Metrowest Chamber of Commerce

A business can do a number of things not only to survive a recession like the one we’re experiencing but to thrive in it. This is what Fox commentator and business development consultant Victor Cheng told the Chamber’s July seminar, “Recession-Proof Your Business,” held at the Sheraton Framingham Hotel and Conference Center. The advice is based on his study of what certain small businesses did during past recessions that helped turn them into Fortune 500 companies.

 

The first thing to understand, Cheng says, is that businesses shouldn’t aim simply to “ride out” the recession until things normalize, as many businesses have done following prior recessions and depressions in U.S. history. Riding out is not likely to work because this recession is different. We’re now at high point of the debt cycle—twice as high as at the beginning of the Great Depression—stemming from unprecedented borrowing and spending without saving. It’s no use waiting for normalization, Chang warned: “This is the ‘new normal.’ ” Stocks are now hitting the 100-year average and we’re at the level we’ve earned. The only long-term solution is to work down the debt by earning a great deal and saving. Of course, people don’t want to do this. And the stimulus isn’t going to help in the long run because it still leaves us owing. Economists may say, in 2010, that the recession is over, but that will not mean we’ve escaped the new normal.

 

“The first rule for creating a recession-proof company,” Cheng continued, “is not to succumb to stress by acting irrationally, as many people do in a crisis. Understand that there’s still a great deal of money in the economy, even if it has shrunk by six percent or so. “There’s still ninety-four percent left,” so focus on the latter, not the former number, on the employed, not the unemployed. It’s a matter of orientation. Make business decisions based on facts and not on what the competitive media say. They stress the downside of things. “Remember, 4,000 airplanes landed safely today.”

 

The next thing to do, says Cheng, is ask what has changed in your business world, and why? For example: People are choosing to keep their cars and repair them, or to buy used ones. This results in shrinkage of auto sales, of course, but also to expanded business for upstream industries, which boom. Similarly, new home sales are way down, but certain areas of the real estate industry are growing because of hard times. “Your job is to find the boomlet in your industry. Look for the money.” You should also look around you to see what other companies, in or out of your industry, are selling successfully. “ ‘Going Out of Business’ signs are doing well; they have no market in good times.”

 

If you don’t adapt, Cheng cautions, you may die. Some simply close their businesses. If that’s the case with one of your competitors, you can inherit his customers. Modifying your service to suit the times may be another way to go. Figure out what your customers want to buy in these times and get there first with the product. GM may have moved too slowly to adapt, although the problem here is less the cars than the culture, Cheng believes. He provided an example of adaptation: A realtor he knows is helping clients renegotiate loans at a time when initial loans for home buyers are hard to come by. “He went from the wrong side of the trend to the new side. Solve the customer’s problem, and you can grow.” That’s what explains the rise of Fortune Magazine—it helped people get back money lost in the Depression, according to Cheng.

 

Another approach, Cheng noted, is to try to solve customer problems in previously untried ways, as Costco has done, not simply by offering low prices, but by getting customers to buy more product, in bulk, than they might otherwise purchase. “Mom even goes out and buys a mini-van to hold it all.” Moreover, customers “sold” Costco by word of mouth, telling everyone they knew about the deals, and so without any advertising, the company went from zero to $71 billion. Chang pointed out that that FedEx grew during a recession when the founder observed airliners landing empty after delivering vital IBM computer parts, overnight, to big companies like Coca Cola. He felt he could deliver the goods less expensively, and FedEx boomed as the recession got worse. How to replicate such unique approaches? Ask your customers why they do business with you. It may be a unique service you’re not really fully aware of. Emphasize that feature as you go forward.

 

Cheng concluded by urging Chamber members to market more aggressively—if they couldn’t become “more relevant” in some other way—and warned them once again not to “hunker down.” Dominos, which also started up during a recession, got to a point where co-founder Tom Monaghan’s brother decided to get out before it was too late. Monaghan remained, scrapped high overhead service, marketed delivery, then speed of delivery, then free delivery if the pizza arrived more than 30 minutes after the order was placed. No competitor matched that for 30 years, and Monaghan went on to make a billion dollars. “In a down economy, the average business shrinks. You yourself can go either up or down. It’s hard to stay in the middle. How you respond will determine which way you go rather than the recession itself.”