In a previous case study we saw how two entrepreneurs emerged from the crisis they were in. There I wanted to show two different cases and two different solutions, since not all crises are the same.
In this second part I want to show two more real cases. They are very illustrative because the first represents a business model adjustment and the second is a perfect example of how to make a comprehensive anti-crisis plan.
Every entrepreneur who is in a bad time should take note of each point of that case and, directly, copy what he did.
We go with them.
(* 2 *) Adjust the business model instead of changing it
The tracking systems company US Fleet He was selling a database, GPS navigation, and DVR capability software package to US security departments. But they soon went into crisis. Mainly due to the duration of the purchase cycles when it comes to the public sector. At the same time as that, when the economy took a turn for the worse, they found it very difficult to market their package, which started the frustration.
How did you get out of it?
The main step was: asking what customers really wanted to buy.
Sound silly? Not so much, keep reading.
Jerry Hunter, its creator, was absolutely convinced that its technology was superior and its product the best. And in a way it was so, but he didn't realize that a product is only as good as the actual demand it has.
It wasn't until it occurred to him to ask in depth and talk to his customers that his GPS system was undoubtedly the best, but the rest of the package was not. If you sold the GPS alone, without the rest of the things, they would buy it from you without thinking.
And that he did, changing the business model. As soon as he offered just that product, which was what they really wanted to buy, sales skyrocketed..
Hunter himself tells how he has had this great revelation that you can't be everything to everyone. You must focus on what sells, release ballast and especially, not obsess over what you want to market because you think it is good, but what customers really want to buy.
Even when it seems pure logic, many entrepreneurs are shortsighted in this regard. In fact, many of us have suffered at times "No sale applause syndrome". In other words, everyone tells us that what we have is good, but they don't buy it.
Why does this confusing phenomenon occur? Because something you like is not the same as something you are willing to pay for. If they don't buy, the product doesn't suit their needs. The only remedy for that is to modify it until it fits.
We won't be able to influence the market, but we can influence what we do. Do not become myopia, do not fall in love with your product, ask questions and face the truth, to adapt the business model to what you really want (and pay for).
A comprehensive anti-crisis plan beautifully designed and executed
This is a perfect case of how a real company developed a comprehensive plan to get out of a crisis situation. If it happens to you, imitate them.
Resicom it served stores across the country but, like many businesses, it was a few customers who provided most of the revenue. In his case, his two largest clients accounted for 80% of that revenue. When, due to the economic crisis, these clients cut their expenses by 80% and 90% respectively, the contracts were canceled in just four weeks.
The worst was who had assured them that this would not happen, so Resicom it had hired and trained six more people over the next six months to manage the growth they expected.
This is something we must be prepared for, The promises have little value until we have the contract signed and the money enters the bank.. They could have yelled at the wind in frustration and given up, but they chose to grit their teeth and get to work getting out of the hole.
How did you get out of it?
Determined to endure, this was the comprehensive plan that, in general, encompassed all fronts that need to be addressed in a crisis.
Achieved clients
They looked for additional sources of income with clients they have already worked with. That was the first, so they met with those clients and found new possibilities.
This does not need a great complication, basically you go to each of them, with an attitude of You never know and ask sincerely "What needs do they have and how could you help them?".
The objective was to diversify the sources of income and never depend on more than a couple of contracts.
Sales team
Unlike the 90% of companies in difficulty, Resicom has made the right decision and added people to the sales team. Actually in his words "Aggressively".
In turn, they created more marketing tools to attract stakeholders and send that sales force to more sites, so they could finish the sales work afterward.
In other words: focused all energies on marketing and sales. In fact, they paid the necessary price of having to draw certain resources from other areas of support that, for the moment, are less critical.
The first thing that everyone does when the crisis shows its teeth is to cut back on marketing, mainly because they are not clear about the results they are getting. But that's the main mistake.
If what fails is that the sales effort fails to tear down the wall, you have to put in more energy, not less. Otherwise, the wall is happy and has more opportunities to stay there.
Finance
They advanced money from their line of credit and transferred it to another bank to guarantee something critical: liquidity.
I always insist that liquidity gives room for maneuver and enables you to make decisions without the urgency of thinking about how you are going to pay your payroll.
If your effort and your head are basically keeping it afloat, you are not swimming towards shore, which will truly save you.
Also in this section they had a system of indicators, to know clearly what the situation of said finances was at all times.
In one word: clarity about what is happening with figures in hand.
I always quote the words of Robert McNamara, but I have not found others that are more true or work better: "The first thing is always to get the data".
Operations
They tried to align spending according to the workload they had. If there was not much, they tried to contain that expense in operations, stocks and others.
Other than that:
- Pay cuts were instituted.
- All expenses that were not necessary to operate were cut.
- They met with each supplier to renegotiate contracts and price agreements.
Human Resources
Attention, because this is very important. It is used to make cuts without lowering productivity, as well as to achieve the (tremendous) effort necessary to get out of a crisis.
There was a total communication campaign about what was happening in the company.. That added transparency about what was being done and how things were developing.
For this, a goal of six monthly communications was established, a weekly update on how things were going, a report in the middle of the month and a monthly message from the president.
This part is one of the ones that I like the most because I have been working with companies where the biggest poison that corroded the day to day was rumors. The fear of not knowing what was happening and the constant denunciation destroyed more than the crisis inside. In emergencies there are always cuts and many employees do not know very well why, or think that they are the only ones who are paying the bill, while "on" They are still the same.
Here the objective is to kill any rumor and that everyone knows why they are tightening their belts, what happens and how things are going. When it is not so clear, the gaps of what you do not know fill with gossip, fear and concern.
In my experience, if you show most of the people what is happening, that the cuts are not pure exploitation and that only by pushing everyone will move the car, then they will make an effort, because they also want to save the boat they are sailing. in. But if they feel that they are rowing and that in the cabins above they do not know what is happening (or worse still, they continue drinking champagne and filling their pockets) the sinking accelerates.
We have to group the troops, show them that we are all or none and set an example in battle, being the first to do what he asks of those under his command. That is leadership.
This whole plan allowed them to resurface, and it wasn't easy, but they did. However, there is an additional lesson, perhaps the most interesting. See the management actions they took once the course was straightened.
We usually only move when we have no alternative. It can be used for minor things, but not for a company. It is essential for a company to move a lot before it hurts.
Administration measures once the crisis is over
With what it cost them to get out of the hole, they tried to make sure they didn't fall into another. For this, these were said measures.
1) Maintain that management system regardless of the economic climate.
The truth is that difficulties are what keep us in shape, when times are comfortable we tend to accumulate "grease" and inefficiency. So when Resicom got out of the situation, it has made the decision to, from that point on, always manages like they're in crisis.
2) Always keep a recovery plan BEFORE it is needed.
This is crucial, because when we start moving due to lower income, it is generally too late.
The 99% of the entrepreneurs who write to me or with whom I contact because they have problems, are usually already too deep in the quicksand.
What they realized in the words of Resicom's own managers is that, when you have a clear mind and can think well about what you have in front of you, that is when you must make the plan. In desperation little is achieved.
3) Always maintain the information and communication policy
This was his great learning, because the aspect of communication is underestimated 9 out of 10 times. When they applied it, they realized that it was a huge change in dynamics and environment.
One of the first goals we have as entrepreneurs in times of crisis is to maintain morale. This is accomplished through clear communication and leading by example. The essence of leadership is not summed up in saying "do this" but in Follow me. That is where you can see the great failure of politicians in those situations.
What I want to point out is that this case study is a guide on how to manage a crisis, which must be done in a COMPREHENSIVE manner. We have to tighten the nuts on all parts of the company, rather than the typical response of cutting expenses, cutting salaries and thus accelerating the agony. With that you only get to die quickly, without trying to return a single blow to the crisis that crushes you.
