About two weeks ago I joined a group of Entrepreneurs and Venture Capitalists at their monthly breakfast meeting. I expected some interesting insight on the deal flow and market perception, but definitely a positive and upbeat morning – what else could you expect of born optimist Entrepreneurs and VCs, even in a recessionary market, right?
Oh, boy, was I wrong. We started the morning with a comparison of macroeconomic data to actual small business data from the last quarter in 2008 and the conclusion was that “small business has not suffered in the same way as it appears large corporation have in this recent economic downturn.”
On this positive note, we started an open discussion about the impact on individual businesses, and I was shocked at the negative outlook in the room and the comments that were soaked in self-pity – the Venture Capitalists suffering a lack of new capital influx and start-up CEOs explaining their performance (or lack thereof) with loosely correlated macro data. I was ready to leave, but I am glad I stayed because it made me realize again why some companies prosper and others fail.
I understand that a recession throws you curveballs and changes your predictions, but a recession means change and opportunity at the same time – granted not for every company, but for some, those with that special DNA that recognizes opportunity in changing times. Companies that are not agile to respond to new market conditions will be attacked in their status quo in a recession. Maintaining your business is the first step toward closing the doors. These times reflect an opportunity for established, larger corporations and smaller, nimble businesses, as well as start-up entrepreneurial organizations, to break into new markets or gain market share. These times provide a reality check to evaluate your services, your leadership and your unique corporate DNA – all in perspective to the value you provide to your customer. This is classical Darwinism. In these times, I am not interested in the followers who can’t show a direction on their own – I am interested in the leaders who seize the opportunity and go to work. I would not follow an old school business model, copy it, and sell the heck out of it – in these times. I am looking for unique value, a drive to succeed, and positive outlook. You know the saying misery likes company, and I like to believe success breeds success and that positivity encourages and empowers.
The reality is that consumer spending accounts for about 70 percent of U.S. economic activity, and borrowing fell at an annual rate of $7.48 billion in December 2008. Since the recession began in December 2007, the economy has lost a net total of 4.4 million jobs, with more than half coming in the past four months. Americans, worried about the possibility that they could be laid off, have cut back on their spending and reduced borrowing. Many are trying to rebuild their savings to help cope with a recession that already is the longest in more than a quarter-century.
So, where can we find opportunity in these market conditions? As one example, I like to point out a business model that we have developed, one that allows businesses to use their products and services as currency in exchange for advertising, with an added benefit that they actually only have an advertising cost when a consumer walks in the door (pay for performance). This is a quasi-offline model of Google Adwords. Our clients use an empty seat – their access capacity, the extra hour of labor that otherwise would be idle, and turn it into an opportunity to wow a new customer with their products and services – all while providing a great deal for the consumer, which is so important these days.
This provides a benefit to all participants in this triangular relationship – retail venue, distribution channel, and consumer. The consumer wins by getting a great deal; the restaurant or golf course wins by getting a new customer, and the distribution channel, i.e., Gift Card Malls, win as well by providing a higher margin, consumable item that consumers actually need and want in these times and buy all year long.
You do not have to be McDonalds or Wal-Mart to beat expectations in a recession. Turn over a few stones and see how you can solve a problem for your consumers and clients in these times, and you will be ahead of the curve. If you are lucky, you just may be in the right spot at the right time!
Hi. I like the way you writeand address this subject. Gift Cards with the support of assisted sales are a winning combination and I wish you good luck.