Boundless Blog
October 28, 2008 by Boundless Network
SURVIVING THE "R" WORD
Musings by Jason Black | CEO, Boundless Network
I am going to write a
couple of blogs on the stress that is being placed on distributors, sales
professionals and end customers. I want to inject a little reality into our
current situation. I truly want all folks to be successful (with or without
Boundless Network). Hopefully some of the topics will create a sense of urgency
or provide some direction for people as they navigate these extremely stressful
times. Like a good preacher, I will try to end my blogs on a high note—everyone
can use a virtual hug.
People of the promotional industry!
I started talking about the big “R” word early this
year. Most people thought I was a cynic (or a bitter bald man), but no, I was
just trying to “keep it real.”
Now reality is upon us, and people have an awful pain
in the center of their gut. Stress is high, and customers are in distress. The
next 12 months will be challenging. So as entrepreneurs, you have some hard
questions to answer.
Are you a survivor? Are you prepared? Do you have the
infrastructure to ride out the downturn? Do you have the capital/commissions to
survive? These are all relevant questions that the majority of industry folks
are thinking about between the hours of 2 a.m. and 5 a.m. (the insomniacs, at
least).
Despite the reports on the news and the current
anxiety of our clients, our industry is not going away. But it’s going to be a
significant shift. As reported by ASI, the industry is worth somewhere around
$20 billion. Let’s assume a worst case
scenario: that spending decreases by 25% (which mean things are in the absolute
crapper). Then the industry’s sales would be around $15B, which is still an
extremely large space.
The real question is, what is the shift? I will give
you four dynamics that will impact our supply chain, and I’ll write a follow-up
blog on how to win in each.
1. The Customers – Unfortunately
for 90% of you (many are already feeling it) your organic sales with existing
customers will decline. More distressing, some of you may lose the majority of your
business. Companies across a wide spectrum of industries will start
scrutinizing all spend—yes, even the lowly promotional spend. As a result, distributors
and sales professionals must step up, add value and have a solid customer value
proposition that shows them how you can save them serious cash.
2. The Distributor Principals
– My heart goes out to the self-funded business owner. Not even Tylenol PM will
keep you from waking up with those panic attacks. You have to be extremely
proactive or run the risk of having your business funds deplete your family
funds. We’ve all heard the cliché that “cash is king.” It is absolutely key to
manage your cash flow, respond to changes in sales and control your operating
expenses. If you don’t have a solid CFO or advisor, I highly recommend this
investment. For more details, see my prior blog on the distributor meltdown.
3. Sales Professionals –
There are three metrics I follow: customer acquisition, customer development
and customer retention. You have to have clear customer retention strategies to
retain your customers. If you don’t,
100% of your historical sales are “at risk.” If you’re working for a distributorship
that’s a great bank, but you do the heavy selling, you need a new partner that
can give you a competitive advantage. For
more details (and a shameless plug), I highly recommend you give Boundless Network
a close look. Our tools for customer retention are significantly better than
the big shops and/or franchise groups. We’re a true partner, instead of more of
the same: a big bank.
4. The Suppliers – I
empathize with your situation… having to be responsive to a lot of unknowns
(from the distributor group) and managing your inventory based on an
unpredictable demand schedule. Suppliers will be tightening their credit. They
are acutely aware that distributors will be “stretching” their vendors, but
don’t take offense when they put their foot down. Unfortunately, once a distributorship
gets put on prepay, this is the first spin of the proverbial death spiral—and
you don’t want to go there. For more information, click here.
Now for the virtual hug. Even with all the bad, there
is a lot to celebrate and be anxiously excited about. Many winners will emerge,
and these winners will have a more fundamentally sound business and a tremendous
amount of momentum. They will have a team and culture with “battle wounds,”
giving them the internal strength that comes with knowing they can accomplish
anything despite the worst economic conditions.
Here’s to “keeping it real.” There will be more to
come on how to win in a recession in the next blog.
JB
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