If your business has survived or even thrived during the past few months, you deserve congratulations.
According to a recent poll by the Canadian Federation of Independent Business, only 58 per cent of businesses have fully opened, with just 23 per cent experiencing the same or better revenue than the same time last year.
If this is the new normal, expect business to get more competitive in the upcoming months for the following reasons.
Survival of the fittest
The recent months of slowdown have created companies starved for cash.
While government loans and subsidies may have artificially raised bank accounts, those loans will need to be paid off and many of those subsidies have been spent keeping employees on the books despite the lack of fruitful activities.
As these injections of cash begin to run out, companies need to get back to the business of filling their coffers.
Unfortunately, because only 23 per cent of businesses are experiencing normal sales levels, this means that 77 per cent are going to be trimming their expenditures.
If your business can’t provide value for dollars, you’re going to have a hard time selling your product or service. Companies that are fit, hungry and eager for work are going to have to out-muscle, out-hustle and out-sell their equally hungry competitors.
One of our clients reported to me last week that he was having trouble winning contracts because his competitors were pricing work 50 per cent under his cost. He discovered that some of them were using government wage subsidies to get work and keep their people busy by undercutting prices.
The recent government interference in the labor market was desperately needed in the short term. But it has caused problems where businesses are changing pricing models and paying cash to workers receiving CERB in order to create a short-term competitive advantage.
Downward spiral of pricing
When we start the rush to the bottom of the pricing barrel because we’re desperate for work – even if it isn’t profitable – we’re in trouble. While we may keep the cash coming in, we end up in a continuous cash flow crunch, since we need the next contract to pay for work from the last one.
The result is a cycle of despair that ends in our customers expecting lower pricing. No one wins – even customers lose because there are fewer choices for them.
While CERB has benefited many workers who were laid off as a result of business closures, many are refusing to work more than a few hours a week because there’s no advantage for them to get off the couch.
This has resulted in an increase in labour costs for businesses that are in desperate need of workers. I’ve heard of business owners who have increased wages and still had employees choose to remain at home.
Businesses can expect that wages will rise in the short term and that their taxes will increase in the long term. The spending spree over the past three months has emptied government coffers and increased debt load.
Unless governments are going to promote continued inflationary measures and print more money to pay off debt and reduce the tax burden on businesses, expect long-term pain. If we do see high inflation, expect another round of cost challenges for businesses and anyone on a fixed income.
For businesses to survive the next few months and even years, they’re going to have to be positively aggressive. This means you need to have trained staff who sell your goods on value and relationships, and that you aggressively use best practices and systems in every aspect of your business.
Your leadership team must clearly understand how to positively motivate your teams.
You’re going to need to use planning techniques that invigorate your employees and enable you to create advantages over your competitors.
You will need to think outside the box to generate new ways to survive and create value for your customers.
If you do all of this, you’re going to improve your chances of survival. Good luck!
Dave Fuller, MBA, is an award winning business coach and a partner in the firm Pivotleader Inc. Comments on business at this time? Email firstname.lastname@example.org