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Speech to Greater Columbia Chamber of Commerce
Speech to Greater Columbia Chamber of Commerce
Thriving in Difficult Times
February 11, 2009
I was thinking today: “What are my credentials to be talking to a group like this?” I could try to impress you with my college and graduate degrees, but I have never taken a business course. I lasted three days in my college accounting class.
I could tell you about the phenomenal success of our four current companies. I could brag about what we are doing and how we are thriving.
But my greatest business feat was that I owned four failed businesses in the 1980s. Have you ever heard of someone who was running around bragging about their mistakes?
Those failures, which created the darkest period in my life, turned into a powerful gift from God. I secured great knowledge on the correct way to run a business through being awarded an MBA in failure. It sure was painful and I don’t want to go down that path again, but I would not trade all the depression, failure, mistakes, and sheer torture for anything. That’s my philosophy in life. You can turn bad events into wonderful learning opportunities. There is gold at the end of the dark rainbow of failure. Eventually, I got up, dusted off my pants, regained my confidence, and started down the road to entrepreneurial success again in 1986. And it has been great ever since!
My goal today is to give you specific advice on how to survive and in fact thrive in difficult times from a person who has traveled the roads of both success and failure. I have a passion for helping others and I am just about finished with my book, The Art of Building a Great Business, which I hope will serve as a resource to business owners.
Now fast forward to 2009. Never have I witnessed such dismal and distressing economic news. Not a day goes by that we don’t hear the media’s constant pounding drum telling tales of tight credit, low consumer spending, stocks losing most of their value, spiraling unemployment, company layoffs, poor corporate earnings, and people simply scared to death. Everyone is running for the hills! Mental health and liquor businesses are booming!
I recently spent two days with Jack Welch, former CEO of General Electric, who authored the bestseller Winning. Jack compared the media during a bad economy to the meteorologists on the Weather Channel. When a hurricane is approaching, they go into a frenzy and begin to salivate. Then, when it arrives, they love to get out there in 100+ mile per hour winds and say, with a rush of adrenaline, “Look at this! This is the thrill of a lifetime! Did you see that 2 X 4 sailing by?” The media is whipping up our bad economic times just like those meteorologists. They make a very bad situation even worse than it is. They say, “Look! There’s more bad news coming! Isn’t this exciting? Let’s scare everyone to death!”
Most individuals are seeing the glass half—if not completely—empty. Even the dreaded “d” word, “depression,” is being thrown around as if doomsday is approaching. No doubt, we will soon witness a record number of people and businesses experiencing failure and bankruptcy. Every person will be impacted by the constant bad news and despair as the pain trickles throughout our economy. I recently witnessed the fear that is circulating in our country when my wife, Debra, said, “We need to cut back!” She is a very wise woman and if I had listened to her more over the years, I would have suffered less. I responded, “WHY? We are doing very well, thank the good Lord.” She said, “Because it is so bad out there!” Now, her advice was good counsel, but I could see firsthand how the media’s bad news is even infiltrating the minds of people like her and that, in itself, is creating a wave of panic.
Former President Franklin Roosevelt was right when he said “The only thing we have to fear is fear itself!” But his wife, Eleanor, was also wise when she said, “You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face…you must do the thing you think you cannot do.”
While many businesses are in crisis mode, others seem to be thriving. In fact, a fast food business owner recently commented to me, with a smile on his face (and money in the bank), “If we are in a recession, we didn’t know it!” But why do some business owners back into a corner while others come out fighting?
There is a Silver Lining: I would never wish business failure on anyone, even if I had enemies. But some of your weak competitors who have been undercutting your prices and delivering less-than-quality service will disappear in this very tough market. Only the strong businesses will survive over the next two years. Once it is all said and done, we will have a smaller group of higher quality businesses out there when the good economy returns. The storm is here and more uncertainty is on the way—but good times are ahead!
Let’s examine ways to survive—or better yet, thrive—in these difficult times.
Don’t Panic! The best defense in these bad times is to do nothing out of panic. I am seeing panic and fear everywhere. Take a calm and rational approach to analyzing your business’ current condition and where you plan to go. Don’t make rash decisions in fear that could make things worse!
Exhibit Positive and Proactive Leadership: Great leaders and staff believe their future is secure and failure is not acceptable. While you want to be open, honest, and realistic about what is going on around you without making false promises to staff, great leaders shine during difficult times and crises. They are cautious optimists who say confidently, “Yes, it is difficult and we will experience some bumps in the road, but in the end, we will not only make it, we are going to do well!” They stare defeat and failure square in the eyes and give them a swift kick in the pants! They build confidence and excitement amongst all staff and are constantly pointing to their bright future. They look through the front windshield and not the rearview mirror.
Increase Revenue: I tell everyone that having successful business is easy—you just have to take in more money than you spend. But we know that is not as easy as it sounds, is it? Even in the worst of times, there is opportunity in conflict, but you have to seek it out. Tell everyone working for you that you need their help thinking outside the box for new ideas to increase revenue that are connected to the company’s purpose, mission, vision, and values. Now is the time to think of innovative marketing approaches (especially those that don’t cost money) to raise awareness of the company and its products and services. Don’t sit back and wait in your office for business to come to you—get energized! It is not a time to reduce marketing budgets. Marketing expenditures should actually be increased in difficult times. And get ready for the new niches that will open up.
While it is important to take a good dose of realism about what is unfolding around us and our nation, now is not the time to dramatically lower expectations or budget projections. At Columbia Conference Center, we are projecting about the same revenues in 2009 as in 2008, even though our logical selves and internal voices say to lower expectations. Set high standards and maintain integrity and ethical behavior when raising revenues. Think outside the box, under it, over it, and around it! This is the time, no matter what the obstacles, to move forward—not to fear that the sky is about to fall. It is a time where you want to inspire your employees by telling them, “See that mountaintop? That’s where we’re going! Follow me!”
Decrease Expenses: Dissect your budget line by line without emotion and ask very important questions: Will it impact quality if I cut this expense? Will the reduction decrease morale? Will it diminish quality customer service? There is a difference between managing costs and cutting them. You have to hold every expense reduction up against these questions. What good is a balanced budget if morale is terrible, your best staff members leave, the quality of your services and products declines, and ultimately your profits vanish?
Your ultimate goal during an economic downturn is company survival. You should carefully examine every expense and eliminate nonessential items if you think your company will suffer during these times. This may mean reducing personnel, which is usually the largest budget expense. But headcount reductions should be your last resort. Bad economic times are also a good time to eliminate poorly-performing employees, but do this very carefully with assistance from human resource experts. Focus more on eliminating positions, not people. We use Administaff and also JoAnn Moss with Human Resource Dynamics (www.humanresourcedynamics.com) as our guides in troubled times or when we face difficult HR issues. Get professional help if you are thinking about downsizing. Otherwise, you may meet your laid-off employee at an EEOC hearing for discrimination or be sued in court for wrongful termination. As someone who has experienced both, I can tell you that you don’t want to face these major distractions when your business is already in a survival stage.
Target weaker and non-profitable positions with personnel cuts, and avoid cuts across the board. Though the “treat-everyone-the-same policy” may sound very fair, is easy to implement, and shares the pain across all areas, you are essentially punishing your best employees and profitable divisions along with the bad. This demoralizing strategy can lead your best staff to leave—and your competitors will always make room for great people. Others are giving staff an option of taking time off (and letting them chose when) without pay. At least they are getting something in return for the pay cut!
All layoffs should be done with compassion, care, dignity, and, if possible, severance pay so impacted employees can survive while looking for work. You don’t want to kick angry, bitter, laid off employees out into the market place to become what the Denove and Power call “assassins” in their book Satisfaction. Assassins will make it their mission in life to tell everyone how your organization treated them unfairly and those receiving the bitter information will tell others who will tell others. In other words, how you handle layoffs can impact your company’s reputation and eventually your profit. It is critical that you maintain an excellent reputation in bad times. The community at large is also watching how your business handles difficult situations.
Don’t wait needlessly with your head in the sand, hoping for the best when the worst is brewing and your business is bleeding to death. Make your cuts swiftly, timely, logically, legally, and ethically.
Renegotiate Contracts: The Wall Street Journal recently reported that a September 2008 study of 1,000 small business owners found that more than 15% had renegotiated contracts with partners. Try asking lenders, landlords, vendors, and others to reduce their fees or costs. They might consider lowering their monthly fees or payments and extending them for longer periods. A bank might change the terms of your loan from a three-year to a five-year with more manageable payments if you have adequate collateral. A landlord might lower rent if you agree to a longer lease. Everything is negotiable.
Eliminate Negativity, Fear, and Introversion: Stress is high among American workers and it will get worse. People are expected to do more with less. You want to have a steady stream of positive communications that will inspire, motivate, and encourage your team. Now is a good time to revisit the book The One Minute Manager by Ken Blanchard. Look for things people are doing right and recognize them. Think outside the box and keep staff energized with rewards. Above all, thank them for going the extra mile. Make them feel valued as part of a professional family and that we are all in this together.
Keep your communication channels open, share important financial information, and hold regular, open meetings where everyone is encouraged to express their opinions, raise concerns, and pose questions. And tell them the truth, even if it hurts. They need to believe you; otherwise, negative gossip channels will flourish. Negative attitudes will kill creativity, dramatically reduce productivity, and build a mindset of failure. People will focus more on their insecurity and bringing others into their dreary discussions than getting the job done and making a profit! Negativity is like a rapidly-advancing cancer that will choke the life out of your business. If you lay people off, remove them from the organization immediately. Don’t let them linger around like I mistakenly did in 2006. Otherwise, they can infect others with their negativity, gloom, and doom. Above all, don’t make layoffs in waves. Implement all cuts and layoffs at the same time and then let your remaining folks know that while you cannot promise anything, the budget cuts and layoffs are over unless things get much worse. Give them a sigh of relief and then promote excitement. Otherwise, they will spend their time looking for another job!
Be sure to show you care about those you are laying off since you are being watched by the people left behind and it is the right thing to do. When I laid off four employees from one of my companies in 2006, I went out to job fairs, called people I knew, and put the word out to help them find jobs. JoAnn Moss recommends that you consider outplacement services to help your employees find new jobs, adjust to the change, find a sense of direction, and refresh their job search skills. The quicker they find a job, the faster they are off unemployment benefits, and the less likely it is that they will sue you. More than 90,000 EEOC complaints were filed last year and I have been there! The law is about to implement even more employee protections, so my advice is to watch out! Seek expert counsel.
Be Humble: When interviewing leaders of great companies for Good to Great, Jim Collins and his team found that truly great leaders tended to be extremely humble. I would take that a step further and say great businesses need to be confident but humble. You cannot sustain long-term success through arrogance, especially in dire times. I recently interviewed a human resource director with a large Columbia-based business who had seen ten presidents come and go at the successful corporation. When I asked him if he observed a common thread in the bad CEOs, he immediately responded: BIG egos! When you think you are next to God and you are invincible, prepare for the fall.
Save, Save, Save! Our philosophy is to plan every day for future storms, like Noah did—always at work building an ark in the middle of the desert with no rain in the forecast. That is why we paid off all our debts three years ago. Our companies also began putting aside more than a year’s worth of savings to carry us through uncertain times. Don’t be greedy—a prime reason many companies fail. As the business owner, it was tempting to put millions in my pocket, but job security, creating safety nets, and ensuring the company’s long-range survival are paramount. If you haven’t saved, start saving now! It’s never too late.
Cash is King! Watch your accounts receivable closely. Send out your bills before they are due and become acquainted with the accounts payable staff at other companies by name so you can make a personal call when payments to you are being delayed. With banks tightening up credit and having limited money to lend, organizations that owe you will stall on payments and use your cash to help keep their cash flow positive. One of our companies writes grants for 60 school districts and I am now seeing payment delays even with public institutions. Keep your cash flow solid and apply for a line of credit when you don’t need it instead of waiting for an emergency situation. Bankers will lend you an umbrella when it is sunny and take it away when it is raining, but that’s their job! I am an investor in BankMeridian and I expect them to make a profit.
Don’t Let Other Failed Businesses Pull Yours Down: As the economy worsens, we will witness more bankruptcies. Watch your credit terms with other organizations because if they go under, they could pull you down with them. When receivables reach more than thirty days overdue, be on the alert. Your staff should begin calling at forty days overdue.
Get Everyone Involved: I treat all my employees like owners of the business. When you actively engage employees and their minds, create a culture of openness and candor, and solicit input, things run more efficiently and effectively. Team members in our companies’ culture are happier because they are helping craft their own futures. Play the game of survival and use fun rather than fear to keep your company focused. At one of my companies, I set an amount that I wanted to net as the owner and told staff that they could have rest of the profits. Talk about an emphasis on cutting expenses, raising revenue, working harder and smarter, and being profit-oriented—it got everyone fired up and they are thinking outside the box as a team!
Focus on Exceeding Customers’ Expectations: One strategy to survive is to build up customers’ loyalty and trust so you can weather the storm. In bad times, customers focus their spending on companies they know, trust, and like. It’s everyone’s job in a company to make this connection. Our philosophy is to give customers what they want, when they want it, in an outstanding way. If you treat customers as partners and provide them service that is beyond simply “good,” they will return for more, even if it means paying higher prices. Great companies invest a lot of time and energy in their customers so that when tough times come, the investment returns. It is getting to the point where you have to go beyond exceeding customers’ expectations and guarantee that your customers are never disappointed. Nurture and love on your customers and keep communication open. At Columbia Conference Center, staff created a humble slogan that they live and breathe: “We are here to serve!” It is amazing to watch them in action: every single person on staff treats the customer like royalty and since 2003 more than 92% of our business is word-of-mouth. I humbly report that nearly 100% of our customers rated us as good to outstanding in the last five years. Our clients have become what Denove and Power call “advocates,” reporting favorably on our services to other prospective customers.
Most importantly, remember to stay in front of your clients! Some experts say that we lose 10% of our influence for every month customers do not see or hear from us. The old adage “Out of sight, out of mind!” applies here. Form a written plan to communicate openly and closely with customers.
My son, Blake, formed a web design company with a focus on personalized service called DuBose Web Group. He says he builds more than websites—he builds relationships! He often comments that all of his customers are good friends. Most of his business comes from happy customers, and he turns down half the business that comes his way because he is so focused on quality within his existing customer relationships.
Create Alliances with Competitors: Examine the marketplace for similar, quality companies with whom you can build partnerships. If you cannot serve a customer, find someone who can. The customer will remember you and the competitor will too. I am sure you have heard the old saying: “Scratch my back and I’ll scratch yours!”
Be Involved in Your Company’s Finances: Everyone should be looking at balance sheets, income statements, expenses, and revenue like hawks! Don’t turn over the finances to others. Be involved, ask tough questions, challenge the budget and cash flows, and use zero-based budgeting where every line is frequently questioned. I have been amazed to see many CEOs become distant from the financial process only to be stunned when their businesses suddenly fail.
Don’t Go for the Good Deals: Bank of America went for the deal of a lifetime with the purchases of Countrywide and Merrill Lynch and used most of its cash to buy the two companies, even knowing the overwhelming losses that they had sustained. Bank of America blindly continued with the purchases and now many analysts are wondering if it will survive without sizeable bailouts. Keep in mind that cash flow is important and you don’t want to scoop up a deal only to become cash poor. A strong balance sheet looks good, but only if a lot of it is liquid!
Watch the Toys: I own two Corvettes and I sure would love to have a corporate jet. I can even see that red ‘57 Chevrolet convertible in my mind’s eye! But those things should be avoided right now. Take my wife’s advice and follow the leaner road even if you have the extra cash.
Be Cautious About Long-Term Contracts: Try to avoid signing new long-term contracts until you can see how this economy pans out. It is a great time to lock in good rates, but try to include annually renewable contracts so you have a way out if things go bad. Especially watch personal guarantees that connect your personal assets to the success of your business. A failing business could drag you, your family, and your assets down the drain with it!
Stay Focused on the Prize: Don’t let bad times impact your purpose, mission, vision, and values. Avoid going for quick, low-profit activities that will distract you from the big picture. Focus on quality and not quantity. You do not want to become a “money chaser!” Maintain a clear strategic plan and keep driving toward your goals, doing fewer things really well. Hold everything that you propose to do up against your mission and purpose, and if it doesn’t fit, don’t do it. If you don’t have a strategic plan, now is the time to create one. As Yoga Berra said, “If you don’t know where you are going, you might not get there!” Our consultant Don Jenkins (djenkins@leadersadvantage.us) helped our companies create strategic plans that make clear what we are all about and where we want to go as a team. That way, everyone is driven toward a common goal and purpose. Keep your plan in front of you and revisit it regularly with staff. Post it on your walls and keep talking about your mission, vision, purpose, and values every chance you get. Be flexible and willing to change it if necessary, but try to stay the course.
Follow the Hedgehog Approach: Jim Collins discovered a very simple concept followed by great companies that we employ in our businesses called the “Hedgehog Principle.” While it is important to experiment and try things outside of the core of your business, Collins found that greatness and success come from three concepts occurring simultaneously. These are the components of the “Hedgehog Principle:” focus on what you do best, what you are most passionate about, and what is most profitable for the business.
Plan to Fail: Every day, I know that any of our businesses could fail tomorrow. When Jim Collins wrote Good to Great, he used Circuit City as an example of a great business. Now look where they are! While we want to be optimistic, we must constantly have our ear to the ground listening for any signals that indicate losses, mistakes, and failure ahead. In nearly all cases, the signals will begin as weak sounds and slowly build until you are sitting on the railroad tracks with a huge train roaring down the tracks. It’s too late to recover then, so you have to be ready to act quickly at the first signs of trouble.
Spend Time Protecting Your Business: I spend about 20% of my time preparing to die tomorrow and training my senior managers to succeed me. Carefully perform a threat assessment as part of a SWOT analysis to determine your weaknesses and where threats may attack you. This should also include a legal analysis and asset protection plan. You simply do not want to have to deal with a major, distracting crisis when you are trying to survive in a bad economy. Use experts like your attorney and accountant to help in your assessment.
Set the Stage: Everyone watches and listens to the leader. He or she sets the stage for the play. You need to smile, be friendly, positive, encouraging, caring, and above all, leading! And that means practicing good ethics and honesty, which are the most important characteristics that employees and customers want to see in their leader and company. You simply cannot say one thing and do another. There have been times when there was a million dollars on the table and I allowed money to guide me down the wrong path. I tried to justify my unethical behavior to myself, but you have got to be consistent, no matter the rewards.
Continue to Be a Good Risk-Taking Company: Successful leaders and staff keep experimenting and reinventing parts of their company. People’s zeal, enthusiasm, and excitement tend to stall in bad times. It is important to feed the entrepreneurial spirit, allow people to dream, and seek good opportunities without risking all of your assets. Don’t put all your eggs into one basket. Now is the time to invigorate that spirit, which creates success and profits. At our companies, one of our mottos is that we turn dreams into reality!
Believe You Will Win! There is a great Biblical scripture that inspires me: “All things are possible for those who believe.” Everyone in your organization must have an unwavering belief that while there may be bumps in the road, they will win in the end and good times are ahead. Keep the momentum going and as Larry Bossidy, author of Execution, once told me, “Celebrate victories, no matter how small!” Look for innovative ways to reward your people and keep their spirits up. Keep your train moving up Mt. Success—the sights up top sure are nice! Great, successful businesses don’t live in the valleys. They build the mountains and then climb them.
Thriving in bad times is not easy, but great companies do it. It’s all about planning, sending the right message, having the right attitude, building great products, developing the right, outstanding teams, exceeding customer expectations, knowing where you are going and how to get there, and—most importantly—having the right leadership.
Above all, you just have to believe you will win! Do I have an “amen?”
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Mike DuBose has been in business since 1981. He is the servant leader and owner of four debt-free corporations, including Columbia Conference Center, Research Associates, The Evaluation Group, and DuBose Web Group with his son, Blake. Mike is writing his book The Art of Building a Great Business, to be released in 2009. For more information and helpful articles, visit www.mikedubose.com.
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Speech to Greater Columbia Chamber of Commerce
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