Best business tip
How to succeed in a declining economy
A host of factors are working against companies these days. And thanks to the credit crunch, the resources consumers have used in recent years to keep spending have dried up.
Most economists say we're headed for a recession, if we're not already in one. So how does a company succeed in a declining economy? We put the question to people who are thinking this very thing: company executives. Here are their answers:
"A number of companies will focus on the cost and expense side of their companies during slower economic times, however, I would use the opportunity to focus on how we can do more for our best customers. Your competitors will try to use lower prices as a way to hold on to top line sales and attract your customers. Trying to compete mostly on price is a strategy that will hurt your business when the downturn is over."
—John Morgan, CEO, Winmark Corp.
"It is important to focus on a couple of significant items that need to be balanced. The first priority is to manage the primary variable costs in your business in order to turn a profit at your current level of revenue. In our service sector business, the primary variable cost is stylist payroll and it needs to be managed through disciplined scheduling of employees for when the customers will be in the stores. The second priority is to keep your employees happy and engaged with the proper incentives to encourage them to work the desired schedules. The employee pay plans need to be incentive based and the managers or owners of the stores need to maintain high employee morale so they continue to provide the same positive experience to their customers. This focus on employees together with proper scheduling can increase revenues in a declining economy while maintaining control of costs."
—Paul Plate, CFO, Regis Corp. Franchise Division.
"Oftentimes, I tell my franchisees to get in sync with your customers as much as possible. I am a big believer in 'hugging your customers.' Customer service is the No. 1 answer to a business in a declining economy. When times are difficult, people want to feel good and appreciated. Get to know your customers as if they are family. Our vision is that anyone that becomes a customer of our stores enters an enduring relationship with us. We like to say at Sharkey's, 'Once a customer, always a friend.' It's clear to me that customers are thirsting for
relationship-driven companies. They want to be coddled. My company and franchisees are more successful because relationship selling inevitably leads to high productivity and high profitability. In a relationship-driven company, it's a lot more fun to go to work in the morning. And we want to have fun."
—Scott Sharkey, CEO, Sharkey's Cuts for Kids