This is one of the most common questions that my consulting clients ask me. They want to know: "What is happening with the businesses that I visit around the world? How are other operations doing in this economy now? How are consumers responding? What is working and what is not working? Are people buying? Is the general feeling up or down?"
Here is what my experiences are telling me now:
This has undoubtedly been the worst recession in America since the great depression. It is the biggest that I have experienced in America in my career. (Although the Asian banking and currency crisis was just as big in the mid-90's when I was working there). The primary U.S. stock market (Dow Jones Industrial Average) fell from a high of 14,500 to 6,500. Trillions of dollars have evaporated. Along with this, unemployment rose steadily as consumer spending plummeted.
Independent retailers sure have felt their fair share of this loss and I really believe they were the hardest hit sector in the U.S. economy. We can all name numerous companies that have gone out of business in the past two years. For those companies that have hung on, I've seen some with 50% drops in sales from their "glory days" and 20% declines have been commonplace.
That said, there were bright spots. Select operations have managed to bust their butts, work smarter, and innovate to avoid declines. Some have even had increases in sales.
But there is something more important than sales: PROFITABILITY! That is a prerequisite and determinant of sales growth. During the recession, I have seen that the most profitable companies were still the most profitable companies, regardless of what has happened to their traffic and their sales. Great businesses have remained the same great businesses in the recession as in the boom.
In my opinion, a great business is defined as businesses with people that embrace learning, innovation, efficiency, self-investment, integrity, and respect for all. They mandate excellence and high profitability. They can make quick decisions, manage professionally, and execute their strategies. They enjoy the process of getting better at what they do.
So, what's next?
The recession is over. Recovery has begun. The economy and retail sales have stabilized. Revenues have stopped declining. That means, and I will repeat, THE RECESSION IS OVER!
Smart companies have restructured themselves during the downturn and are seeing decent profitability levels again. Just look at the earning reports on CNBC. Even though sales are flat and definitely nowhere near peak times, in most cases, earnings are good.
Across the U.S., retailers that we work with are doing the same. They are becoming efficient at their new sales levels through maintaining proper inventory mix, capturing appropriate gross margin, changing marketing methods, and investing in expenses that add rather than take away from their businesses.
It is extremely important that you have decent profitability at this point in the economic recovery. First, it will determine whether you will survive the bottom that we are currently in. Then, this efficiency will allow you to reap the maximum benefits in the future when consumers return in larger numbers.
If you are not maximizing your profitability now, do so quickly. To do it right, and as fast as possible, you should contact us and we will help you as we have helped others.
Advice:
Don't worry about the PAST. It does not exist. It does not matter if sales once were double where they are now. What matters is NOW!!! Get your business in order NOW. Turn your fixed expenses into variable expenses NOW. Build your productivity and profitability NOW. Your future will thank you.
Good luck!
