Bouncing back from a financial crisis, product default, or natural disaster is difficult but not impossible. Focus on fixing the problem and finding opportunities for growth.
You may be facing your share of woes from financial problems to employee shortages to increased competition. Just because those setbacks are occurring and you are struggling to survive, doesn't mean you can't turn your circumstance around. If you take a new look at your company and the situation you are in, you may very well find some opportunities for growth and success.
That has been the experience for Anne Houlihan, president of Satori Seal, an industrial parts supplier in Rancho Cucamonga, California. "My company was down 35 percent in June 2009 and within 10 months, by April 2010, we were ahead 1 percent. We looked to reduce overhead but really focused on what industries were busy in these tough economic times," she explains. So, "even though automotive was dying the medical industry was thriving. We targeted that market." After Hurricane Katrina struck, the company benefited from relationships with clients in housing construction, another example of how to expand or embrace opportunities during a crisis or setback, Houlihan points out.
Don't get stuck agonizing over what went wrong. A setback isn't a permanent retreat unless you stay there. You can make the most of a bad situation or you can make matters worse. Don't avoid the problem, take decisive actions. Not just swift action, but a well thought out plan of action to stage a successful comeback, advises Erika Hayes James, PhD, an associate professor at the University of Virginia Darden School of Business and co-author of Leading Under Pressure: From Surviving to Thriving Before, During and After a Crisis.
Let employees, customers, and suppliers know about your game plan. "The biggest mistake owners make is not communicating poorly but not communicating at all," says James. "With BP it was the communications that was the downfall of their crisis handling not the technical things that they were doing to stop the spill, the flow of oil."
There are plenty of stories of corporations that have come back after business downturns, natural disasters, product recalls, or corporate scandal. Genworth Financial and Ford Motor Company are prime examples, says James.
"You have to make sure that you understand the root cause of the setbacks. Determine if it something that you can actually fix or not," says Houlihan, who also is the founder of Los Angeles-based Golden Key Leadership, a consulting, coaching and training company. "You may very well have to sell it (the business) or shut it down."
There are several ways to react to a setback, some helpful and some not. Here are seven things you can do to turn around your company after hard times hit.
1. Assemble Your Crisis Management Team
Create a committee of people to address the crisis or setback. It doesn't matter if it is three or ten people; it's your key executives, says Lisa M. Poulin, a certified turnaround professional and president of the Turnaround Management Association. "Decide if you need to bring in someone from the outside, either a new executive or a consulting firm. Come up with a strategy on how you are going to approach the problem, which may be tactical, operational, or legal. Formally agree on the implementation."
Throughout the various life cycles of the business it is important to build relationships internally and externally so that you have some collaborative people who can help you with a set of company challenges, says James. If you don't have a management team, tap into your personal and professional sources for guidance such as a mentor, an agency like SCORE or regional Small Business Development Centers.
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2. Communicate With Customers and Employees
Don't be reluctant to confront bad news. Develop a strategy to disseminate information. Are you going to have weekly conference calls, meetings, and so forth? It may not just be customers you need to talk to but also key suppliers or vendors, says Poulin. "How many of your constituents will be impacted by this situation. For example, with a product recall it's not just the customer who is affected you have a whole distribution chain." Moreover, you have to engage your employees, says Poulin. Listen to your staff and address any specific challenges they face. "Keep them up to par with what is going on; even you don't have all of the answers."
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3. Conduct Overall Cost Analysis
Look at where you can reduce overhead. Negotiate with suppliers for a better price. Find ways to save money. Cut back on inventory if you have a bunch of product that doesn't sell. But don't take the easy way out, cautions James. "Companies think that because headcount is the biggest line item on their budget then that's where they should cut costs. Getting rid of employees is the easiest strategy but it might not be the right one," she says. "Layoffs are generally a reaction versus a well thought out strategy. You don't want to cut so deep that it hurts your company."
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4. Take Stock of Your Marketing Strategy
Your existing customers are your No. 1 asset. Always know where your customers stand, says Houlihan, noting that about 80 percent of your revenues come from about 20 percent of your customers. Fine-tune your marketing if you want to attract new customers and retain existing ones. Tweak all your marketing messages, including your web site, brochures, and sales letters. Don't just sell a customer the same product. Even if someone has been a customer for years they may not be familiar with all you offer. Stay connected with customers via surveys and other customer awareness tools. Ask what do you need, how are we being responsive, and what can we do differently to better serve you?
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5. Empower Your Employees
Find ways to increase moral and empower employees to be the best that they can be. Show that you value their input and opinions. "Happy employees take care of customers," says Houlihan. "Your employees are an important asset because they are in direct communication with customers. Motivated employees attract more satisfied customers which in turn lead to increased profits."
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6. Seek Out Growth Opportunities
A set back can be a prime time for growth. In general, there is always business that you are going to lose. But always prepare for growth and ways to expand. You have to identify and help manifest opportunities during a crisis or setback. Do damage control but if you just focus on fixing the problems, then you leave opportunity, value, and the possibility for creativity on the table, says James.
Change or a setback could in fact force you not to be complacent. Pay attention to changing environments and new technologies that could make what your company does obsolete. Don't just stay on top of the competition but try to continually reinvent your business or technology so that you are staying ahead of the game instead of trying to play catch-up.
The movie rental business is one example. Blockbuster responded at a snaillike pace to competition from NetFlix's online model and Redbox's $1 video kiosks. Not only did Blockbuster fail to see Netflix as a threat it alienated customers with its late fee policies. Blockbuster also underestimated consumers' willingness to order videos online and receive them in the mail or to stream video from the web directly to their computers.
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7. Embrace Change
"Most people are not good at taking risks when they are threatened. We have a tendency to react by fright or flight," says James. "We become very defensive. That can limit your ability to try new things that could lead you out of a setback or crisis situation." You should be asking: What can we learn from these challenges so that we do things differently or better or we create a new product or innovation? Have a big picture vision of what the company should look like post setback.
Since 2004, Brennan G. Proctor, the founder of Uncle Brutha Gourmet Foods, has been bringing the heat to the Washington, DC area with his hot sauces, bottles No. 9 and No. 10—an award-wining blend of four peppers. Recently the business has been beset with challenges after Proctor was forced to close the company's only store two years ago due to a fire. Uncle Brutha's Hot Sauce Emporium was located in the highly foot trafficked area of Eastern Market stocking not only its product but hundreds of other hot sauces.
The closing set Uncle Brutha's back financially about $200,000 and took a toll physically on Proctor with the added stress. But it forced Proctor to take stock of himself and his company. "I realized that my venture really was not about opening a retail store. It was about the product. I was still getting calls about where can I get Uncle Brutha's hot sauces. I still had my clients and retailers," he says. "I found ways to work around the loss of the store and the debt that was incurred as a result." Making matters worse was that previous funding sources had dried up because of the major Wall Street crash. Some banks even started calling in existing loans.
One strategic move Proctor made was to switch production from a company in Lancaster, Pennsylvania that had become difficult working with to a packaging company in Alexandria, Virginia that offered better quality, consistency, and smaller batches plus local connections. "Because demand was still up the new company was willing to work with me to keep the product in production, to grow my client base, and increase market share."
Proctor is pushing gallons of hot sauce through distribution channels such as Whole Foods Market Stores, a local Co-Op, and area restaurants. He also has some notable followers including Celebrity Chef "Rock" Harper, Season 3 winner of the reality TV show Hell's Kitchen.
Uncle Brutha is still paying off debts from the store's closing, but Proctor is slowing getting the business back on its feet and is embracing new opportunities for expansion. He is using social media, e-mail newsletters, and the Web to market the product and create awareness among new and existing customers. You can find Uncle Brutha on Facebook, follow Uncle Brutha on Twitter and shop for Uncle Brutha's hot sauces online. Proctor is even orchestrating a hot wings competition. "The business is still in the recovery mode; 2010 is better than 2009. I am cautiously optimistic," he says.
Proctor knows firsthand that when faced with a company setback it's necessary to stay positive: look at what is working; be proactive: find new growth opportunities; and persevere: hang in there and ride out the storm.
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