Have you ever been to the beach when the surfers were out? Do you remember watching them sit out in the ocean on their boards, waiting for the perfect wave to come along and carry them into shore? Some were probably paddling to catch the next wave, while others just sat there, as if to say, “I’ll get the next one.”
Business is like surfing. It seems everyone is trying to catch the wave of prosperity, though only a small percentage succeed. Especially now, when times are unbelievably tough for small business owners, many are sitting in a still ocean wondering when their wave will arrive. It feels like treading water—working hard but going nowhere.
Several recent studies predicted that the unemployment rate, a good economic indicator, would remain high at least through the end of 2011 and begin to drop through 2012. At some point—exactly when is virtually impossible to predict—the American economy will turn around. People will be able to find work and businesses will be able to invest and grow. However, not everyone will benefit when this happens. Even in good times, unemployment will likely hover close to four percent or higher—many entrepreneurs will have already lost their businesses—but there will inevitably be a huge contingent of owners still in business who will sit and watch the wave soar right past them. They will scratch their heads and ask, “Why didn’t that wave carry me into shore?”
Learn to read the ocean .
We are all in the ocean and we all know the wave is coming, so now is the time to prepare. To the untrained eye looking at the beach, it may look like wave after wave is rolling into shore when there are only small swells. A good surfer is able to distinguish the real waves from the swells at their beginnings. In the same way, business owners need to pay attention and educate themselves so they can see the “signs of the times.” Learn to read the nationwide and even global business landscape. Become fully aware of the economy in which you operate. Like the ocean, it fluctuates constantly, but in that fluctuation is a certain constancy and repetition that can be studied and understood. Seek to understand your “ocean.”
Inspect your surfboard .
What is the single most important piece of equipment a surfer needs to ride the wave? Right, a surfboard. All the study in the world will not get you anywhere in the ocean without the right gear. Think of your business as your surfboard. Is it broken and splintered, or smooth and sanded? How big a wave could it handle? In other words, how would your business hold up under a huge influx of orders? Would you be prepared to deal with exponential growth, or would the company hit an early ceiling and send potential customers elsewhere?
Recently, I visited a manufacturing business that had been awarded an order from one of the nation’s largest retailers. However, the company was unprepared and the owners refused to make the needed adjustments to fulfill the order. The order was given to the local competition: a company half the size. As a result, this business not only lost an ongoing million-dollar contract, but with it three key, experienced and well-seasoned employees. Today, the once smaller company is prospering while the other is hanging on by a thread. The wave came and one business owner ignored it while the other was riding high.
Get the right gear .
The board is vital to surfing, but things like wax, wetsuits and tethers are also important. These are all things that enable surfers to be better, faster, safer and stronger on the water. In business, these things are called policies, procedures, systems and controls. Means of ensuring employee productivity and quality control are vital to business growth. Make sure systems are standardized and can be easily replicated. That way, you can focus on your strengths and allow others to make up for your deficiencies.
Learn to surf .
Before taking on a big wave, every aspiring surfer starts small. They build the skills like balance and reflex required to remain standing on the board. In fact, the first lesson is on shore, where they learn the popping motion to quickly go from paddling to standing. When the ocean brings a wave your way, you have to paddle as hard as you can until its time to pop up onto the board.
Most small business owners spend very little effort learning how to surf. They often start with the trade from which they build their business, but never learn the business of running the business. As a result, they tend to be clumsy when it comes to skills like management and business finance. The time to learn these skills is not while riding the big wave, but well in advance, in the calm. Right now is the time to develop the skills that will keep you on the board and moving forward when the wave hits. Reading books, taking classes and practicing are all good ways to develop the business skill set necessary to grow a company in an up economy.
When you turn around and see the wave headed your way, will you be ready to get on your feet and ride it? A good way to answer that question is to ask yourself, what would happen if the economy turned around tomorrow?
Just as fear of the ocean can prevent people from surfing, fear of the future can paralyze and prevent innovation. Some see an oncoming wave and think it might drown them. Some see a flat ocean and fear the wave may never arrive. To overcome this fear, it is critical to establish a safe and effective routine of good business practices that will help your company stay afloat until the wave hits.
So, what can you do now? The following are three vital business practices for surviving a recession.
- Control the cost of goods sold. Engineer your business for profit. To make a profit on the back end, start with the cost on the front end. To make a 10 percent profit, only spend 90 cents on every dollar in sales. That’s the way Henry Ford did it—and we all know how that worked out.
- Maximize productivity. Are your employees and managers putting their best efforts in at work? Maximizing productivity will go a long way toward bringing down the cost of goods sold. One of the easiest ways to do this is through the implementation of schedules and goals connected to a measurable incentive program. Maintaining schedules not only for the company as a whole, but also for departments and employees, will ensure every employee knows what he or she is supposed to be doing while the incentives will give them motivation to do it. Of course, with a schedule must come accountability. Set goals and review them at predetermined times with your employees throughout the year to build consistency. There should be incentives built into this system whereby employees are paid according to the quantity and quality of their work.
- Operate according to the basic tenets of business. In times of crisis, it is easy to forget the simplest things. Innovation is helpful in recessionary markets, but more important is keeping a firm grip on the basics of profitability: sales, cost of goods sold, break even, days of required working capital, etc.
Keeping these three essentials in mind and practicing them will help you stay afloat and prepare to catch the coming wave.