Lessons From 2009 Applied to 2010

Lessons From 2009 Applied to 2010

Five Skills That Are Key In Any Economy

When Rental & Staging Systems executive editor David Keene asked me to write a column on the business lessons of 2009, I had no trouble citing factors that seem to have the biggest impact on success in a changing economy. The following five skills are not just theory. I have seen them all in practice (though rarely all in one place) and have measured their effect on my customers. And I discussed these concepts with many of you at the Rental & Staging Roadshows held across North America this year. Let me emphasize that these skills are important at any stage of a company’s life cycle, but are even more critical in a down economy when survival is on the line.

Look Outside Your Bubble: Forecast Better

The tendency in this industry is to take one month at a time, then look back and see how things turned out. Needless to say, this is just wrong. Longer range forecasting gives you clues as to how you should adjust your business plans and approach. You might choose to become more conservative or more aggressive. Either way, you will be in control rather than sitting on the sidelines.

Predicting the future does involve some voodoo, so you have to learn how to look around corners. Here’s what I said in Rental & Staging Systems magazine in December of 2007:

"Preparing for the eventuality of a recession should be a high priority in the coming months.My recommendations are to maximize your potential returns in the first half of 2008 and be prepared for a downturn in the second half.” Two years ago, I could only look at the numbers and make an educated guess as to when an inevitable recession would manifest itself. As it turns out, the recession had already started in December 2007. The effects cascaded from East to West starting in May 2008. Some stagers were still in denial as late as January 2009 and were hit extremely hard when corporate incentive travel outrage desiccated the events industry. Smart companies were prepared. The clues are out there — you just have to look for them.

Know How to Scale Quickly

What goes up must come down. The biggest success stories of 2009 are companies that heeded the economic warning signs and quickly reduced their operating costs and overhead while reinforcing their sales efforts. I have worked with several and spoken to many that wished they had made adjustments even sooner than they did. The thing that most of us learn from rescaling is how much we can learn to live without. The biggest obstacle to reducing operating costs is being busy. Looking at the big picture and seeing the bottom about to drop out is a macro view. However, most of us take a look at this week or month and say, “Dang, we’re swamped…there’s no way I can reduce hours.” The solution is to design a scalable operations system that knows how to work as efficiently during slow times as when busy.

Understand Your Customer’s Economic Reality

We can complain about competition eroding profit margins, but I think we do it to ourselves by not listening to what customers are saying. I have never had a client come to me and say they wanted my company to make less profit, but they sometimes tell me they have less money to spend. It is my job to make the most of that revenue, which often involves modifying clients’ expectations along with my own.

It doesn’t help that there are some individuals out there who will leverage suppliers against one another. So in order to protect your bottom line and be in position to maximize your customer’s available funds you have to fully understand your profit margin. Then — and this is the hard part — you have to decide when to walk away from bad business. Companies that have learned how to do this report increased confidence from their sales teams. Being in control of your business is empowering, and high profit clients buy from confident salespeople.

Do the Math

Understanding the components of revenue and expense at a granular level does not have to mean devoting your existence to spreadsheets. It does mean you have to be completely engaged with the numbers that matter. Start by analyzing your revenue in terms of which customers purchase what products or services. Calculate profit margins by transaction, by time period, and by salesperson. Be sure to review how you calculate cost of goods sold. One of the biggest challenges I encounter in staging companies is a misunderstanding of direct costs versus overhead. You need to include all direct labor in COGS and apply equitably (not equally) to all revenue because not all income incurs the same costs. For instance, a box rental uses fewer resources as a percentage of revenue than a staged event. The mistake many make is to tie up valuable resources on low-margin projects, leaving themselves out of position to win profitable business.

Create a Sustainable Company Culture

I know that the green movement has usurped the word sustainable, but it does have other applications. In this case, I want to convey the importance of a company culture that is self-perpetuating. In this past year I have witnessed companies that have gone through extraordinary changes without losing their unique personality and drive. On the other hand, 2009 has yielded a crop of businesses that will never feel the same again to their employees or customers. How does this happen? It starts when leaders do not understand the four lessons I have already cited above.

Thanks for listening, and no matter what 2010 may bring, make the best of it.

Tom (T.R.) Stimson, MBA, CTS, is president of The Stimson Group, a Dallas-based management consulting firm providing strategic planning, market research, and process management services to the audiovisual industry. Tom is the 2010 President of InfoComm International, a member of the ETCP Certification Council, and keynote speaker for the Rental & Staging Roadshow. Contact him at tom@trstimson.com