KEY POINTS:
The reality of doing business in a recession is that while some industry sectors are going to boom, most won't.
Industry analysts are saying that we are in a recession right now and they're picking it to last through to September.
Regardless, in every recession there will be those businesses that do well.
The key? Making sure you're still going to be around. Once again, the fundamentals are actually quite simple, there's just a few things to focus on.
Once you've made up your mind to stick around you've got to get smart about the moves you're going to make. You need to reforecast your budgets, look at your cash flow, you need to understand what impact zero growth or negative growth will have, what fixed costs you can move to variable costs.
Why? Because a shrinking market is a golden opportunity to grow your market share.
Lets say for example that every year in a particular town 1000 houses get built on average, and that there are 15 main building firms who build 800 of them.
Over the next two years five of those companies go out business. There's not enough houses being built, so five players drop out of the game.
But for those ones that are going to be still be around when the market comes back, they'll be building on average 50 per cent more. They've grown market share just by being able to stick around when others couldn't.
The harsh reality is that growing your market share through recession means taking business off competitors when they hit recessionary quicksand.
Recession presents the opportunity is to increase your client base, so you need to focus on your core business, make sure your model is efficient, that there's no fat in your system.
So many of our clients at the moment have had such long periods of sustained growth that they have become less efficient in how much of their top line transfers to their bottom line.
What's happening now is that they're all becoming efficient again. Everything is being scrutinised to make sure that we're tidy.
Now, if you can maintain those efficiencies when the market comes back, you can increase your profitability massively.
Compound that with growing a market share because others aren't and you can actually set yourself up over the next couple of years of recession.
The best example I've seen of this firsthand is when I used to fix windscreens.
Basically the windscreen business relies on the road works. The road works start and run through the period of daylight savings, that's when they do the most work.
So the bulk of our work was over the same period, October through April.
During the period of May to September you'd have your basic maintenance work but it wasn't that busy. And so some people would sit back and cruise, maybe spend a bit of time holidaying or whatever.
What I used to do during that period every year was go prospecting for new clients. And every year I'd double the business but I wouldn't see that until the following summer.
All the work I did prospecting during the winter wouldn't give me any results until the following summer when I didn't have any time to look for new clients. Each year I'd add another guy or two in summer based on the work I did in the winter.
All I'd done was to change my work focus, but stuck to my core business. And that's how recession works, it just plays out over a longer period of time.
Getting your business through recession and winning, requires a long-term game. The people who win will be those who have a long term play not a short-term play.
The ones who do all the desperate stuff, the specials, the loud advertising, doing everything they can to hold on to a dissolving market, are thinking short term.
They won't be the ones who gain through this process. They might have some quick wins, but we're talking about a long-term play through this time to become sustainable, efficient and to grow your market share.
Those are the keys to surviving: sustainability, efficiency, and market share. Stick to your core business and get it ready, set up to go because that's the thing that'll make your money when the market comes back.
And the market will come back! As we always say in business, no matter how good it is, or how bad it is... this too shall pass.
* Ben Ridler is managing director of business coaching company The Results.Group.
