Survival of the Fittest

Charles Darwin may not have had economics in mind when he coined his famous “survival of the fittest” phrase, but business owners would do well to keep his words in mind these days.

According to the National Bureau of Economic Research, the United States has been in a recession since December 2007, much earlier than originally anticipated, and the prevailing sentiment is that it will last well into 2009 if not longer.

Business owners must now prepare themselves for a long economic winter and focus on keeping their businesses operable on a day-to-day basis without taking their eye of the long-term.

Balancing these two seemingly disparate responsibilities can be daunting, especially since experts say that what you do to survive a recession today could have significant benefits or consequences for the future. Here are some suggestions on how to make the right choices:

Think Before You Cut
Even when your staffing tends to be seasonal, it could be a bad decision in the long term to reduce staff during a recession.

Whether you’re contemplating cuts with respect to full-time employees or the ones you hire on an ‘as-needed’ basis, you risk extended consequences if you make cuts because of these challenging times.

“When you’re in the customer service business—as all of us really are—your employees are your front line,” says Rory Cohen, a Wyncote, Pa., business consultant. “They are, in essence, your product. Cutting jobs cuts morale. So you end up with a smaller, more demoralized workforce, which leads to poorer customer service, which lowers revenue.” Instead, Cohen suggests that small-business owners consider using salary freezes—and making sure that owners tell their employees that they’re taking a freeze just like everyone else.

Trim Fringe Benefits—Without Exception
Employees respond better to tough decisions if they understand that everyone on staff is in the same boat. So if you’re cutting out a fringe benefit, such as a seasonal bonus, make sure that you’re cutting it out for all employees, and not just a few. After all, in these times, employees realize that having a job serves as its own ‘bonus,’ says Neil Ducoff, a Centerbrook, Conn.-based business leadership expert and author of No-Compromise Leadership: A Higher Standard of Leadership Thinking and Behavior. “This is a how an accountable, open leader can demonstrate that he or she is doing what needs to be done,” Ducoff says.

Find the Silver Lining
While it may be an unfortunate reality, a recession will actually create some potential to grow revenue. One prospective new market for contractors is in foreclosures, as defaulted owners often leave their homes in disrepair. “I have a construction trade client who’s now working with banks to do repairs on these foreclosures, because the banks need to sell them,” says consultant Stuart Woltz, president of Tarzana, Calif.-based Mpower Group, which serves many small-business owners in the building industry. “Unfortunately, foreclosures are booming. One man’s crisis is another man’s opportunity.”

Stay Busy
When times are good, there are jobs that you simply won’t do—perhaps out of a need to brand your niche, or maybe just because your pride won’t allow it.

For example, a high-end remodeler may never consider repairing a deck. A landscaper who specializes in high-end country club communities may turn down a standard mulching job for a neighbor’s yard. In these times you’ll have to forgo that mentality.

“You need to be flexible in this economy,” says Stephanie Bullwinkel, who helps run her family’s Imperial Kitchens and Baths, a Brookfield, Ill.-based remodeling company. “Perhaps instead of a complete bathroom remodeling job, you sell a new toilet installation. Six months ago, you may have said ‘We don’t do that.’ But right now, you need to stay busy.”

Regardless of how you do it, the goal is to stay agile and flexible. Opportunities will not be as easy to come by in the year ahead, and the spoils will go to the businesses that are prepared to pounce.

Clean House
Any business that lasts for several years or longer eventually acquires inefficient practices that become a part of the company culture. For example, employees may start to take shortcuts in getting jobs completed. Quality control processes may get ignored in an attempt to save time, or out of sheer laziness. Your entire organization could well be operating below its potential due to a lack of motivation.

While those attitudes may fly in normal conditions, they are a virtual death sentence in tough economic climates. In that sense a recession can be a blessing in disguise, because it allows you to address bottlenecks and inefficiencies with the extra time you may have on hand.

“This is an opportunity for positive change,” Ducoff says. “You need to fix the issues, behaviors and ‘entitlements’ that have been waiting to be fixed. If something isn’t creating lift, it’s creating drag. So it’s time to confront the elephant in the room—because you won’t make it through this dragging that elephant along.”