The announcement yesterday from Jacinda Ardern around travel restrictions and the requirement for all travellers other than those coming from the Pacific Islands to self Isolate for 14 days and refusal of Cruise Ships until at least June 30th has fast tracked the arrival of our recession.
This is not scare tactics (far from it) it is reality and one that we either react to with emotion or respond to with planning and objectivity.
Those obviously hardest hit will be the tourism and hospitality businesses. With $112million dollars a day being spent on average in the tourism sector alone (excluding hospitality), it is easy to assume that there will be a minimum of $100million dollars a day that will not be spent and distributed in our economy.
The trickle down effect of this will be a lot more than a trickle for many businesses and make no mistake there will be plenty of casualties with businesses large and small that have not effectively managed their cashflow and are just far too highly leveraged to survive 3-6 months of this.
However - THIS IS NOT THE TIME TO PANIC
Decisive decisions must be made and in a relatively short amount of time and there are many opportunities that come from hard times.
The path to success in a recession is resilience and winning the war of attrition. You need to be a lot smarter with your resources than your competition.
Survive then Thrive!
There are three main camps in the war of attrition in a recession.
I am well known for my "Take Imperfect Action" mantra but there is a big difference between taking imperfect action, and an emotional over reaction.
Reactors will stop nearly everything and hunker down.
Sales heads will roll, marketing activity will stop, stock levels will get run down and service delivery will suffer.
Reactors will play the blame game. Blame the govt, blame the competition, blame their team and blindly keep reacting and retrenching activity until there is nothing left.
If you are a reactor you seriously run the risk of imploding your business.
2. The Fence Sitters (the vast majority)
Fence sitters will play the wait and see game. "Let's see what happens over the next few months" before we make any decisions. Fence sitters are generally great people with good businesses that care about their clients and staff. They can struggle to proactively make the tough calls that may need to be made early to put themselves into a position to take advantage of opportunities that arise in a recession.
3. The Responders (or Planners)
Responders know that things will be tough but with tough times come opportunities to take advantage of the over reaction of the reactors and the apathy of the fence sitters.
Responders will have a plan in place early.
Responders will streamline their business (not hamstring it) to free up resources to capitalise on others mistakes.
The Two Main Opportunities Coming Your Way?
Capture Market Share
As others pull back and stop sales and marketing activity the flow on effect can lead to reduced advertising costs and less competition for quotes.
Lower cost per click on things like Google Ads, Distressed Ad space in magazines, papers, events etc and less direct sales activity from reactors that have let too many sales staff go.
Smart use of resources can lead to you dominating in your space.
Roll Ups & Mergers
Another opportunity for those that protect cashflow and reserves. As other businesses fold (or come close to it) you can buy them out (or merge, taking a controlling interest) at distressed sale rates to (once again) grow market share. While you may have to lay off some of their existing staff (as you have capacity within your own team), these efficiencies can dramatically boost future profits.
What Should Your Next Steps Be and What are A Few Things You Should Consider?
1. Planning - Please please please, don't just wing it. Seek advice from your accountant, business coach or an independent marketing advisor as they will see the opportunities you miss and help you make the hard calls earlier (and there will be hard calls to make).
If you do not have a business plan then project what your year would look like if it was all business as usual and then throw some scenarios around. Look at your competition and what they are doing, where you can make inroads and who may be ripe in the future to either acquire or form a partnership with.
You can then model those predictions of market share and revenue through the scenarios and post recession what it would look like for you and your business when top-line revenue numbers return to "normal".
When you look at the big picture in the future it can make the next steps so much easier to make as you have clarity and purpose behind your actions.
Remember in any recession it is Survive THEN Thrive. If you fail to invest in planning the chances of surviving are greatly reduced. you need to step back, be objective and formalise your options.
2. Streamlining - Do you want to run a lean hungry machine that will devour the competition or a bloated ship that will founder in the stormy seas?
You may not be able to save everyone or every project you are working on today but by decisively and compassionately taking action early you are giving your people a chance to find alternatives while they are still there and conserving cashflow so you can invest in a much bigger future that they can possibly be part of.
3. Communication - Perception is reality and the more frequent and positive you are in the tone of your communication internally and externally then the more likely you are to be front of mind with potential clients and the better company moral and culture will be.
Invest more heavily in organic posting on social media like LinkedIn, Facebook and Instagram (posts and stories).
Increase frequency of email communication with your email database BUT tell more stories and share more informative content rather than constantly selling or offering massive fire sale discounts.
Investing more in frequency of this style of communication to your database will allow you to actually put more offers out without seeming desperate and can protect margins.
4. Invest in your Tech Stack - Do you have to have face to face meetings with every client all the time?
Tools like Zoom, Loom, Live streaming technology can create great efficiencies in both time and cost and allow you and your clients to continue to meet as well as increase productivity of sales and support staff.
This is especially relevant in the current situation
5. "Old Skool Can Be New Skool" - Don't forget some of the old school marketing techniques such as lumpy mail, networking groups letter box drops etc.
Don't forget the power of your network & community - Partnerships, joint ventures and networking groups can create a family atmosphere where you look after each other and share resources, ideas and build together.
As more people are creating social barriers & distancing with the Covid-19 situation some of those old school techniques will quite possibly give great returns.
6. SEO strategy
SEO (website optimisation for search engines like Google) is going to become even more important for smaller businesses. If you already have tight budgets and are worried about Ad Spend then basic SEO is something you can do yourself with a little guidance and very little cost.
The reality is most small businesses do a very poor job in this area so all you need to do is just be a little less crap than them to out perform and pick up leads.
7. Staffing overheads - As part of your streamlining consider if all roles have to be in house or full time?
This is an area we have already seen great growth in our business. Our Strategic Support Marketing Director and Marketing Manager service started taking off in late 2019.
This was originally tailored to small to medium sized businesses looking to hire marketing managers but couldn't justify the $80k to $125k required.
Having an alternative option to have a senior marketer working with their business part time on retainer for $1500 - $3000 a month to facilitate all strategy and manager service partners and agencies can free up cash-flow to either reinvest in marketing or conserve cash for other opportunities.
We are already seeing other businesses that are streamlining their marketing teams but still wanting strategic senior marketing support come to us as an alternative. My advice is to first see if there is a way your existing team member can work part time. If not consider out sourcing to a virtual marketing or strategic marketing directors service (There are a few of us around that can do a great job).
8. Invest in yourself and your team - From a marketing perspective it is understandable that you may not be able to afford to keep investing in the services of agencies to do all of your marketing and advertising.
As part of your streamlining you may be able to take some of that work in house and get training or coaching to streamline expenditure while maintaining presence and market share. Investing in up-skilling yourself and/or your team now could help set you up to Survive then Thrive.
At Konnector we have already immediately doubled the allocated support hours for all of our tourism sector clients and reduced their retainer fees to a token $1 a month while the travel restrictions are in place. I am also in the process of organising a leadership retreat on a boat in the Bay of Islands and a 3 day "Power-Hitters Weekend" in Queenstown where business leaders can come, play a round of golf in the mornings and have action planning sessions each afternoon.
I urge you all to see what else you can do to support domestic tourism and other small businesses in your community that WILL need your support, guidance and custom. We can not do this alone.
Stay positive, plan Survive THEN THRIVE!
I am happy to spend 20min of my time for free with any business owner that wants to get their head around what they should be doing right now.
You can check my calendar and book some time directly HERE