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8 Things You Can Do Now To Survive and Prosper

Last month, using history as a guide, I made the argument that the best time to invest is during the worst economic times. The feedback I received from business leaders was essentially one of agreement followed by the question, “how do I survive and prosper in this environment?” Most cited the triple threat of customer belt-tightening, limited resources and tight capital markets.

And that’s the paradox. Great opportunities currently exist because of the dearth of reasonable capital. Case in point: Multi-family home prices in Providence, RI recently dropped 47% from a year ago. The contributing factor? Financing for these properties has essentially dried up for all but the most qualified buyers. With the most recent turmoil, this lack of available capital is spreading to additional sectors of the debt market.

Barring a suitcase of cash magically appearing, what can business leaders do to persevere and take advantage of today’s challenging business climate? The following list offers eight suggestions.

1. Service, service, service – Any company considering outside financing must demonstrate that management consistently addresses critical operational issues. Service quality is a great place to start.

Many companies let service quality erode over time, often imperceptibly. An outside perspective is critical. Ask others to shop your services (or better yet, hire an outside secret-shopper firm) and provide feedback. Don’t give your customers an easy excuse to no longer conduct business with you.

2. Streamline offerings – During good times, most companies tend to expand product and service offerings to build sales.
 
Attempting to be things to all people isn’t always the best strategy. Not only does added complexity sometimes hurt quality, but it can impact the bottom line through increased indirect overhead. Audit profit margins on individual products and services.

3. Review and rerun the numbers – For companies eyeing potential expansion, recalculate breakeven based off today’s economic conditions. Certain expenses have increased dramatically in recent years, but recessionary periods often bring lower costs. Retail space is dropping in certain markets, reducing breakeven for many companies.

4. Update/tweak your brand – Is your brand holding your company back?

Whole Foods is currently struggling with consumers’ “whole paycheck” perception even though their “365” house brand items are price-competitive against mass-market grocers’ offerings. Not a good place to be in these frugal times.

Make changes carefully. Markets can (and will) shift again. Just ask any company that added the letter “i” to their name back in 1999. It worked fine for Big Party’s transition to iParty, but where are the rest of “i-Companies” now?

5. Open communication channels – Sticking one’s head in the sand hoping the problems go away is not an effective strategy. Open a dialog with employees (and in some cases, customers) about the current environment. Most good ideas come from the trenches. Mine them.

6. Pump up the marketing – Most companies cut marketing budgets during bad times to cut costs. Not always the smartest move. Even if your company is running a lean marketing budget, dig for alternative, cost-effective marketing strategies to get the story out. Do you have a success story that contrasts with the doom and gloom permeating our lives? Grab some PR on it.

7. Ignore the negative chatter –The media has a tendency to dwell on negative stories. It’s what sells.

Take the beleaguered restaurant industry where the combination of rising food and energy costs and reduced consumers spending are battering many chains.

What has gained little attention is the increasing availability of affordable attractive restaurant space in some markets. The ability to find competent help, the bane of nearly every one of my clients, has eased a bit. Yet, these current “benefits” were reported as the worst problems three years ago when the restaurant industry was far healthier.

Is the glass is half full or half empty? You decide.

8. Network for money – If you have a profitable business model, the money will follow. It just might take a bit of legwork to find the alternative financing sources that are sitting on the sidelines waiting for the right opportunities.
 
Conclusion
When driving, we’re most out of control at the top of a hill looking down, versus at the bottom of the hill driving upward. We’re near the bottom of that hill. For those people willing to take calculated risks, now is the time to step on the gas and climb that mountain.

Reducing franchise recruiting costs is an increasingly difficult issue facing most franchise systems. In Part I, we reviewed what management can do to tweak internal operations to make their system more attractive to prospective franchisees. In Part II, we turn our attention to the traditional methods most franchise systems use to recruit franchisees such as the Internet, franchise brokers, trade shows and publication advertising.

While each method has its advantages, each possesses challenges for franchise systems with finite resources and limited brand recognition.

Franchise Opportunity Portals
Nowadays, most franchise leads come from the Internet either through franchise opportunity portals or search engine ad-words.

Some franchise executives swear by franchise opportunity portals. I’ve even heard other franchise consultants swear that this is the only form of advertising worth conducting.

Like any method, they have limitations. The shear volume of competing franchise systems on many sites can create a “cast of thousands” problem where it is easy to get lost (especially if management didn’t work on creating a unique enough brand as pointed out in Part I). In addition, using multiple sites can quickly consume a limited advertising budget.

Search Engine Ad Words/Pay Per Click
Buying search engine ad words can be effective, unless well capitalized competitors are bidding for the same words. In these situations, the cost of acquiring popular key words can prove prohibitive. Lead quality is often inferior to other methods. Finally, recent research also suggests that some consumers are growing weary and suspicious of sponsored links.

Franchise Brokers
Many franchise systems use brokers to sell franchises, some exclusively. Just like any profession, there are some great brokers with impeccable reputations with a long term focus on partnering to bring long term success to the system.

Ideally, most brokers want to work with systems that have a business development team that can effectively close the hot prospects they send the franchisor’s way. Most brokers prefer systems they can easily sell in high volume (which begs the question, if they are easy to sell, then why hire them in the first place?). Fewer will have an interest in a system that would max out with 100 units nationwide.

Some limitations present themselves. Some of the largest broker firms are constantly inundated by emerging franchise systems looking for representation. Even if they do agree to take you on, unless you’re one of their “top 20 favorites”, you’ll end up in the “extras” pile with little to show for it.

Compensation brings two additional challenges. Brokers do extract their pound of flesh, typically taking the greater of 40% of the franchise fee or $12,000 on up.  Because many brokers are paid for a consummated deal, the less scrupulous brokers are sometimes swayed more by the deal than worrying about building the best long-term franchise candidates for a particular system.

Find the best brokers with a proven track record for long-term success and you’ll do fine.

Franchise Opportunity Publications
Franchise opportunity magazines share the same challenge as the Internet, with hundreds of opportunities vying for attention. Flip through some of these publications and you’ll see many tired franchise advertisers pitch get-rich-quick schemes that look like rejects from “That 70’s Show”. Many promote “top franchise systems” lists. A more appropriate name should be “the top advertisers” list.

If you have something real to offer, use these publications sparingly.

Newspaper Advertising
Franchise opportunity advertising in reputable national newspapers and their associated portals are a step up from franchise opportunity publications; however, they present two challenges. First, in order to gain positive results, you must advertise repeatedly, which can quickly overload ad budgets for smaller systems. Second, emerging franchise systems looking to grow in particular regions will generate leads that are unusable.

Business Opportunity Trade Shows
Most “business opportunity” shows are a waste of time for legitimate franchise systems. The only franchise opportunity shows worth considering are the three national Franchise Expo shows put on by MFV Expositions.

The Franchise Expo shows are best for systems looking to generate leads from potential international buyers or local buyers in the host city. These shows are less effective at finding candidates throughout the U.S.
There are a host of problems with even the best shows. Advertising in these shows is both expensive and time consuming. They often yield limited results for emerging franchise systems with limited brand differentiation as there are literally hundreds of other systems vying for attendees’ attention. For smaller systems, the timing may be premature to start talking to representatives from other countries.

Between the cost, long hours and untimely prospects, exercise caution with trade shows.

Conclusion
Traditional methods can work. Unfortunately, they get costly and are best suited for larger franchise systems. While each method has its advantages and disadvantages, collectively, they pose challenges for franchise systems with limited budgets, regional brand recognition or specific area expansion goals.

Next month, we’ll wrap up this series with a review of cost-effective, alternative methods for recruiting franchisees.

When I was building my home a few years ago, I would frequent local building supply stores. At one location, one thing that always struck me as odd was the “Parking Reserved for the President” sign conspicuously located right in the middle of customer parking (usually with the owner’s shiny white new Cadillac occupying the space).

So what’s wrong with this picture, you ask? Besides limiting space for customers during busy times, consider that it:

• Reeks of arrogance that the owner is far more important than customers and employees.
• Builds employee resentment to the owner’s success, which manifests itself in poor employee/customer interaction (experienced firsthand).
• Gives an impression that the company is making too much money off their customers (next time, maybe I should shop at the big-box home improvement warehouse down the street to save money).
• Reduces buy-in from employees, which could prove critical when asking for greater effort or sacrifice during lean times (which the company is probably facing right now).

Now, contrast this experience with a client who has headed an organization for the past few years. Every day, he parks his car farthest from the company’s building. The implied message: I’m no better than anyone else here. He has gained the admiration of employees resulting in a 20% decrease in employee turnover and 15% increase in revenue while under his stewardship. Qualitatively, he’s gained buy-in from employees to bring needed change into the organization.

Competition is tougher than ever. Don’t give your customers or employees an easy excuse to defect to your competitors.

Ask anyone about air travel, and you’ll likely gain an earful about a most recent debacle.

While I’m no “road warrior”, I do fly about once per month, so I am always searching for ways to make air travel a bit more palatable. I’ve mitigated some of these challenges by flying JetBlue whenever possible and wearing noise canceling headphones.

When I first starting shopping for headphones, I found it difficult to justify the $350 that the Bose Corporation was looking to vacate from my wallet for a fine set of headphones. So, I started with a $50 pair, which seemed to work out just fine.

Then, on one flight, I caught a video from David Pogue, the technology writer for the New York Times, comparing 5 noise canceling headphones against the Bose. The result? David found two competitors that compared very favorably to the Bose at less than half the price, one by Panasonic, the other by Audiotechnica.

Following his recommendation, I purchased the Audiotechnica headphones on Amazon ($106 as of this writing) and found them to be a significant improvement over my previous pair. They worked as advertised, significantly mitigating the dull roar of jet engines and passengers’ conversations.

Unless you’re in the million mile club and absolutely must own the best, the Audiotechnica’s Noise Canceling Headphones represent an excellent value for anyone looking to make their air travel experience a bit more tolerable.