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 businesses 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.
However, if you think that 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 that are 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 some the lack of fruitful activities. The result is that as these injections of cash begin to run out, companies need to get back to the business of filling their own coffers. Unfortunately, because only 23 per cent of businesses are experiencing normal levels of sales, this means that 77 per cent are going to be trimming their expenditures. The result is that if your business cannot provide value for dollars, you are 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.
Unfair pricing: 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 into the labour market, while desperately needed in the short term, has caused problems where businesses are changing pricing models and paying cash to labourers who are benefiting from CERB in order to create for themselves a short term competitive advantage.
Downward spiral of pricing: When we start the rush to the bottom of the pricing barrel because we are desperate for work even if it isn't profitable, we are in trouble. While we may keep the cash coming in, we end up in a continuous cash flow crunch as we need the next contract to pay for work from the last one. The result is a cycle that ends in our customers expecting lower pricing and a cycle of despair where no one wins. In the end, even customers lose because there are fewer choices for them.
Increased costs: While CERB benefits for workers have helped many who were laid off as a result of business closures, there are many who are refusing to work more than a few hours a week because there is no advantage for them to get off the couch. This has resulted in an increase in labour costs for businesses who are in desperate need of labourers. I have heard of business owners who have increased wages and still had employees choose to remain at home. Businesses can not only expect wages will rise in the short term, but they can expect their taxes to increase in the long term. The recent spending spree over the past three months has emptied government coffers and increased debt load. Unless the government is going to promote continued inflationary measures and print more money to pay off debt and to 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 are going to have to be positively aggressive. This means that you are going to need to have trained staff who sell your goods on value and relationships, and that you are aggressively using best practices and systems in every aspect of your business. Your leadership team must clearly understand how to positively motivate your teams. You are going to need to use planning techniques that invigorate your employees and enable you to create advantages over your competitors. You will need to be thinking outside of the box to generate new ways to survive and create value for your customers. If you do this you are 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 dave@pivotleader.com
