See the Moment, Seize the Day (3/3)

Amidst the Global Financial Storm, these guidelines will help Filipino entrepreneurs bulletproof their businesses, advance despite the hurdles, either through reengineering, expanding, or both.

Form a Crisis Management Team
Crisis Management Teams must evaluate three scenarios – slow, slower, slowest. Through astute data and market analysis, create forecasts derived from probable scenarios, considering effects on pricing, sales and the bottom line, and design appropriate responses. Remember, seemingly negligible but consistent sales slumps will translate into limited liquidity – a critical factor in a worsening economic environment.

Identify, Qualify, Diversify
The time represents a fantastic opportunity for businesses to diversify; into vertical or horizontal integrations perhaps. Consider the downturn’s possible effects on your competition, anticipating possible counters. Identify their vulnerable markets, and find ways to acquire them.
Because as allied or competing industries suffer in the Financial Storm, they cannot command top-dollar to interested buyers, creating a good deal for acquisition, definitely a lower price than when they were performing well. The newly acquired and reoriented entity is up and running (and earning) much sooner than if a separate unit was assembled. Diversification brings a new product range, and wider markets.

Rationalize Marketing

Marketing has become demonized as a bloated cost center spending on TV ads and billboards, for seemingly small, immeasurable returns. Today, gone is the advertising yardstick of “creating interest and awareness,” giving way to “how much revenue,” as a justification for advertising expenses. A Php1,000,000 TV commercial budget, for example, must now be concretely justified, aka earn over Php1,000,000 in guaranteed sales, by specific market; otherwise, why do it? For “interest and awareness,” issue press releases. They’re more cost effective.

Alternative methods have also emerged, supplanting (not supplementing) Marketing methods, with the Internet as the primary springboard for “viral” and “social network” marketing. Think about it; as yet unregulated by cost, time, or censorship; so therefore are its potential – and reach.
More personal approaches are also being used, from radio personalities' barely scripted endorsements, to discount-laden emails, and contact center agents calling you at home.

Strategize Product and Price

The economic environment greatly influences consumer behavior. The Big Three automakers failed to address this, prioritizing products – gas-guzzling SUVs – despite waning demand due to skyrocketing oil prices. They are paying the price.

Strategic entrepreneurship targeting unexploited markets can uncover a potential goldmine. Eyes Candy, a local optical store, found its niche offering eyeglasses for the younger market, citing the demographic’s potential revenues. Sporting a toy store-like design, Eyes Candy has received offers of expanding from its Cebu store, to malls in Manila.

Go Prepaid
Prepaid presents a win-win situation. It unshackles consumers from periodic fixed payments – providing a “friendlier” (aka more affordable) payment scheme based on individual consumer usage. The plus? For the company, it means instant cash before services are provided, zero credit risk, and zero collection expenses. As of June 2008, Smart Communication's prepaid business contributed Php38.8 billion to the company coffers. That's pure cash.

Expense for Efficiency

Immediately eliminating unneeded, less productive expenses is primary for greater financial stability. Identify and do away with activities contributing the least to a business’ overall development. Create a lean, mean organizational structure: by eliminating unnecessary executive positions and merging employee functions, training employees for additional roles. More efficiency for less overhead.

Rethink your supply chain, and methods of material acquisition, considering costs for raw materials. If materials are imported, consider cheaper local alternatives, lowering importing costs, and limiting company exposure to foreign exchange fluctuations.

Bundled Revenue
Maintaining a solid customer base through loyalty can help keep any business afloat through regular, multiple revenue generation. SM Group's BDO bank promises perks and discounts to customers using BDO credit cards when shopping at SM malls.

Customers use their BDO credit cards (or subscribe to one).
Customers choose to shop at SM Stores for the “points” and rebates.

Realign sales objectives, prioritizing products generating immediate cash, instead of banking on huge deals that can falter in rapidly-changing crisis economies.

Regulate Customer Credit

Learning from the US sub-prime crisis, avoid doling out customer credit haphazardly. Simply put, ensure capacity to pay.

Belt tightening induces consumers to purchase on term-based credit. Instead of implementing blanket extended payment schemes (e.g. 0% interest at 6 months, for everyone), assign payment plans based on specific customer payment capacities (e.g., salary and employment nature), reducing nonpayment risks.

Pray Hard
I mentioned last June 23 PGMA inciting the practice of working as if everything were up to her, but praying as if everything were up to God. Our economy, robust against the buffeting winds of the Economic Crisis, is proof of that solutioning’s effectiveness. With hard work, and an upbeat attitude, trust in the designs of a higher power will see any entrepreneur's venture, great or small, surpass current crises.

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