Don’t be caught understaffed, outplanned when recovery hits

By Dave DeWitte

With many economists believing the worst is over, one of the worst mistakes business leaders can make now is to wait until the recovery is in full bloom to react.

Matt Miller of Mobile Demand in Hiawatha has thought long and hard about what the recovery means for his company. Mobile Demand designs and sells rugged mobile tablet computers used in business.

Miller expects more sales opportunities, so he’s beefed up his sales team. He’s also expecting more inflation, so he’s preparing to review his pricing more frequently as suppliers adjust their prices.

“We’re going to have to be nimble and quick,” Miller said.

Experts say it’s too early to tell if a recovery has arrived, but when the recovery arrives in full steam, it will be too late to gain a competitive advantage.

One thing for certain — it won’t be the same market as it was before the recession began.

Monica Vernon of Vernon Research, Cedar Rapids, said customers are surveying their customers to find out how their needs have changed, and their market expectations for the months ahead. She said they’re also performing competitive analysis, to find out what customers think of their rivals’ products and services.

Retreating from the development of new products and services is one of the worst things a business can do in a recession, according to Vernon.

“You know, life is long,” Vernon said. “What do the customers need and want so that when the economy does come back, you have the product they’re looking for when they have a few dollars in their pocket.”

Mobile Demand kept right on developing its next-generation tablet, the xTablet T7000, even as the recession cut into sales and pricing of current products. When the recovery comes, Mobile Demand will have a more capable product, Miller said, that will be ahead of the competition instead of behind it.

Vernon said larger companies are also researching morale and attitudes within their current employees. Deep employee dissatisfaction now could be bad news when the economy recovers, Vernon said. Top talent might be easily lured away when they are most needed if they feel they are overburdened or disagree with their current employer’s direction.

Curt Nelson of the Entrepreneurial Development Center of Iowa said even small startup businesses should be doing their market research.

“You have to go back on your marketing database and know what customers you have going forward,” he said. “Call them and find out their situation. Are they still your customer. When do they see the upturn coming?”

Nelson said it’s common during a recession to lose some customers, because many businesses are forced to rethink their business models or product needs.

“They may have gone out of business,” Nelson said.

That brings Nelson to one of his key points about recovery preparation. He advised businesses to “revalidate” their business model.

The needs of customers during an industry downturn often change dramatically, Nelson said. Technology companies discovered that in 2001 when the so-called tech bubble burst. Demand for many hardware-centric products had evaporated in the telecommunications market by the time the industry recovered, replaced by software-based products that offered the same functionality.

Nelson urged companies to carefully begin to build back their marketing and advertising campaigns. He said marketing has a delayed effect, with a six-month cycle being quite common. As a result, companies that have let their marketing and advertising lapse might not notice immediately.

Nelson said companies shouldn’t retreat to a marketing campaign that relies too heavily on social media despite the widespread fascination with the potential of Web applications such as Facebook. Use of the social media doesn’t cut across all demographics, Nelson said, and could be ineffective with some older customer groups.

“Go after your competitor’s customers,” Nelson said, but don’t abandon common sense. Because the recession was so deep, Nelson said some customers may be tottering on the brink of failure, or slow to pay. Making a big sale to them today could be a big mistake if they file bankruptcy tomorrow, and get out of paying.

Before taking big orders from a new customer, Nelson said it’s a good idea at such times to research their credit history.

The problems competitors face can make this a good time for small companies to recruit talent. Top managers may even be bailing out of larger competitors that are struggling with the economy.

The challenge, Nelson said, is to keep the great talent once the economy improves and the job market tightens. Employers may have to offer incentives such as stock options to keep them onboard if they can’t pay them a high enough base salary or bonus, he said.

The threat of inflation during a recovery is worth taking seriously, according to Nelson. He urged businesses to evaluate their debt in order to determine how much is tied to indicators such as the prime rate that could rise dramatically. If it’s too much, Nelson said, businesses should see if they can get their loans restructured with interest rate caps, or a fixed interest rate.