


The Economy and Recession
Advertising and Business

Can't Decide Where to Advertise your Business...

In a tight economy like the one we are experiencing many small business owners are cutting back on expenses, one expense they look to cut is advertising. Being more effective with your advertising dollars is smart, but if you don't know where to advertise or which media is most effective how can you be sure if you are making the right advertising decision?

Take a look at what the leaders in your industry are doing with their advertising dollars. What is your number one competitor doing? Where is the busiest company in your industry putting their advertising dollars? Make sure you are there too offering a choice to consumers.

Track your advertising, hire call tracking companies to help you figure out which ads are working best and which are not. Make sure you are funneling enough of your funds into the best media and cutting back on the media that isn't working. However, don't just guess when deciding on where to cut back, you may be loosing more business then you bargained for.

Some articles on Saving Money as a Business in 2009

Thought I'd put together a small list of different articles that will help the small business owner plan to save money. In my opinion it is not smart to arbitrarily start cutting back, it is smarter to have a plan in place that will ensure that money is being focused into income earning areas and away from non income expenses like your electric bill.

From Canada One - Keeping Your Cash in an Economic Downturn

Canada's Economic Forecast looks Good!

Canadian Government is

poised to announce Major Spending to help economy
Tuesday's budget is expected to include more than $6 billion in new infrastructure spending, increased training money and possibly enhanced benefits through employment insurance, a major program of tax credits to encourage home renovations and support for forestry, manufacturing, aerospace, mining and other industries.

How are you preparing your business to ensure that you will be getting a piece of the pie. If you are a contractor how are you advertising to ensure your company will be called upon?

Although I don't agree with the idea of cutting back on advertising, the ideas in this lengthy list are a good way to save money and change up your advertising methods. 78 Ways to Save during an Economic Downturn

When looking to save money look to lower the costs that do not provide a return, like your energy bill. Here is a list of 10 ways to save money and become more Green in the process. 10 ways to Green your Business

10 ways to save money on fuel if you are a business.

I believe that the best way to survive a recession and grow your business stronger is to market and advertise, after all why shouldn't you get your competitors customers when they shut their doors or stop providing the service or quality their customers have come to expect. Ensure you are where prospects will look for you and your services, plus find unique and cost effective ways to build awareness. 10 Low Cost Marketing Ideas for Businesses to Save Money

Cut back your costs that don't bring in business - like your insurance costs. Ideas to decrease your business insurance costs.

I've met with lots of small business owners over the last few months and almost all are cutting back and finding ways to save money. Not all are making the right choices, but most are smart about how they plan on saving money and surviving.

Some though have a different attitude. One business owner, a very smart individual who was on top of everything going on in the marketplace, decided that he and his business were not going to participate in this recession. Considering the short span of time the Canadian recession is projected to be he will come out ahead of his competition that will need to restart their marketing and advertising campaigns. Most will have done so too late and potential customers will have already made their choice of a new provider.

Historically by the time the recession has been officially declared the bottom has been hit and the economy is already in recovery. The only time this isn't the rule is when the banks and financial institutions have collapsed and thereby inhibiting any cashflow and recovery. Without financial institutions, credit, and government investment there is no job creation which makes things slower to recover. In Canada that is not the case, our 5 major banks are still viable and our government is planning on a large spending and tax incentive to get the trades back to work.

Canadian Real Estate Market - Is it Really That Bad?

Is the Canadian Economy as bad off as the media says it is? Watching the news one would think Canada is in a melt down, but the media is skewing statistics to make things out to be worse then they are.

A Canadian TV News Media reported in January that in 2007 there were over 2500 foreclosures (sorry I didn't take notes) and in 2008 the rate of foreclosures was up over 9%. Wow 9% sounds terrible doesn't it, after all its close to 10% and that's horrible. But think about it, it means that there was an extra 2,000 foreclosures in 2008 over 2007 in Canada. Considering all the millions of mortgages that are out there 27,000 foreclosures isn't a huge amount. Notice they also didn't mention how many foreclosures there were during 2005 and 2006 when the market was inflating.

Finding the number of foreclosures in Canada isn't as easy as I thought it would be but I did find the bank associations data on mortgages in arrears. These are the % of mortgages in arrears taken from the monthly numbers as an example:

October 1991 0.57%
October 1994 0.49%
October 1996 0.24%
October 1999 0.43%
October 2001 0.44%
October 2005 0.26%
October 2006 0.24%
October 2007 0.26%
October 2008 0.29%

Graph of Canadian Vrs US

The numbers are from Canada's seven major banks, which together issue about 60 per cent of the country's mortgages.

In B.C., only 0.15 per cent of those mortgages were in arrears in April 2008, the last month for which data is available. That number has steadily declined from about 0.65 per cent in 2001.

Meanwhile, 0.26 per cent of mortgages nationally were in arrears in April, a number that has held fairly steady since 2004.

"And by implication, the foreclosure rate remains quite low - if not historically low - in Canada," Guatieri said. "And it's miles different from the U.S. situation."

Does knowing that mortgages in arrears in 2008 were lower then mortgages in arrears during the 1990's and early 2000s change your opinion on the health of Canadian Mortgages?

Everyone looks at housing prices as an indicator as to whether or not the real estate market is going good or bad, but is it as bad as we think it is? It was worse during the early 1990s - Check out the graph if you don't believe me. In 1991 my mother went into Real Estate and looking at the graph one would think that 1991 was the worse time to become a realtor. Many realtors at that time were quitting, closing up shop and changing careers. The Okanagan during the early 1990s was hit hard and their recovery was very slow due to lack of industry, yet she made a good solid career as a realtor during this time. The economy has little to do with whether or not a business will survive an economic downturn - it is up to the choices of the business owner.

Links:
Do Ads Work?
6 Survival Tips for Lean Times
Advertising Can People Find Your Business?
Is the Cost of Living Effecting Your Business?
Southern Alberta Real Estate Market is Steady.

Christmas Spending Results and Economic Outlook for 2009 - Is it a Good Thing for Your Business?

Predictions regarding the decrease in consumer spending for the 2008 Christmas Season have started to hit the news wires. All agree there is a decrease in dollar spending, as a result of both less spending and deep discounts. So what does this mean for your business? That consumers are still spending money just less of it - will they choose to buy from your business?

According to the NY Times, ShopperTrak's earlier predictions were opptomistic when compared to the reality of both traffic and dollars spent:

Releasing interim data on Wednesday, ShopperTrak said the full report would most likely show that customer traffic for the full holiday season plummeted 16 percent, and that total retail sales sank 2.3 percent. Those are darker than previous estimates, of a 9.9 percent drop in traffic and a 0.1 percent increase in sales.

We won't know the concrete actual results of December spending until January 8th but as it stands it may be worse than expected. This is a result of people being cautious about their spending habits and starting to save more resulting in a worsening of the recession. So will you still be in business when these consumers start spending more money again?

In Canada the results were better and show that although we are in a recession as well, it isn't the recession to the south of us. Our recession is a result of both a slowing economy and consumer assumptions that the American numbers are the same as ours. The difference is that our nation didn't have the creative mortgages the States had and as a result we don't have the same credit crisis that caused this recession.

Canadian retail sales for the holidays have not been released yet – Statistics Canada typically has a two-month lag in reporting – but the figures from October show sales were 0.9 per cent less than September, standing at $35.9 billion. When compared with October 2007, however, sales were up 4.1 per cent.

Despite losses in furniture, home furnishings, electronics, cars and other big-ticket items, the agency said price reductions were the prime factor in the monthly decline. When taking price changes into account, sales volume actually rose by 0.1 per cent.

The prospects for 2009 are not looking good, even north of the 49th parrellel. However, I believe that these numbers are very pessamistic for the Canadian economy. Although our economy was inflated and needs to contract down to a healthier level of growth, I don't see it as a bad thing for anyone, business owners included.

"Never before, in December, have we been so pessimistic regarding economic growth for the upcoming year," says Dale Orr, chief economist at Global Insight, which is forecasting that the Canadian economy will contract by 0.4 per cent in 2009.

That's a relatively optimistic prediction.

Scotiabank, for one, sees the Canadian economy contracting by three times that amount in 2009, or 1.2 per cent, with employment falling by 170,000 jobs, or one per cent, and the jobless rate rising to an average of 7.7 per cent from 6.1 per cent in 2008.

Another forecast, this one from TD Bank, predicts an even greater 1.4 per cent contraction in 2009, with virtually all provinces in recession. The jobless rate, after reaching an average of 7.7 per cent in 2009, will rise to an average of 8.2 per cent in 2010, the bank said.

Why is a contraction in the economy a good thing? Because it cleans it up and weeds out the bad apples thereby strengthening the good apples and the economy at large. The reason for the US crisis was too many bad apples in the mortgage market, too many people who shouldn't be getting mortgages were getting mortgages. Too many people who shouldn't be buying new expensive cars were buying new expensive cars. The market was being inflated beyond healthy growth by credit and not healthy spending. When the credit ran out so did the spending and as a result the demand dried up and equity went bye bye.

The results have shown that healthy spending is continuing. The decrease in spending is a result of the credit spending or unhealthy spending not being there this year. People are still spending money, you just have to understand where the money is coming from, their actual pockets and not the banks.

How to survive a recession
Are You going to survive the recession
Have a Leaner Better Business

Economic Woes for Some are Opportunity for Others ... Will Your Business Survive the Economic Downturn

Reading about the projected Christmas Season spending of 2.2% increase and Master Card's report of a -3% decline in spending over last year may bring fear to some business owners. To me this market slow down is an exciting time for business owners.

How can a recession be a good thing for business owners? This slow down is bringing our economy back to where it needs to be in order to be healthy. Over the past 10 years our economic growth has been unhealthy because it has caused business people to be fat and lazy resulting in poor quality products and less than acceptable service. This so called recession will clean up the economy and inspire some business people to rise and be better for the marketplace and put the less then reputable out of business.

So will you rise to the challenge? Will you become a better business person? Will your business become leaner, meaner and stronger in the world or will you shut your doors? The choice is yours and it will take work because you will need to look at how you do business and how you want to do business, find that gap and create a business you will be proud of and will survive any recession.

Links for more on this topic:

After Christmas Sales a Result of Lower Christmas Spending

Will Your Business Survive a Recession?

High Gas Prices and the Price of Bread

Can Your Business Survive a Recession? Work Smarter, Harder and Leaner

Back in June when I wrote that I thought many industries were already in recession and the US economy as a whole was on its way to a recession many were in disagreement. With the stock markets taking a hit and banks going into receivership I think we are already way beyond recession and now heading for a larger economic downturn then most would say. I don't even want to use the word depression but when you look at the historic reasons for the depression you can't help but see parallels. Banks going under, stock market values falling, people loosing their homes and jobs.

The big difference is the governments willingness to inject cash into the market sooner rather than later which will hopefully keep things from getting worse. The economy was being supported by borrowed money for so long it shouldn't be a surprise that it ran out.

As a business owner what can you do to survive this economic downturn?

Simple answer be smart about credit and spending. Longer answer:

1. Don't plan to expand in the next year, if your business plan called for expansion right now, revamp it and create a maintenance plan for the next 2 years at least.

2. Don't borrow right now. Get your inventory levels under control with systems that enable you to have more just in time deliveries and less overhead. Figure out a system that will enable you to turn over inventory more efficiently and cost effective. If possible negotiate longer payment terms then you currently have with suppliers.

3. Bring in more "must have" items, by this I mean necessity consumable items that people have to buy that are similar to what you offer consumers now. Keep luxury items at a minimum.

4. Advertise, but don't be stupid about it. You still need to get your story out into the market place and let people know that you are still in business. If you stop advertising your present customers may think you are no longer in business or worse, that you are going out of business. Advertising is an investment not a cost. Make sure you advertise where your customers see you and in the most affordable manner.

If you have a full colour ad in Yellow Pages you may want to cut back to a black and white ad that is the same size or look to their competition for more affordable advertising: Canpages being their number one national competitor.

Look at going to community newsletters for affordable advertising rather than the big ads in the newspaper. Community newsletters are relevant to their readers, are delivered to consumers homes, and is much more affordable then newspapers.

Instead of independent direct mail fliers that get thrown into the round file, advertise with direct mail catalogs like UPTOWN which provide recipients with articles and relevant information. These magazine's will stay in a home longer than your independent flier and cost you a lot less.

Know where your customers hear about you and find your contact information and then focus on those areas of advertising first.

5. Network, Network, Network....... Attend as many networking functions as you can without breaking the bank because this is affordable word of mouth advertising at its best. Don't go in expecting to make a sale right then or to sell everyone on your business. Go with the expectation of meeting new people and finding new services and business that you want to use.

Have a good 30 second commercial that will spark interest in your business and how you can help their business or personal lives. Don't go in spouting how great your product is and then leave and never return, networking takes an investment of time and interpersonal skills.

6. Merge your resources with another business. Cooperative marketing or cooperative advertising will help both businesses cut costs but at the same time provide both with exposure to the marketplace. Partner with a business that is a complement to yours and not your competitor. Put a plan in place together and write out the responsibilities and expenses of both parties. This will act as a contract for both of you to understand expectations and responsibilities.

7. Hire Professional Advisers. Professional advisers can help you look at the problems you face in a different creative way to ensure that you will come out ahead in the long run. Ask people who they use, google them, read their blogs or articles, and contact them to make an appointment to discuss your business.

Surviving a market downturn, especially one as ugly as this one could be will take planning and commitment on your part. If you continue to run your business in a reactive way instead of proactive you may find yourself in a huge hole that you can't get out of. If you want to be a successful business person, you have to foresee any circumstance and have a plan of action for the long run. By planning, working hard, being smart, and understanding your customer base you will come out of any recession ahead of the game.

Other entries on this topic:

Is the US going into a Recession?

Should you Cut Back on Advertising During a Recession?

Advertising Can People Find Your Business?

Consumers are Spending Less

A Nation in Denial? Is the US Economy in Recession?

The media and the government continue to deny that the US economy is in recession. The Jobless rate is increasing and their is a crisis in housing, financial and Credit markets. With Fuel and food costs rising on top of all the other problems in the economy can the economy stabilize? Is there enough cash injection left to grow the economy or are the majority of people tapped out?

From the Associated Press:

And, there’s been a lot of talk about whether the economy is on the brink of, or fallen into, its first recession since 2001. That determination, made by a panel of academics, is usually made well after the fact

.

Airlines Cut Jobs

The squeeze, a byproduct of record oil prices that are pushing airlines toward financial disaster, accelerated Wednesday when United Airlines announced plans to take 70 more jets out of service and cut domestic capacity by 17 to 18 percent in 2008-09. Its discount unit Ted will be shut down and 1,100 additional jobs eliminated, with more to follow.

That came two weeks after a similar move by AMR Corp.'s American Airlines, the only U.S. carrier larger than United, which said it would slash domestic capacity 11 to 12 percent after the peak summer travel season. American already has begun eliminating flights, as have No. 3 Delta Air Lines Inc. and others.

What determines a recession?

A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.

From an article on About.com:

They [BCDC] define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. When the business activity starts to rise again it is called an expansionary period. By this definition, the average recession lasts about a year.

An economy cannot continue to go up and up forever it is a cycle of expansion peaks contraction and vallys. A smart business owner will plan for all the stages of the economic cycle and understand economic indicators to help develop their plan of action.

Will things get better? From the same Associated Press article:

Fed officials and the Bush administration are hoping that the Fed’s powerful doses of rate reductions and the government’s $168 billion stimulus package, including tax rebates for people and tax breaks for businesses, will pull the economy out of its deep funk in the second half of this year.

Even if that happens, the unemployment rate is expected to climb to 6 percent or higher early next year. Employers won’t want to ramp up hiring until they feel more sure that an economic recovery has strong legs.

I think the US is on the road to a recession for how long or how deep I do not know. Right now many sectors are in recession and if your business is in this sector you need to take action and create a plan to survive it.

Should You Cut Back on Advertising During a Slow Economy?

Cost of Living is Increasing, Consumers are Cutting Back, Is Your Business Effected?

Cost of living is getting high thanks to the higher cost of feul, wheat, and corn. These are staples and necessesities for families and they have to cover the cost of these items, which means they have less for luxeries. Some businesses are finding it harder to cover costs and meet their liabilities.

Restaurants are declaring Chapter 11.

People are getting dog food from food banks and looking for discount vets because they can't afford their animals.

Toyota and Ford are reporting lower sales.

GM is closing 4 plants and considering cancelling production of the Hummer.

Jobless Rate Increases - 49 000 jobs cut nationwide.

So if the big guys are having trouble how can the smaller guy survive? Here are some ideas:

1. Get your financing and books under control to ensure you won't have a cash flow emergency.

2. Find another use for your product and service to increase your target market. Ask yourself, what other ways can my product or service be utilized? Get creative and brain storm with friends and family.

3. Add other products and services to your business, preferrably ones with high margins. Make sure that the new products complement your presents products. You don't want to go out and find a new target market, you want to offer your present target market more.

4. Reduce your inventories to hold less items that don't sell very well. Can you downsize your lease space? Perhaps sublet a piece of your footprint to a complimentary business but not a direct competitor? For example Postal Outlets in Drug Stores. If you have extra storage space you could warehouse items for anther company to help pay the rent.

5. Talk to your suppliers about offering drop shipping or custom order only items instead of inventoring it and having to be out of pocket.

Where can you cut costs? Where can you expand your market share? The goal here is to make it through a recession period with your business entact, which means cutting back and cutting expenses. Finding creative cost effective ways to save money and increase sales takes planning. Take time to plan and brainstorm with trusted mentors, consultants, advisors and friends. Try not to get so bogged down in the day to day you forget to plan for tomorrow.