How to beat the recession: Why you need to put up prices, pay slower and sack staff
by AccountingWeb on
- There's no point getting more sales if you aren't making money on the additional sales
- Fix the under-performing staff, suppliers, customers and products, or sack them
- Compete on everything but price so put your prices up!
It seems that my 'Beating The Credit Crunch' ology is like marmite. People love it or hate it.
The messages are pretty straightforward. You shouldn’t even think about increasing sales until you have done the following:
- Put up your prices if you can
- Compete on everything but price
- Screw your suppliers’ feet to the ground on price
- ‘Fix’ the under-performing staff, suppliers, customers and products, or sack them
- Pay money 10 days slower; collect money 10 days faster
- There is no point getting more sales if you aren’t making money on the additional sales. Only once you have done the above (i.e. fix the financial model) should you even think about selling more.
I will list the top few grumbles and my reply.
“It is impossible to put prices up in a recession. All your customers will go to the competition.” Answer: Only the people buying on price will leave, but they tend to be the ones who are the hardest work that you would be happy to lose. We recently surveyed some 500 businesses that have put up their prices since autumn 2008 and all felt that their businesses have benefitted from the price increase (poor clients have left and profits per sale have gone up to outweigh any sales loss).
“It is impossible to put prices up in my industry.” Answer: Nonsense. Put the price increase into the contract, or do it annually, or do it based on raw material price increases, or repackage the product, or bundle products together, or do it by stealth. There is no shortage of ways to put up prices.
“You can’t go around sacking people yet expect the rest to remain loyal.” Answer: In the first instance you should only remove staff that are not pulling their weight or delivering the expected results.
“It is dumb to expect to be able to screw suppliers’ feet to the ground yet not get screwed yourself.” Answer: You should be selling on everything but price and you should be confident that your customers/clients understand this. As for your suppliers, while they would prefer to keep your business, there are plenty of others who may wish to win your business with low prices.
“It is dumb to expect to be able to get paid 10 days quicker yet pay 10 days slower. It is also immoral.” Answer: Most of us collect the money (that is owed to us) much too slowly; many of our suppliers don’t seem to be too bothered about how quickly we pay them.
Without making sweeping generalisations, I seem to have wound up a brigade of people who feel that their business deserves to do well because of their good intentions. These people hope to be able to survive by being nice.
I am afraid that nice is not enough, especially in these recessionary times. Like pulling off a plaster, the best way to make the decision is to brave up to it and get on and do it. Procrastination does not help anyone.
So, take a morning out with your key business partner or colleague, take a blank piece of paper and make the tough decisions that you will implement over the next two weeks. You will be amazed at how this decisiveness will give you the energy, focus and direction that might have been lacking of late. Go for it.
Robert Craven runs the Directors Centre  and shows MDs and owners how to grow their sales and profits and focuses on how to do this in recessionary times. His latest book is the runaway success 'Beating the Credit Crunch – survive and thrive in the current recession'.